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a survey
V 
   

 asco da Gama

Ô ¬

Ô ¬ ± East India Co.
Ô Dominant economic Philosophy of the west ±
Mercantalism  till the second half of the ¬ th
Mercantalism
century]
Ô 3 Gs
Gs Gold , Greatness and Glory«.
Physiocrats later half of the ¬th century]
Ô Physiocrats
Ô Doing away with 3Rs of Mercantalism
Mercantalism
Restriction, Restraint & Regulation.
¬ 




• Classical Economics ¬

¬ damSmith
damSmith
n Inquiry into the Causes and Nature of
the Wealth of nations ± David Ricardo,
J.S Mill. Malthus etc.

Free markets
markets forces of DD and SS
SS price
mechanism invisible hand
mechanism hand laissez
faire«..



¬ merican Declaration of Rights

• ¬
• Industrial Revolution and the French revolution
revolution
¬
?
?
• Division of labour, accumulation of capital and growing
international trade
• Benefits of freedom, democracy , a free state etc.
• The western world being more and more attracted to
free markets and the benefits of laissez faire
ÿ 
  

 




Ô Say¶s Law of markets

markets SS creates its own
DD
Ô Full employment of resources
resources no
voluntary unemployment
Ô Price mechanism clearing the market at
equilibrium quantities
Ô Wage price flexibility
¬
 


Ô Emergence of the free market capitalist economy in the

global arena ±
Ô led largely by British Industrial revolution
revolution primarily due
to the English colonial Empire

Ô Emergence of the ideology of communism/socialism as

an alternative to the free market capitalist economy
economy
Marx, Engels etc.

Ô Emergence of the neo classical revolution in

economics ± the marginal revolution
revolution lfred Marshall
Marshall
¬
.
 


 







Ô Russian revolution
Ô I world war ± increased military spending by the major
countries of the world
world diversion of expenditure from
investment
Ô Great Depression ¬



¬


33 ± unemployment ,under
utilized capacity, volatile prices etc.
Ô Hitherto unprecedented in capitalist history shaking the
foundations of the classical capitalist economy
Ô Led economists and policy makers world wide to
rethink the basics of classical market economics
juxtaposed against the fact the socialist Russia was
almost unaffected by the depression and was already
registering the highest agricultural output growth rates
in human history



 










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Ô The post II world war regrouping of the
world
Ô The break down of the colonial empires
Ô The emergence of new nation states and
their new growth agendas
Ô The division of the world into two power
blocks
Ô The entry of the big business enterprise
m









Ô High level and rapid growth of output
output
economic growth
Ô Full employment ± high level of
employment with low involuntary
unemployment
Ô Price
Price level stability &
Ô Exchange rate stabilty ?
 
 






Ô FISC L POLICY
POLICY use of taxes and govt.
expenditure
Ô Govt. expenditure consists of purchases of
goods and services, transfer payments etc. ±
govt. spending determines the relative size of
public and private sectors
Ô Taxes impact in two ways, one by affecting
people¶s incomes and two, by affecting prices
of goods & services & thereby incentives and
behaviour..
behaviour
Ô MONET RY POLICY
POLICY regulating the
money supply of the country by
managing money , credit and banking
system of the country
Ô Money supply influences many financial
and economic variables like interest
rates, stock prices, housing prices and
foreign exchange rates