2. Tea Party Platform
•Allowing free markets to prosper unfettered
by government interference is what
propelled this country to greatness with an
enduring belief in the industriousness and
innovations of the populace.
• http://www.teaparty-platform.com/
3. J.M. Keynes
•Practical men, who believe themselves to be
quite exempt from any intellectual influence,
are usually the slaves of some defunct
economist.
8. It's no secret that in New York during
the last 30 years there has been a
tragic exodus from the churches into
materialism, secularism and
humanism.
-Billy Graham
An attitude to life which seeks fulfillment in
the single-minded pursuit of wealth - in
short, materialism - does not fit into this
world, because it contains within itself no
limiting principle, while the environment in
which it is placed is strictly limited.
-E. F. Schumacher
10. Mercantilism
• Thomas Mun (1571-1641)
• Measure of societal wealth
• Precious metals
http://timerime.com/en/event/828184/Thomas+Mun/
11. Mercantilism
• Thomas Mun (1571-1641)
• Measure of societal wealth
• How can these be obtained?
• Discovery
• Capture
• Trade
12. Mercantilism
• Thomas Mun (1571-1641)
• Measure of societal wealth
• How can these be obtained?
• Role of the government
13. Two flaws
• The Price-Specie Flow Mechanism
• David Hume (1711-1776)
• A “hoarding” mechanism?
https://en.wikipedia.org/wiki/File:Painting_of_David_Hume.jpg
14. Two flaws
• The Price-Specie Flow Mechanism
• The wrong source of wealth
• Adam Smith (1723-1790)
https://en.wikipedia.org/wiki/File:AdamSmith.jpg
15. Two flaws
• The Price-Specie Flow Mechanism
• The wrong source of wealth
• Adam Smith (1723-1790)
• It is not by augmenting the capital of the
country, but by rendering a greater part of
that capital active and productive than
would otherwise be so, that the most
judicious operations of banking can
increase the industry of the country.
19. Smith’s role for
government
• All systems either of preference or of restraint,
therefore, being thus completely taken away, the
obvious and simple system of natural liberty
establishes itself of its own accord. Every man,
as long as he does not violate the laws of
justice, is left perfectly free to pursue his own
interest his own way, and to bring both his
industry and capital into competition with those
of any other man, or order of men.
20. Smith’s role for
government
• People of the same trade seldom meet
together, even for merriment and diversion,
but the conversation ends in a conspiracy
against the public, or in some contrivance
to raise prices.
21. Not a minimal role
• But limited to situations of market failure
• Unfortunately, not well specified during
the period of the Classical Liberals
• John Stuart Mill (1806-1873)
• Were I framing a code of laws according
to what seems to me best in itself ... I
should prefer to restrict what any one
should be permitted to acquire ...
22. Schools of Thought
• Mercantilism
• Classical liberalism
• Neo-classical economics
25. Neo-classical economics
• Refinement/mathematization of economic
models
• William Jevons (1835-1882)
• Leon Walras (1862-1910)
• Carl Menger (1840-1921)
• Founder of the Austrian School
• Rejected labor theories of value
https://en.wikipedia.org/wiki/File:Car
lMenger.png
26. Neo-classical economics
• Refinement/mathematization of economic
models
• Final model assumptions
• Many actors
• Homogenous products
• No barriers to market entry/exit
• Symmetric information
• No external costs/benefits
27. The role of government
• Limited
• Correction of market failures
• Imperfect competition
• Sherman Act, 1890
28. The role of government
• Limited
• Correction of market failures
• Externalities
• Henry Sidgwick (1838-1900)
https://en.wikipedia.org/wiki/File:
Henry_Sidgwick.jpg
29. The role of government
• Limited
• Correction of market failures
• Externalities
• Arthur Pigou (1877-1959)
https://en.wikipedia.org/wiki/File:
A.C._Pigou.jpg
30. The role of government
• Limited
• Correction of market failures
• Asymmetric information
• George Akerlof (1940- )
https://en.wikipedia.org/wiki/File:
George_Akerlof.jpg
31. The role of government
• Limited
• Correction of market failures
• Was this universally accepted?
• Walras
• Nationalization of land
36. Marx and Marxism
• Karl Marx (1818-1883)
• Stages of development
https://en.wikipedia.org/wiki/File:Karl_Marx_001.jpg
37. Government in the final
stages
• Socialism
• “The proletariat seizes from state power
and turns the means of production into
state property ...”
• The state as the agent of coercion
38. Government in the final
stages
• Socialism
• Communism
• “The state is not 'abolished'. It withers
away.”
• A maximal state as tool to obtain a
minimal state
39. Schools of Thought
• Mercantilism
• Classical liberalism
• Neo-classical economics
• Socialism/Marxism
• Keynesian
40. J.M. Keynes
• 1883-1946
• Father of modern macroeconomics
• Failure of aggregate demand
https://en.wikipedia.org/wiki/File:John_Mayna
rd_Keynes.jpg
42. Schools of Thought
• Mercantilism
• Classical liberalism
• Neo-classical economics
• Socialism/Marxism
• Keynesian
• Chicago School
43. Chicago School
• Intellectual forebear
• Friedrich Hayek (1899-1992)
https://en.wikipedia.org/wiki/File:Friedrich_
Hayek_portrait.jpg
44. Chicago School
• Intellectual forebear
• Founder
• Milton Friedman (1912-2006)
https://en.wikipedia.org/wiki/File:Portrait_o
f_Milton_Friedman.jpg
45. Chicago School
• Intellectual forebear
• Founder
• Opposition to “naive Keynesianism”
• Complexity of stabilization policy
46. Chicago School
• Intellectual forebear
• Founder
• Opposition to “naive Keynesianism”
• Importance of monetary policy
• Monetary growth targeting
47. Schools of Thought
• Mercantilism
• Classical liberalism
• Neo-classical economics
• Socialism/Marxism
• Keynesian
• Chicago School
• (Social) Welfare Economics
48. (Social) Welfare
Economics
• Amartya Sen (1933- )
• Redistribution policies
• Equality of capabilities
https://en.wikipedia.org/wiki/File:Amartya_
Sen_NIH.jpg
49. Where are we now?
• No closer to an answer
• Austerity debate
• Short-term gains vs. long-run costs
50. Where are we now?
• No closer to an answer
• Austerity debate
• Redistribution
• “We are the 99%”
51. Where are we now?
• No closer to an answer
• Austerity debate
• Redistribution
• Pollution
• Global warming
• Fracking
52. Where are we now?
• No closer to an answer
• Austerity debate
• Redistribution
• Pollution
• Competition policy
• Apple and the DoJ
• TTIP
53. Why?
• The political problem of mankind is to
combine three things: economic efficiency,
social justice and individual liberty.
• J.M. Keynes
• Are these always compatible?
54. In the end ...
• Politics trumps economics though
economic reality will eventually have its say