The Macroeconomic Perspectives of David Ricardo, Karl Marx

The Macroeconomic Perspectives of David Ricardo, Karl Marx, and rump Stuart Mill ECON 350 19 noneember 2012 crimp The author surveys three influential economists of the Classical eraRicardo, Marx, and John Stuart Milland introduces the reader to their Macroeconomic perspectives found on somewhat(a) of their more prominent Macroeconomic theories. David Ricardo David Ricardo was a Classical Economist who lived from 1772 to 1823.In his professional spirit he wore m any(prenominal) hats he was a businessman, a financer, a speculator, and a member of Parliament. But what he is most remembered for is the role that he played in the evolution of economic theory, alongside of such separate greats as John Stuart Mill and Thomas Malthus, among otherwises. In examining the economic theories which he espoused it is interesting to consider the get out that his above-mentioned professions played in influencing his positions.Through his experience as a businessman was un surmiseedly cap fit to top insights into the whole caboodle of industry through his experiences as a financer and a speculator he gleaned invaluable insights into the croakings of the financial system and through his experiences as a member of Parliament he no doubt acquired insights into the reverseings of government and politics that does more than to add credibility to many of his economic expostulations. Although he worked diligently in the palm of both Macro- and Micro-economics we will be focusing here primarily on some of his more distinguishing Macroeconomic contri thations.The principals within this field of economics which we will be focusing on in percenticular are The Law of comparative Advantage, Comparative Statics, International Money Movement, and Deficit Spending. The principal which is arguably the most important and enduring contribution that David Ricardo ever made to the field of economics is The Law of Comparative Advantage, also known as The Law of Comparative Cost. Th is was a principal that was originally developed by crack smith in his renowned work entitled An Inquiry into the Nature and Causes of the Wealth of Nations. However, although Adam metalworker commencement exercise developed this principal it was David Ricardo who refined it and thus he is deserving of credit for his part in the formation of this economic principal. The Law of Comparative Advantage was first mentioned by Ricardo in his work entitled On the Principals of Political Economy and Taxation. It is based in specialization. and is a law which we see direct all around us in present clippings. Basically this law get hold ofs one of Adam Smiths observationsthat specialized wholes within a manufacturing process leads to increased efficiencyand applies it on an international scale.Adam Smiths observation was that when manufacturing a particular type of spot, if each worker present were to work on an item from start to finish they would be inefficient and slow and would n ot be able to vex nearly as much of the items as would a factory of workers who were separated into specialized units, each unit having the responsibility of completing one of the processes necessary for manufacturing the particular item. Ricardo took this one step further and applied it on a macro level.He noted that different countries, for various reasons, have specific goods that they are particularly practiced at producing. He further noted that if countries had to provide for all of their needs internally then they would be unable to focus their attention on the things that they did particularly well. On the other hand, if each country were able to focus on producing the things that they did well then they could produce exponentially more of them and could trade amongst each other for the things that they needed but did not produce internally.Also, he took the Opportunity Cost into account and noted that correct if one country did everything better than another it would sti ll be practical for the lesser country to constrain items for the greater country since the greater country would see the highest draws if they focused their epoch, bills, and energy on the things that they did particularly well. This was genuinely quite a big deal during Ricardos since Protectionist policies were hindering free trade, which Ricardo was a proponent of as can be seen from his Law of Comparative Advantage.One of Ricardos first interactions in the economic dialogue of his time was based around the Quantity Theory of Money. At the time in that location was something going on in Britain that would come to be known as the Bullion Controversy. Basically, as a conclusion of a potential war the British government temporarily suspended the obligation of the Bank of England to convert its notes into gold. During this time agricultural prices rose (which some people attributes to poor harvests) and gold prices went up. It is on this second point that Ricardo chimed in. R icardo argued that the boot out in gold prices was actually the result of largeness.According to him, since the bank wasnt obligated to exchange their notes for gold they were depression more notes than they had gold to back them. This flood of currency, Ricardo said, was creating an excess supply which was devaluing the currency and thus causing inflation (Laidler, p. 12). Karl Marx Karl Marx is probably best known for the work that he co-authored with Fredrick Engels entitled The Communist Manifesto and also for his work entitled Capital. He is also arguably one of the most well-known of the Classical Economists, or of any group of economists for that matter.In addition to be an economist he is also renowned for his work in the fields of philosophy, sociology, history, and journalism. Karl Marx was a staunch Socialist and the vast majority of his contributions to the field of economics revolved around a singular event that he believed would inevitably occur sometime in the fu ture and would bring active the fall of Capitalism, replacing it instead with a Socialist society that would eventually evolve through natural means into a Communist society. Marx saw society as segregated units of distinct classes.In his mind there was a constant struggle going on between these classes as a direct result of one class having dominance over the other. The two classes that he was particularly concerned with were the travail and the middle class. The Bourgeoisie were representative of the wealthy Capitaliststhis included factory owners, entrepreneurs, and the the like. In other words the Bourgeoisie was composed of those individuals who were able to create great wealth for themselves as a direct result of the Capitalist system. Aristocracy and the like were not included as among the Bourgeoisie.The Proletariat on the other hand were those individuals who worked in the factories, et cetera, of the Bourgeoisie. These were the blue nip workers of their time and the l ower class members of society. In Marxs opinion the Bourgeoisie had taken advantage of the Proletariat by making themselves wealthy off of the labor of this oppressed class. Furthermore Marx felt that the base genius of the work that the Proletariat was given to do was stifling. Last and worst of all Marx felt that these workers were not being fairly compensated for their work.What we now call Recessions and Depressions Marx referred to as Crises. He felt that these Crises were the direct result of disproportionalities in the Law of Supply and Demand. According to Marx the amounts of items supplied to markets and the amounts demanded were in a constant state of tension because they were always seek to achieve equilibrium but could never quite do so. Since this often led to more of an item being supplied than was demanded by the market, the market became flooded and the items price would drop significantly.Businesses in their up-to-date state could not survive off of these minima l returns, and workers ultimately suffered as a result. Marx believed that workers were not salaried adequately during good times to compensate for these Crises, whereas the Bourgeoisie ultimately became wealthy despite these Crises. Marx did not hellish the Bourgeoisie but instead saw them merely as a product of their environment. He did, however, scent that this environment which ran according to the tenets of Capitalism was inherently flawed.Marx believed that the Proletariat would eventually revolt against this flawed system and would take manufacturing into their own hands. At first a Socialist form of government would be set up and would be run by what Marx referred as the Dictatorship of the Proletariat. This would only be a temporary entry however and it would eventually become obsolete and dissolve naturally and from that time on Communism would be the sole system that would guide the economy, government, and society as a whole.John Stuart Mill John Stuart Mill was bo rn(p) in England and lived between 1806 and 1873. He was both an accomplished philosopher and economist and is recognized as one of the sterling(prenominal) thinkers of his time. His father, James Mill, was a respected philosopher, economist, and political theorist. James Mill was also a contemporary and decision friend of David Ricardo and was influential in the Classical economic science movement of his time.Because of James Mills mental circle of friends, and also because of his strict tutelage, John Stuart Mill was, from a very young age, privy to much of the political, philosophical, and economic discussions and arguments of his day. Because of the influence of his father and also because of his close acquaintance with David Ricardo and others in his fathers circle, he would continue to hold to and defend many of their opinions and precepts throughout the flow of his life. John Stuart Mill was also a contemporary of Karl Marx although Mill was apparently unaware of who Mar x was.Although Mill wrote volumes of literature on the topic of economics during the course of his lifetime, there is one particular topic that seems to be especially relevant in shaping an sense of his macroeconomic perspective and so it is on this topic that we will focus our attention. Thomas Stowell tells us in his book entitled On Classical Economics that the three major controversies in economics during John Stuart Mills lifetime were disputes over swans Law, the Malthusian overpopulation theory, and the theory of value (p. 134). The first is a macroeconomic concern whereas the second and third fall under the banner of microeconomics. Therefore it is on this topic that we will now focus our attention Says Law, also known as the Law of Market, was founded on the presumption that money is used solely as a means of initiating proceedings and that in the end transactions ultimately consist of one commodity being traded for another. Say believed that producers are eager to get r id of their products because of price fluctuation which could cause their devaluation and because an unsold product produces no return on investment.Say also believed that producers were equally eager to get rid of the money they acquired through transactions because moneys value fluctuates as well. In order to get rid of money it must be traded for some product or service and thus through this cycle economic growth is created. Say believed that gluts occurred when too much of one product was created, thus flooding the market. This, the law states leads to a loss of tax income for the producer, who in turn consumes less due to this loss of revenue.Because of this lowered consumption there is an overall step-down in demand in the economy as a whole. This reduced demand leads to unemployment and recessionary conditions. It should be noted however that these consequences ultimately result not from an inadequate supply of money with which to purchase goods, but from markets supplying more of one particular product than is desired and not enough of others. John Stuart drudgery was a huge proponent of Says Law although he did appear to alter some parts of it slightly throughout the course of his life. ReferencesBalassa, Bela A. (1959). John Stuart Mill and the Law of Markets. The Quarterly Journal of Economics, Vol. 73, No. 2. Balassa, Bela A. (1959). Karl Marx and John Stuart Mill. Weltwirtschaftliches Archiv. Bordo, Michael D. Schwartz, Anna J. (1984). A Retrospective on the Classical Gold Standard, 1821-1931. University of Chicago Press. Chicago, IL. Brandis, Royall. (1985). Marx or Keynes? Marx and Keynes. Journal of Economic Issues. Vol. 19, No. 3. Campbell, Martha. (1997). Marx and Keynes on Money. International Journal of Political Economy. Vol. 27, No. 3 Davis,Timothy. 2005). Ricardos Macroeconomics Money, Trade Cycles, and Growth. Cambridge University Press. refreshed York, NY. Laidler, David. (2000). Highlights of The Bullionist Controversy. Retrieved from http//economics. uwo. ca/faculty/laidler/workingpapers/highlightsof. pdf. Lutz, Mark A. (1979). The Limitations of Karl Marxs Social Economics. Review of Social Economy. Vol. 37, No. 3. Sowell, Thomas. (1974). Classical Economics Reconsidered. Princeton University Press. Princeton, NJ. Sowell,Thomas. (2006). On Classical Economics. Yale University Press. New Haven, Conn.