Sunday, April 15, 2012

Essay on Economics

Essay on Economics

Economics as any other science has its own history of development, which started during ancient times. However, more distinct outline as a separate field of study economics received in the 18th century, when the works of the first and famous economists appeared. Indeed, the fathers of economics are considered Adam Smith, the author of the famous work “Wealth of Nations”, David Ricardo, John Stuart Mill, Jean-Baptiste Say and other followers of the Classical school of economics. Despite of the fact that Classical theories are not very much applied in the modern economy, the importance of them cannot be underestimated as they mark the beginning of the economic theory. These scientists established one of the two main branches of economics – macroeconomics. They studied the interrelation of supply and demand, the reasons of unemployment, the role and functioning of money in economy, the role of government and etc.

In the Middle Ages, there began to be two more or less separate but overlapping trade regions in Europ: the traditional southern one, dominated by the Arabs but also involving Italy, and a northern one, centered on the Baltic Sea and involving trade with England, Scandinavia, Poland and Russia. Cities began to grow again, and gradually self-sufficiency decreased in favor of the beginnings of an urban economy. The rise of the guilds, or associations of craftsmen, helped to move power from the country to the city. Still, even at the very end of the Middle Ages, the great majority of people still lived on small farms and in small villages, out in the country, and got most of their food by growing or herding it themselves.

Economic thought developed from feudalism in the Middle Ages to mercantilist theory in the renaissance, when the prevailing wisdom advocated that trade policy be structured in order to further the national interest. Britain had gone through some of its most troubling times through the 17th century, enduring not only political and religious division in the English Civil War, King Charles I's execution and the Cromwellian dictatorship, but also the plagues and fires. All these events have reflected on the economical thought of the time. During British enlightenment many economic views have changed. Unlike the mercantilist thinkers, wealth was found not in trade but in human labor. The first person to tie these ideas into a political framework was John Locke. The decline of influence of Catholic church in Europe and growth of the cities have significantly influences politics and economic thought of the time.

Classical economic school is represented by Adam Smith, David Ricardo, J.B. Say, Thomas Robert Malthus, John Stuart Mill and other economists. The work by Adam Smith, “father of economics”, which was written in 1774 and received the name “An Inquiry into the Nature and Causes of the Wealth of Nations” indicated the birth of Classical economic theory. Since that period of time and until Adam Smith’s writings have been enormously influential. Mentioned for the first by Adam Smith in his book, the expression “invisible hand” has been widely used to describe free market, meaning a market that is free from intervention of government, a market that is guided by self-interest and competition. However, idea that “invisible hand” means competition developed not during the period when Classical Economists lived and worked, but much later. That is why it is fair to conjecture that Adam Smith did not quite understand the whole mechanism of the free market, but only some parts of it. In the book “Wealth of Nations” Smith rights “he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention”. This citation evidences the importance of self-interest, which makes all economic agents be engaged into economic activity. Another prominent representative of Classical economic theory is David Ricardo, the author of the book “On the Principles of Political Economy and Taxation” (1817).

It wasn’t until Ricardo read the book by Smith when he started writing down his own thoughts. For several years Ricardo was engaged into the correspondence with another notable figure in Classical economic theory – Thomas Robert Malthus, the author of the book “An Essay on the Principle of Population” (1798). As well as Smith and Ricardo Malthus also imported his contribution to economics. The main idea of his works was that the population grows faster than food supply necessary to satisfy people’s needs.

Order custom essay on Economics