History of economic thought

History Of Economic Thought

Provide a clear summary of the main ideas of the major 18th Century French economists and show how many of their ideas foreshadowed the thinking of Adam Smith and other classical writers.

French economists of the Enlightenment epoch developed the fundamental concepts of the modern political economy and directed the development of economical thought proceeding from the objective natural laws. Unlike mercantilists, who believed that money (and their equivalent gold and silver) were the source of material wealth, Physiocrats believed that the only wealth could be land. This was the main issue of divergence in the principles of these two trends. French economists advocated tax on land possessions and were in favor of promoting free trade policies in order to establish true competition. French economists who belonged to Physiocrats divided society on three classes: agricultural (the only productive class), the class of artisans and the class of landowners. They did not consider industry to be productive as it was reusing and modifying the products "received from the land." In addition French economists of the 18th century were the first who used systematic and scientific approach to explain the main economical concepts: natural law, freedom of trade, the colonial system, the distribution of wealth. They proposed that the price of goods is established by natural principles of market economy: by competition, by demand and offer. French economists proposed that only competition could regulate prices. So we can conclude that French economists of the Enlightenment epoch developed a basis of political economy using the historical and materialistic approach on the hand with principles of civil society which had to expand on all sphere of life, not only political relations but also economy.

2. Outline Smith's moral and philosophical foundations as initially expressed in his Theory of Moral Sentiments and later laid the groundwork for his Wealth of Nations.

In 1759 Adam Smith published his first famous scientific work "Theory of Moral Sentiments," which represented correlation of his philosophical and economical ideas. The ethical aspects of this work were directed against puritan Christian morality and Christian ethics, based on the fear of after death punishment. Smith instead proposed the theory of equality, according to his views people were naturally equal and principles of morality had to be applied to everyone equally. Smith ideas originated from absolute or natural laws of people's behavior, but nevertheless he didn't use the theory that ethics is based on social and economical order of particular society. Smith neglected religious morality and "innate moral sentiments" substituting them by the principle of sympathy. Smith tried to explain people's behavior by their ability to put them on place of others. In addition, he argued that human behavior is mainly based on the pursuit of material profits.

According to Smith the society could develop only in case of existence of freedom and equality. These rational principles according to Smith could stimulate objective development of society and development of economical relations. His philosophical and moral ideas of course influenced his political economy. Smith's political economy based on freedom of competition and Smith principles of political economy based on the natural needs of developing capitalist society of Great Britain in many respects defined the economical policies of the major 19th century capitalist states.

3. Provide a sense of the historical context and the nature of the main debates in political economy during the first quarter of the 19th Century in Britain and how these debates shaped the complexation of early classical economic thought.