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Lou Osagie
Eco 105 Assignment
Question 1: Why do you believe Adam Smith the Father of Economic Liberalism?
Question 2: Write a critique about the views of Karl Marx and John Maynard Keynes on economic
thought. Why do they differ?
Question 3: Conceptualize the word “Mercantilism”
Q1. Adam Smith is considered to be the Father of Economic Liberalism is based on the fact that
Economic Liberalism is an economic system based on organizing the economy with the decisions
being made by individuals of the society rather than organizations. It allows economic policies such
as freedom of movement, but is based on a strong support for a market economy. Economic
Liberalism is mostly associated with support of free markets and private ownership of capital goods.
Adam Smith formulated some ideas such as
1. The government should have minimal interference in a market economy.
2. That every individual should be left with their own economic goods instead of being controlled
by the government.
3. Economic actions were mostly based on the self –interest of individuals (invisible hand), that
allowing them to act without restrictions would produce double the results provided that there
were minimal standards.
4. That private property and individual contracts were the basis of economic liberalism.
Due to Adam Smith’s ideas it moved the society into a capitalist economic system after the end of
the mercantilism system in the late 18th century that is why he is believed to be the Father of
Economic Liberalism.
Q2. Karl Marx views on Economic Thought were;
1. He saw an end to capitalism before it broke down in 1848.
2. He was convinced about the breakdown of capitalism and the inevitable rise of a communist
takeover.
3. He also advocated Materialism and not holding onto ideas but grounded on the social and
physical environment.
4. Marx employed a labour theory of value, which holds that the value of a commodity is
the socially necessary labour time invested in it. In this model, capitalists do not pay workers the
full value of the commodities they produce
5. He had theorized the gap between the value a worker produces and the wages is a form of
unpaid labour, known as surplus value.
6. The role of distribution on the surplus product and surplus value in various types of economic
systems.
Lou Osagie
Eco 105 Assignment
John Maynard Keynes views on Economic thought were;
1. To solve the Great Depression, a reduction of interest rates (monetary policy)
2. Also a government investment in infrastructure (fiscal policy)
3. He advocated a mixed economy predominately the private sector, but with intervention
from government during recessions
4. He saw the economy as unable to maintain itself at full employment and believed that it was
necessary for the government to step in and put under-utilized savings to work through
government spending.
5. Investment by government in infrastructure injects income into the economy by creating
business opportunity, employment and demand and reversing the effects of the
aforementioned imbalance.
The difference between Karl Marx and John Maynard Keynes is that Karl Marx wanted
capitalism replaced for socialism and communism, while as John Maynard Keynes was trying to
save capitalism by contributing that the capitalists had to impose policies that strengthened the
economy.
Q3 Mercantilism is an economic system of government that originated from Bullionism which can be
defined as an economic theory that defines wealth by the amount of precious metals owned.
Mercantilists believed a country’s wealth lied in the accumulation of gold and silver. Nations who lacked
accumulated by trade locally and over long distances. Mercantilism also had advantages and
disadvantages.
Advantages
1. Different types of goods due to trade.
2. Development of new technologies and products.
3. Positive cultural exchanges.
Disadvantages
1. High tariffs, especially on goods.
2. Prices varied in proportion to the quantity of money.
3. Limiting wages, and exporting subsidies.