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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.