Economics- greek words “oiko”(to manage); “nonos” (home)

-okonomia (management of the household)

1. Science that refers to production, distribution and consumption
2. Study of how people prioritize production and consumption activities to achieve progress and development.
3. How individuals use varied means to produce goods and services from limited or scarce resources and distribute it to
the members of the society

Economic system
-An economic system is the system of production, distribution and consumption of goods and services of an economy.
-Alternatively, it is the set of principles and techniques by which problems of economics are addressed, such as the economic
problem of scarcity through allocation of finite productive resources.
-The economic system is composed of people and institutions, including their relationships to productive resources, such as
through the convention of property. Examples of contemporary economic systems include capitalist systems, socialist systems, and
mixed economies.
-An economic system can be defined as a "set of methods and standards by which a society decides and organizes the
allocation of limited economic resources to satisfy unlimited human wants. At one extreme, production is carried in a private-
enterprise system such that all resources are privately owned. It was described by Adam Smith as frequently promoting a
social interest, although only a private interest was intended.

The basic and general economic systems are:

>Market economy (the basis for several "hands off" systems, such as capitalism).
>Mixed economy (a compromise economic system that incorporates some aspects of the market approach as well as
some aspects of the planned approach).
>Planned economy (the basis for several "hands on" systems, such as socialism, or a command economy).
>Traditional economy (a generic term for the oldest and traditional economic systems)
>Participatory economics (a recent proposal for a new economic system)
>Inclusive Democracy (a project for a new political and economic system)

Adam Smith
(1723-1790)
Ideas
- Nature provide a basis in sentiment for virtue.
- When we adopt the role of impartial spectators, sympathy is the sentiment that is the basis for moral judgments.
- Acting from a sense of duty corrects for any lack of appropriate sentiment in particular instances.
- The deity has implanted powerful instincts (passions), which lead us behave in ways that are ultimately beneficial for
all.
- Self-interest coupled with the predisposition to 'trade', 'barter', and 'exchange' provides a basis for the division of labor
and economic development.
- In a market free from monopolies and self-serving public policies, competition among the self-interests of isolated
consumers and producers produces a stable and expanding economy.
- The self-interested pursuit of wealth may not be individually satisfying but leads to an aggregate increase in wealth
that is in the best interests of a nation.
-economies are made up of producers who manufacture (or grow) a variety of goods. Each producers is able to do so at a particular cost, with the cost being affected
by any number of factors.

Karl Marx
Economic/Political Philosopher, 1818 - 1883
-According to Marx, commodities were physical objects that possessed both use value (physical qualities for fulfilling a
need) and exchange value and had specifically been produced for the purpose of exchange in a market for the purpose
of acquiring economic gain.
-For Marx, capitalism could be defined as an incessant drive for the accumulation of capital and was the production of
commodities for exchange.
-Prior to the birth of capitalism, simple commodity production could be expressed by the equation C-M-C, where a
commodity was simply produced for exchange with only one other agent, for the producer's own personal use, and not
for economic gain.
-After capitalism was put into full swing, exchange took on new meaning. Now, the general formula for capital, anchored
in the sphere of circulation or exchange, became M-C-M'. Here, commodities were produced for the specific purpose of
profitable resell and involved at least three agents.

John Maynard Keynes

-Keynesian economics argues that private sector decisions sometimes lead to inefficient macroeconomic outcomes and
therefore, advocates active policy responses by the public sector, including monetary policy actions by the central bank
and fiscal policy actions by the government to stabilize output over the business cycle.
-Keynesian economics advocates a mixed economy—predominantly private sector, but with a large role of government
and public sector—and served as the economic model during the latter part of the Great Depression, World War II, and the post-
war economic expansion (1945–1973), though it lost some influence following the stagflation of the 1970s.
-

David Ricardo (19 April 1772 – 11 September 1823)

-Perhaps his most important contribution was the law of comparative advantage, a fundamental argument in favour of free trade
among countries and of specialisation among individuals.
-He held out the belief that the rate of profit for society as a whole depends on the amount of labor necessary to
support the workers who farm "the most barren land that can still maintain agriculture"

-Ricardo argued that there is mutual benefit from trade (or exchange) even if one party (e.g. resource-rich country,
highly-skilled artisan) is more productive in every possible area than its trading counterpart (e.g. resource-poor country,
unskilled laborer), as long as each concentrates on the activities where it has a relative productivity advantage.
-This model breaks land down into categories based on average fertility rates. The most fertile land naturally produces
more food than land of poorer quality. As a result it commands a higher rent. The poorest land utilized for agriculture
receives no rent, with all of its earnings going to cover labor and capital costs.
-The difference between the output from the least fertile land which can still be farmed and that of a higher quality
constitutes the source of rent on the better land. As the population grows, poorer land must be cultivated in order to
meet the growing demand. The cost of rent for good land then increases.
-

Thomas Robert Malthus

(1766-1834 )
-was interested in everything about POPULATIONs. He accumulated figures on births, deaths, age of marriage and
childbearing, and economic factors contributing to longevity. His main contribution was to highlight the relationship
between food supply and population. Humans do not overpopulate to the point of starvation, he contended, only
because people change their behavior in the face of economic incentives.
-Malthus thought that the dangers of population growth would preclude endless progress towards a utopian society:
"The power of population is indefinitely greater than the power in the earth to produce subsistence for man". [7] As an
Anglican clergyman, Malthus saw this situation as divinely imposed to teach virtuous behaviour. [8] Believing that one
could not change human nature, Malthus wrote:
"Must it not then be acknowledged by an attentive examiner of the histories of mankind, that in every age and in every
State in which man has existed, or does now exist
That the increase of population is necessarily limited by the means of subsistence,
That population does invariably increase when the means of subsistence increase, and,
That the superior power of population it repressed, and the actual population kept equal to the means of subsistence,
by misery and vice."

Henry George
-was an American writer, politician and political economist, who was the most influential proponent of the land value tax, also
known as the "single tax" on land.
-He inspired the philosophy and economic ideology known as Georgism, which is that everyone owns what he or she creates, but
that everything found in nature, most importantly land, belongs equally to all humanity. His most famous work is Progress and
Poverty written during 1879; it is a treatise on inequality, the cyclic nature of industrial economies and possible remedies.
-In the first place, it is impossible to support his distinction of the branches of production into two classes, in one of
which the vital forces of nature are supposed to constitute a special element which functions side by side with labour,
and in the other of which this is not true. [...] The natural sciences have long since proved to us that the cooperation of
nature is universal. [...] The muscular movements of the person using the plane would be of little use, if they did not
have the assistance of the natural forces and properties of the plane iron.

Joseph Alois Schumpeter

(1883-1950 )
-Marx believed that capitalism would be destroyed by its enemies (the proletariat), whom capitalism had purportedly
exploited, and he relished the prospect. Schumpeter believed that capitalism would be destroyed by its successes, that it
would spawn a large intellectual class that made its living by attacking the very bourgeois system of private property and
freedom so necessary for the intellectual class’s existence.
-And unlike Marx, Schumpeter did not relish the destruction of capitalism. “If a doctor predicts that his patient will die
presently,” he wrote, “this does not mean that he desires it.”
-Capitalism, Socialism, and Democracy are much more than a prognosis of capitalism’s future. It is also a sparkling DEFENSE
of capitalism on the grounds that capitalism sparks ENTREPRENEURSHIP.
-Indeed, Schumpeter was among the first to lay out a clear concept of entrepreneurship. He distinguished inventions
from the entrepreneur’s innovations.

Capitalism is an economic system in which the means of production are privately owned; supply, demand, price, distribution, and
investments are determined mainly by private decisions in the free market, rather than through a planned economy; and profit
is distributed to owners who invest in businesses. Capitalism also refers to the process of capital accumulation.
Fascism is an authoritarian, nationalist and corporatist ideology, but there is no single established definition of fascism.
Under a capitalist economic system, individuals own all resources, both human and non-human. Governments intervene
only minimally in the operation of markets, primarily to protect the private-property rights of individuals. Free markets
in which suppliers and demanders can enter and exit the market at their own discretion are fundamental to the
capitalist economic system. The concept of laissez-faire, that is, leaving the coordination of individuals' wants to be
controlled by the market, is also a tenet of capitalism.
Feudalism is a political and military system between a feudal aristocracy (a lord), and his vassals. In its most classic
sense, feudalism refers to the Medieval European political system composed of a set of reciprocal legal and military obligations
among the warrior nobility, revolving around the three key concepts of lords, vassals, and fiefs. Although derived from the Latin
word feodum (fief), then in use, the term feudalism and the system it describes were not conceived of as a formal
political system by the people living in the Medieval Period.
Socialism is an economic and political theory based on public ownership or common ownership and cooperative management of the
means of production and allocation of resources.
In a socialist economic system, production is carried out by a public association of producers to directly produce use-values
(instead of exchange-values), through coordinated planning of investment decisions, distribution of surplus, and the use of the
means of production. Socialism is a set of social and economic arrangements based on a post-monetary system of
calculation, such as labour time or energy units.
Communism
Under a communist economic system, all resources, both human and non-human, are owned by the state. The
government takes on a central planning role directing both production and consumption in a socially desirable manner.