Chapter 4 - History of Economic Thought (OCR PDF)

Chapter 4 HISTORY OF ECONOMIC THOUGHT: PROGRESSIVE PERIOD Overview Progressive economic thought comprises a wide range of economic principles and doctrines that have evolved or been included into modern economic schools This...

Chapter 4 HISTORY OF ECONOMIC THOUGHT: PROGRESSIVE PERIOD Overview Progressive economic thought comprises a wide range of economic principles and doctrines that have evolved or been included into modern economic schools This chapter of your learning journey will of thought. provide you an outline of these fundamental ideas and how they relate to SOcial progress and political economy. Beginning with Bentham's Utilitarianism, which emphasizes maximizing general happiness and wel. being in economic decision-making, the course will delve into a variety of prominent theories. Another important subject is monetary policy, which focuses on the impact of money supply and central bank policies in influencing economic stability and growth. This chapter consist of the following units: Unit 1: Economic ldealisms Unit 2: Socialists' Economic Standpoint Unit 3: Marxian Dialectic Materialism Through this chapter, you will gain a greater understanding of progressive economic theory and its consequences on society by looking into these diverse economic concepts, allowing you to assess and evaluate different economic systems and their impact on social progress and economic well-being. Learning Outcomes After finishing this module, students will be able to: 1. Determine the underlying concepts of diverse idealisms. 2. Evaluate socialism's key contributions. 3. Critique Marxian doctrine froma dialectic materialist standpoint.  Unit 1 Economic ldealism Objectives 1. List theimportant key points of capitalism.. 2. Align Utilitarianism to the idea Evaluate the impact enterprise market. ofjustice. of economic conservatism on the free Inis chapter's first unit examines the origins of numerous economic ideologies, ranging from classical economics through neoclassical economic philosophy. These ideas have had a significant influence on S SOCIely, altering socioeconomic and political processes. As an essential concept in all disciplines, including economics, ideology seeks to effectively allocate finite resources for the welfare of society. Capitalism, Socialism, and Communism are three important ideologies that have affected human discourse, and they are frequently viewed as opposing ideologies. Economic Darwinism, Utopianism, Bentham's Utilitarianism, and other ideologies that appeared during the pinnacle of Political i2 Economy, such as Social Conservatism and Theological Economics, are all covered in this unit. A detailed consideration of these notions leads to a better grasp of thekey beliefs held by the Socialist and Marxian schools of thought. This lesson will provide you with important insights into the formation of economic concepts and ideologies, as well as their significance in molding societies throughout the course of time. The information provided will improve your knowledge of the many economic viewpoints and their enormous impact on society as a whole. Formation of Economicldealism ldealism refers to wide range of philosophical positions that arque for a the inseparability of "truth" from human experience and comprehension. It implies that truth is formed within a given environment or is intimately linked to ideas. ldeology, on the other hand, is a theory, concept, or set of individual or group views and values. Ineconomics, idealism serves as the foundation for all human professions, with the goal of optimizing the allocation of our limited resources for the benefit of society. According to Morgan (1931), idealism thrives when sufficient preparations have been made to allow it to resist and preserve a balanced existence crises disciplined and modest lifestyle prepares us with the courage to withsted unfortunate circumstances by converting riches into reservVes rather than yielding to urgent demands. Different schools of thought in economics have supported diverse socio-political and economic idealisms. These ideologieshave affected conomic thought and policy throughout history. For example, classical economics, which evolved in the 18th and 19th centuries, championet laissez-faire capitalism and the belief in open markets as the mos effective way to allocate resources. Economists like Adam Smith and David Ricardo advocated for the aforementioned perspective. The growh of industrialization and the resulting social and economic inequities resulted in the emergence of competing idealisms during the nineteenth century. Socialism, for example, emphasized the need of collective Ownership and control over the means of production in order to achieve a more, fair society. This philosophy was expressed in the works of writers such as Karl Marx and Friedrich Engels, who criticized the capitalism system and demanded a revolutionary social reform. Marxism, which drew on socialist goals and integrated a full explanation of class and historical materialism, struggle another prominent ideology that emerged during this period. Marx maintained that the capitalist mode of production necessarily leads to exploitation and alienation, and he advocated for the creation of a classless society based on common ownership of the means of production. Communism, an ideology closely connected with Marxist ideals, rose to popularity in various countries during the twentieth century, including the Soviet Union and China. Communism sought to create a classless society by abolishing private property and establishing a state-controlled planned economy. These examples demonstrate the wide diversity of economic idealisms that have influenced economic philosophy and policy throughout history. We can acquire insights into the fundamental principles and values that have shaped socioeconomic dynamics by analyzing the evolution of these ideologies. Types of Economic System An economic system serves as a framework for the creation, allocation. and distribution of capital, goods, and services within a certain geographical area or society. It consists of the institutions, organizations. decision-making processes, create a and Consumption patterns that community's economic structure. AS a result, an economic system is an essentlal component of the social structure as a whole. The providesS tabie bo a concise comparison of the three systems: main types of econoe Traditional and Cultural Values Limited custom-influenced Stability and technological policy decisions Preservation progress Traditional are largely Concerned with Use of renewable Economic growth the nation, tribe, resources and development or ethnic group. are lacking. Social integration The distribution of and community Economic money is cohesion opportunities are determined by limited. heritage. Inequality and gender Farming, hunting, discrimination and gathering practices have essentially remained unaltered over the centuries. Environmental factors are critical." Private control Encourages Inequality of of resources and entrepreneurship income and manufacturing and innovation. concentration of Capitalism means. wealth. Market i, 3. i Economy based mechanismsfor Externalities on the free efficient resource andmarket market. allocation. failures.  motive Individual liberty There are no Profit and competition. and economic social safety mobility are nets. Individual liberty intertwined. and autonomy. Individual Collective Greater social freedom and ownership or justice and choice are control of equality. restricted. Socialism resources and All members of producing Profit incentives means. society have for innovation equal access to are lacking. basic Economy that has been requirements. Centralized planned. decision-making Economic has the Wealth planning for the benefit of potential to be redistribution. inefficient. society. Essential servicesare provided by the government. Common Equality and Incentives for ownership of freedom from productivity and resources and exploitation. initiative are Communism producing lacking. means. Theabolition of social Personal There are no hierarchies. liberties are social classes. restricted due to Making decisions centralized society A as a grOup. authority. without astate or classes. Full-time There is arisk employment. of autocratic Distribution of control and commodities corruption. and services on an equal footing.  Bentham'sUtilitarianism Utilitarianism is a philosophical thought that advocates for acts that aximize satisfaction while reducina miserv or harm. Proponents of this Concept include Jeremy Bentham and John Stuart Mill. Bentham's theory nighilights the role of pain and pleasure in human behavior, which Milladds on by pushing for government involvement to rectify wealth imbalances and ensure a fair distribution of profits. Utilitarianism has had a large impact on several sectors, including economics, politics, and education. The central tenet of utilitarianism is that ethically correct behaviors promote happiness or pleasure for the greatest number of people. Utilitarianism is founded on three fundamental ideas:. i ii. The ultimate intrinsic worth is pleasure or happiness. Actions are correct when they foster happiness and incorrect when i*2s they bring unhappiness. Everyone's happiness is valued equally. :Act utilitarianism and rule are the two primary types of utilitarianism Act utilitarianism considers the effects of individual actions in utilitarianism. order to optimize overall utility or well-being. In contrast, rule utilitarianism addressesthe implications of following a set of rules or principles. Tiered 5pricing is an example of rule utilitarianism in the business sphere, where ar-different customers pay varying prices for a product or service based on their ability to pay. Act utilitarianism can be seen when pharmaceutical corporations create government-approved pharmaceuticals while taking tominor adverse effects into account in order to benefit a wider number of people. Act utilitarianism embodies Machiavelli's famous statement that the end justifies the means. It is crucial to highlight that. despite its popularity; utilitarianism has been the topic of criticism and ethical controversy. Critics claim that it may prioritize enjoyment over individual rights and justice issues. overall Furthermore, measuring happiness and determining which activities actually enhance utility are difficut and subjective undertakings. In practice, utilitarianism has influenced policy and ethical considerations in 2ir variety of disciplines. In economics, for example, cost-benefit analysis frequently incorporates utitarian principles by measuring the overall happiness or well-being provided by a certain policy or project. The pursuit of policies that attempt to increase societal benefit while minimizing harm In politics can be traced back to utilitarian reasoning. Econonmic Conservatism and Christian Liberalism Economic conservatism emphasizes fiscal responsibility and dok, control. Fiscal conservatives argue for policies that minimize overal government expenditure, prevent deficit spending, and balance national debt through balanced budgets. Conservatism's co values include veneration organic culture, hierarchy, authority, and for tradition, money. To guarantee societal stability and continuity, Conservatives strive toprotect institutions such as religion, parliamentary rule, and properv rights. In contrast, Christian liberalism translates into economic ideasthat promote the freedom to develop, associate, trade, and contract. In Christian teachings, the concept of equal rights serves as a solid foundation for the principle of equality before the law.While conservatism resists rapid change and favors the preservation of society traditions, Christianity has over the centuries contributed to the expansion of market freedoms and activities based on religious scriptures and ecclesiastical standards. Thomas More, a key figure in Christian liberal thinking, coined the term "utopian society" to describe an ideal society that does not exist in reality. Utopian societies are distinguished by beneficent governments that ensure citizens' safety and well-being. In these cultures, everyone is treated equally and with dignity, and everyone lives in safety and without fear. Economic conservatism favors the status quo, whereas maintaining Christianity promotes development and improvement. In practice, these ideas can be seen in taxation, welfare programs, regulation, and the balance of individual rights and collective duty. The degree to which economic conservatism or Christian liberalism impacts policymaking can vary according to a country's political landscape, cultural values, ano historical circumstances. Theocratic Economic Thought Economic ideas and theories that are affected or led by religious belo and doctrines are referred to as theocratic economic philosopny. includes economic systems and policies that are intended tobe consistel with religion ideals and teachings. Religious authorities or organizations may play a substantial influence in determining economic policies, rule and decision-making processes in a theocratic economic sys Theocratic economic theory varies according to societies or community pecific religious beliefs and traditions. Economic issues such as money  poverty, property rights, labor, in and social social justice may have different positions different religions. Religious beliefs, moral norms, and ethical considerations may guide economic actions and behaviors. There are and presentexamples historical theory. lslamic economics, for example. is based on of theocratic econoG and emphaszes themes such as Sharia law principles economic justice, interest prohibition (riba), and ethical business practices. The economy example, is inspired by Catholic of Vatican City, Tor social teachings that stress community well-being and individual dignity,. Reliaious ideals and standards interwoven into into are economic decision-making processes in theocratiC economic philosophy, with the goal of building a iust and equitable society s based on religious principles. The extent to which infused into economic policies and religious ideas, are practices, on the other hand, can r and diverse vary, readings of religious scriptures might result in varied economic methodswithin theocratic systems. Among the notable figqures. in the field of theocratic economic philosophy are: wic»lbn Khaldun: An Islamic thinker from the 14th century who wrote about therelationship between government, and economic religion, 9N3 prosperity. He highlighted the need of social cohesiveness and justice in economic progress. ii.Ayatollah Ruhollah Khomeini: The leader of Iran's Islamic.i Revolution who campaigned for an lslamic-based economic system. He advOcated for self-sufficiency, social fairness, and the r abolition of exploitation. Sayyid Abul Ala Maududi: A notable Islamic thinker who emphasized social welfare and equitable wealth distribution in an Islamic-based economic system. He advocated for the abolition of h interest-based financial systems as well as the construction of an equitable economic order. M Jean-Baptiste Colbert: King Louis XIV of France's finance itsminister:. who supported economic policies influenced by Catholicism and governmental interests. He emphasized government intervention in the economy in order to enhance national prosperity and progress.  theological and socio-politicalcontexts, these In their different of thneocratic economic theory..The personalities shaped the development theory can be found in economic policies. influence of theocratic economic welfare systems in a variety of religiously corporate practices, and social diverse countries and communities. Evolutionary Economics the evolution economics is a viewpoint that acknowledges role of individuals and Evolutionary society in and highlights the of economic systems that It opposes standard economic theories affecting economic behavior. decision-making and instead views psychological presuppose rational Thorstein Veblen. a as important drivers of economic behavior. variables from the United States, was an early proponent sociologist and economist do not He contended that economic processes of evolutionary economics. work but rather change throughout time. Veblen's remain static on economic the relevance of social and cultural factors emphasized rationality. economic theory's prevalent belief in conduct and questioned evolutionary economics the conventional economic approach, Unlike that economic activity and development can be viewed through contends This viewpoint draws analogies between evolutionary perspective. evolution, contending that economic economic systems and biological over time. It acknowledges that systems change, adapt, and transform and is influenced by human nature impacts economic decision-making however, psychological and social elements. It is crucial to emphasize, not always adhere to strict Darwinian that evolutionary economics does principles. While Darwin's theories have been associated with economics, in terms of adaptation and competition, there are discrepancies particularly inthe application of evolutionary notions to economics. Another well-known economist, Joseph Schumpeter, recognized He contendeu importance of entrepreneurs in driving economic proress. and business that economic development is dependent on invention While ownership, and that economies run in cycles of creative destruction, fo influenced by evolutionary thought, Schumpeter's perspective more on the role of individuals, particularly entrepreneurs, in determining economic processes.  Overall, evolutionary economics an alternative paradigm for offers comprehending economic phenomena by highlighting the dynanic nature onomicsystems and the impact of psychological and social elements on economic behavior. It calls into question the concept of pure rationality ald emphasizes thesianificance of examining economic processes in the Context of a larger societal backdrop. EvOlutionary economics has contributed to various disciplines within economic subfields as economics, behavioral such institutional etonomics, and the study of technological change have benefited from evolutonary economics, it has revealed how institutions, social norms, and cultural elements influence economic Outcomes. Economists get a more thorough grasp of economic dynamics and can constructmore realistic models and policy recommendations by taking into account the evolutionary nature of economic systems. It is important to recognize that evolutionary economics is a varied and dynamic field with continuous research and controversies. Scholars continue to investigate and improve the concepts and method ologies within this paradigm, thereby improving our understanding of the intricate relationships between individuals, society, and economic systems. Key Takeaway The main takeaway from the lesson on Economic ldealism is that ideological perspectives and have a strong influence on economic beliefs systems.Throughout history, much economic idealism such as capitalism, Socialism, and communism have formed human discourse and influenced these idealisms Socioeconomic and political dynamics. Understanding allows for a more in-depth understanding of the underlying concepts their enormous impact on espoused, by many schools of thought and SOciety as a whole. Economic idealism alsoemphasizes the significance of society distributing finite resources for the betterment OT successfully perspectives. While taking into account various economic