Economic Theories: List and Marxism

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Questions and Answers

What aspect does F. List emphasize regarding the state's role in the economy?

The establishment of free trade without restrictions

The complete concentration of the economy in foreign hands

The necessity to define and defend national interests (correct)

The elimination of all forms of economic intervention

What does F. List consider beneficial during the development phase of a country's economy?

Total deregulation of markets

Protectionist policies to shield against foreign competition (correct)

A balanced budget approach

Increased reliance on foreign investment

In Marxist theory, what is the primary form of ownership emphasized?

Cooperative ownership only

Private ownership of production means

State and cooperative ownership (correct)

Foreign ownership control

What management style is associated with the economic policies of socialist states according to Marxist theory?

Administrative management based on planning Signup and view all the answers

What was a result of directive planning in the USSR during the 1930s?

Rapid industrialization and military buildup Signup and view all the answers

Which country continues to reference Marxism as a basis for economic policy today?

China Signup and view all the answers

What is a negative aspect associated with socialist management according to the content?

Inefficiency in long-term economic planning Signup and view all the answers

What method does F. List suggest to rationalize the structure of the national economy?

Creating a state sector within the economy Signup and view all the answers

What is the action the state should take during an economic crisis according to Keynesian principles?

Stimulate demand by increasing budget expenditures Signup and view all the answers

Which economist initiated the idea of indicative planning?

F. Perroux Signup and view all the answers

Keynesian theory heavily influenced which U.S. president's policies during the 1930s?

Franklin D. Roosevelt Signup and view all the answers

What does indicative planning differ from in terms of nature?

It is of a recommendatory nature. Signup and view all the answers

What is a key aspect of the neoliberal direction in neoclassical theory?

Emphasis on self-regulation of the economy Signup and view all the answers

Which factor is recognized as crucial for economic growth in the conservative direction of neoclassical theory?

Scientific and technological progress Signup and view all the answers

What was the primary goal of implementing Keynesian theories in post-war UK?

Ensuring high employment Signup and view all the answers

How did Keynesian ideas influence the economic strategies in Germany during the 1960s?

Through deficit funding and regulated interest rates Signup and view all the answers

What does Keynes consider essential for maintaining high economic activity?

A low norm of interest Signup and view all the answers

What is the primary aim of government fiscal policy according to Keynesian theory?

To stabilize the national economy Signup and view all the answers

How can an increase in public spending affect the state budget?

It likely increases the budget deficit Signup and view all the answers

What role does scientific and technological progress play in Neo-Keynesian theory?

It stimulates new investments Signup and view all the answers

What is a potential consequence of financing the budget deficit through money emission?

Inflation in the economy Signup and view all the answers

What should the state do if the economy is experiencing 'overheating'?

Raise interest rates and impede activity Signup and view all the answers

What is the significance of the investment process in Neo-Keynesian economic regulation?

It is prioritized for achieving dynamic balance Signup and view all the answers

According to Keynes, what happens if inflation reaches alarming levels?

Raising taxes and reducing spending is necessary Signup and view all the answers

What is the key postulate of the Bem-Baverk theory?

Priority of consumption over production. Signup and view all the answers

Which economist initiated a theory combining elements of labor theory of value and marginal utility?

A. Marshall Signup and view all the answers

What does A. Marshall consider as an activating factor for production?

Human capital Signup and view all the answers

According to A. Pigou, what role does the state play in an economy with monopolies?

Direct intervention to control prices and output. Signup and view all the answers

What was R. Hawtrey known for in his contributions to economic theory?

Neoclassical monetarist theory Signup and view all the answers

What was a significant shift in economic thought during the early 20th century?

Need to revise economic policies due to changing global situations. Signup and view all the answers

Which of the following reflects the central idea of A. Pigou's welfare economy?

Redistributing income through active state tax policy. Signup and view all the answers

What is a major standpoint of Keynesian theory?

Government's active intervention in economic processes. Signup and view all the answers

What is one of the essential responsibilities of the state for economic development in under-developed countries?

Ensuring rapid economic development Signup and view all the answers

Which of the following is considered a direct measure for economic development?

Organizational changes in labor markets Signup and view all the answers

How does the government support labor mobility according to the content?

By creating information centers in rural areas Signup and view all the answers

What does the government do to enhance the productivity of labor?

Provides social security measures Signup and view all the answers

What is one of the indirect measures the government can use to control economic fluctuations?

Regulating the quantity of money Signup and view all the answers

How does the government influence the distribution of income?

Through organizational changes in labor markets Signup and view all the answers

What is a responsibility of the government regarding rural laborers?

Providing information about job opportunities Signup and view all the answers

What role does the government play in addressing issues of urbanization?

Managing labor mobility from rural to urban areas Signup and view all the answers

Study Notes

Friedrich List’s Economic Thought

State’s Role in Economics: List emphasized the state’s active role in economic processes, particularly in a globalized economy where national interests might not align with those of other nations.
Protectionist Policies: List advocated for protectionism as a way to shield emerging national economies from foreign competition. He believed this strategy was especially crucial during a country’s developmental phase.
State Intervention in Economic Structures: List recommended that the state intervene to optimize the nation’s economic composition, suggesting the creation of a government-owned sector.
Dumping: List argued for the potential benefits of dumping—selling goods below cost—as a tactic for developing economies to gain an edge in the global market.

Marxist Theory

Elimination of Private Property: Marxist theory centers on abolishing private ownership of the means of production, replacing it with state and cooperative ownership.
State Ownership: In practice, state ownership dominated in most socialist nations, with cooperatives being subject to state control.
Centralized Economic Planning: Marxist economic models rely heavily on central planning, where economic plans are designed and enforced by the state.
Five-Year Plans: In the USSR and other socialist countries, five-year plans (or longer) were implemented as a way of strategizing and managing economic development.
Short-Term Efficiency, Long-Term Limitations: Directive planning with strong administrative control can be effective in addressing immediate economic challenges, as witnessed in the USSR’s rapid industrialization and wartime production. However, this approach tends to be less adaptable to long-term economic changes.

Marginalism

Consumption Precedes Production: Marginalism prioritizes consumption over production as the driving force behind economic activity.

Neoclassical Traditions (Cambridge School)

Alfred Marshall’s Contributions: Marshall combined elements from the labor theory of value and marginal utility theory. He identified demand and supply as the key drivers of product prices, tying in the concept of demand elasticity.
Human Capital: Marshall recognized "human capital"—skills, education, and culture of workers—as a vital factor in boosting productivity and ultimately impacting output.
Arthur Pigou and Welfare Economics: Pigou's welfare economics emphasized the use of progressive taxation to achieve a more balanced income distribution. He advocated for state intervention at different levels, suggesting regulation through taxation or direct intervention in monopolized markets.
Richard Hawtrey and Monetary Policy: As a key neoclassical monetarist, Hawtrey focused on the role of money in the economy. He proposed that monetary policy should be nimble and coordinated with wage policy. Hawtrey theorized that bank loans to businesses could ultimately stimulate consumer spending, pushing investment and employment.

Keynesian Theory

Government Intervention for Economic Stability: Keynesian theory stresses the need for government involvement to mitigate economic instability and combat persistent unemployment.
Interest Rates and Economic Activity: Keynes highlighted the significance of interest rates in guiding economic activity, advocating for low rates to stimulate investment and overall economic growth.
Role of Financial Institutions: Credit institutions, through their influence on interest rates, play a critical role in regulating the economy.
Fiscal Policy and Stabilization: Keynesian theory emphasizes the use of government fiscal policy, including spending, taxation, and transfer payments, to stabilize the national economy.
Stimulating Demand: Expanding government spending and reducing taxes can stimulate demand and boost employment, potentially leading to budget deficits.
Inflation Management: Keynes argued that modest inflation was not inherently detrimental, but suggested that measures to reduce government spending or increase taxes should be implemented if inflation rises to dangerous levels.

Neo-Keynesianism

Dynamic Balance and Cyclical Fluctuations: Neo-Keynesianism focuses on the dynamics of economic growth and how to manage cyclical fluctuations. It recognizes the impact of investment fluctuations on the economic cycle.
Technological Progress and Investment: Neo-Keynesians highlight the importance of technological advancements for economic growth, emphasizing the need for ongoing investment in up-to-date technology.
Cumulative Income and Demand: Investment spurs production, leading to increased income, which then drives aggregate demand. This process, when regulated effectively, creates a dynamic equilibrium.
State Regulation of Investment: Neo-Keynesianism advocates for government intervention to moderate economic cycles. During recessionary periods, state policies should encourage investment, while during periods of overheating, measures like raising interest rates should be used to curb investment.
Tax Policy and Economic Cycles: Tax policy should be adjusted based on economic conditions. Higher taxes can help slow down rapid growth, while lower taxes can offer support during downturns.
Indicative Planning: French economist Francois Perroux's concept of indicative planning—a combination of market mechanisms and government planning—is a prominent theme in neo-Keynesianism. Indicative plans, though advisory, leverage tax policy, interest rates, and public investment to guide economic development.

Neoclassical Theory

Main Directions: Three main strands of neoclassical theory are identifiable: conservative, neoliberal, and neoclassical synthesis.
Conservative Neoclassical: Emphasizes the role of production factors in achieving economic stability and growth. The production function is seen as the base for intra-industry economic balances, while technological progress is considered vital for economic growth.
Neoliberalism: Foundationally, neoliberalism believes in self-regulating markets and economic freedom. Minimal state intervention is preferred, except in specific situations. The state should focus on public services, resource allocation, income distribution, monetary and fiscal management, inflation control, full employment, and investment guidance.
State Intervention in Developing Countries: Neoliberalism argues that state intervention is crucial for promoting economic growth in underdeveloped countries. This can involve both direct and indirect measures.

Direct Measures for Developing Countries

Organizational Changes: Direct state involvement is necessary for specific essential tasks, including shaping the market’s size and the functioning of labor markets. This can include developing transportation and communication infrastructure, fostering agricultural and industrial development, and organizing labor markets to increase productivity.
Labor Market Organization: State functions involve recognizing labor unions, setting working hours and wage levels, creating dispute resolution mechanisms, and instituting social security programs. These actions can create a more harmonious employer-employee relationship, boosting efficiency and enhancing production.
Labor Mobility Assistance: The state can help facilitate labor mobility by establishing information centers in rural areas to inform workers about urban employment opportunities.
Urbanization Management: The state plays a role in managing the challenges of urbanization associated with labor migration from rural to urban areas.

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Description

Explore the contrasting economic theories of Friedrich List and Karl Marx. This quiz covers key concepts such as the role of the state in economics, protectionist policies, and the abolition of private property. Test your understanding of these critical economic ideas.