Javier, Raven B. BSBM FM1C A brief history of economics •Economy is an interaction of people with value, particular production, distribution, and consumption of goods and services. •Adam Smith “Father of economics”. •According to Smith’s theory in 1716, every individual acts with their self-interest and it will generate the greatest wealth for the community. In addition, self-interest produces an “invisible hand” that controls market activities and eliminating the doubt of the government. •He advocated a completely free market, he also argued people were given the freedom to produce and exchange products as they liked and the markets were opened to domestic and foreign competition, people neutral interest would promote greater prosperity. Karl Marx • A communist. • He believed that capitalism stand for destructive cycle as more people were demoted to worker status and it leads to depressed wages, unemployment and economic depression resulting in a revolution and the state taking over production. Max suggest that the means of production should be owned and controlled by the workers. John Maynard Keynes •According to Keynes theory, is the economy’s demand decreased, it would lead to drop in prices, and wages as a result of weakening production and employment. •He also believed that the government should play a more active role in economics in order to promote employment and keep the economy stable. Milton Friedman •Friendman’s free market thinking. •He re-adopt free market of Adam Smith by developing economy, arguing for free trade, smaller government, and a slow, steady expansion in money suppli. Monetarism was named for his emphasis on monetary policy and the quantitative theory of money. Classical Economics •Adam Smith is the founder of classical economics. •It was developed after the birth of western capitalism. •The classical economic theory helped countries in transitioning from monarchical authority to self regulatory capitalist democracies. •In the 18th and 19th century, it represented to the primary economic schoo of though. •Classical Economics was concerned with the development of the theories to explain value, price, suppy, demand and distribution. Keynesian Economics •John Maynard Keynes is the developer of keynesian economics. •It emphasize the use of active government policy to manage aggregate demand in order to address economic downturns. •Macroeconomic •It can affects outputs, employment, and inflation by macroeconomic theory. •Economy’s demand decrease, prices, wages, production and employment decreased. Modern Economy Two branches 1.Positive Economy •Positive economy is a theory describes and explains a variety of economic occurrence, or the “what is” scenario. •Based on facts. 2. Normative Economies • focused on economic fairness and it emphasizes the “should be” or “ought to be” economy. References: https://www.britannica.com/topic/economics https://www.investopedia.com/updates/adam-smith-wealth-ofnations/#:~:text=Smith%20argued%20that%20by%20giving,than%20with%20stringent%20government %20regulations. https://www.investopedia.com/terms/m/marxianeconomics.asp#:~:text=Marxian%20economics%20is%20a%20rejection,maximizing%20profit%2C%20au tomatically%20benefits%20society. https://www.investopedia.com/terms/k/keynesianeconomics.asp https://www.investopedia.com/terms/m/miltonfriedman.asp#:~:text=Friedman%20argued%20for%20free%20trade,money%20became%20known%20a s%20monetarism. https://www.investopedia.com/terms/c/classicaleconomics.asp https://www.investopedia.com/terms/k/keynesianeconomics.asp#:~:text=Keynesian%20economics%20 is%20a%20macroeconomic,output%2C%20employment%2C%20and%20inflation.&text=Based%20on%2 0his%20theory%2C%20Keynes,economy%20out%20of%20the%20depression. https://www.investopedia.com/ask/answers/12/difference-between-positive-normativeeconomics.asp#:~:text=Positive%20economics%20describes%20and%20explains%20various%20econom ic%20phenomena%20or%20the,or%20%22ought%20to%20be.%22
