History of Economic Thought: A Selective Overview - Essay Sample

Introduction

History of Economic Thought can be based on the theories and perspective from thinkers who were driven by economics and political economy. It is a soco9al science filed that encompasses many schools of economics thought philosophers thoughts (Keynes, 2018). The main aim of economic theory was to deal with problems that the society faced, in their desire to fulfil their needs from the scarce resources. History of economic thought was selective in a manner that, it prompted the readers to interpret various approaches. It also had steps which required interpretation like historian's system value, prejudices, and biasness. For instances, controversies were found to be interesting than agreements. Historian and economist came up with views based on absolutist and relativist approaches. They formulated theories to describe theories of economic alongside sociology knowledge.

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What were the views of John Maynard Keynes on fiscal policy?

Maynard Keynes believed that economic decisions in private and public influences aggregated demands. He played a significant role in trying to solve the problems of so-called full unemployment. According to John Maynard, Keynes monetary policies were sometimes powerless and that economic recession could be stopped by government interventions (Keynes, 2018). His career views spanned to government interventions and academic works to mainstream financial problems. After the end of World War I, historian and economics had different opinions on how to solve the issues of unemployment in the country. A Keynesian economic theory which states that governments can directly influence macroeconomic productivity by raising or decreases national spending and taxation levels

The Keynesian theory is based on the idea to balance taxes and public expenditure; for instance, creating a stagnant economy by reducing taxes can increase the level of inflation (Keynes, 2018). The increase of money in the economy raised demand for certain goods and services by consumers making people buy things that have not changed the value with more and more money.

When the economy of a country is slowing down, and the levels of unemployment are rising, a government may decide to provide subsidies to companies and decrease the amount of taxation to encourage and fuel economy increase. By making such economic goals, a government consequently increases employment and creates and jobs rising wages, and therefore, the money is pumped into the economy. Further, Keynesian theory revealed that unemployment and real output was affected by the changes in the aggregated demands and all had a short-run effect. It is also evident in the Phillip curve where the idea is portrayed to as when the inflation rises just after a fall in employment opportunities starts to show.

In addition to the multiplier effect, the Keynesian theory by John Maynard separated investments and private saving into two separate functions. This is why some economist, modern economist inclusive devalued Keynesian theory about the multiplier effect because the effect drained the economy, and so it becomes compared with spending deficits. Several other economists have criticized the approach on multiplier effects terming it as powerless because the government would use it's saving and revenue and raises a tax to pay off on spending in a bid to regulate or reduce inflation.

Adam Smith Views in the Wealth of Nations

Adam Smith made an essential document published in 1776 in his contribution to the wealth of nations (Rosenberg, 1965). On Adam's gift, he came up with the mercantilism systems, which he felt that wealth was finite and fixed and therefore the only wat to proper globally was to hoard traffic of goods and gold (a measure of currency at that time) from abroad. In his theories, countries were supposed to sell assets to other countries, but it discouraged buying products from other countries. Predictably, his approach is what is evident in the modern economist, retaliatory tariffs that control inter-trading amongst various countries in the world.

Adam Smith also foresaw the significance of the division of labour and how it can have a substantial impact on the level of productivity and industrialism (Smith, 2010). Adam Smith explains in him "An Inquiry into Nature and Cause s of Wealth of Nation" that the differences between a philosopher and a street porter are the impact of the division of labour and its consequences (Rosenberg, 1965). According to Smith, division labour was a dynamic economic engine. Smith criticized mercantilists because of the wrong perception of the wealth of nations. He further, considered the real wealth of nations as annual produce from the labour a land in the society. The view of this consideration was to air that a higher productivity thriving countries that had a division of work was the productive power of labour. Still, in his book, the wealth of the nation Adam smith defined invisible hand as to where the actual economy can work better in a free market where every person does what they want in their interest. Adam Smith thought that self-interest as per individual would make government work better in a comparatively and leave people alone to do work they wanted to do (Rosenberg, 1965). Their invisible hand by Adam Smith could let people work alone and have the freedom to compete freely. Free competition would lead to a positive output, and therefore, the standards of living would increase consequently. The free market further cement that the government would not impose restrictions and other related regulations to their traders. Adam Smith said that the free market scenario would prompt every trader to provide high-quality goods competitively and will also make the other traders add value and quality to their rights for a better market place.

John Keynes believed that because of the rigidity of prices fluctuation, consumption and spending, and government spending or investments; therefore, the overall output would fluctuate. Therefore, a government decides to increase its expense, and then the other components remain stagnant in terms of prices it will lead to fluctuation. Keynesian theories also included the multipliers effects as introduced in the 1930s. Multiplier effects explained the manner at which the government impacts directly to the wealth of a nation even if it decided to deal with several minor projects to the public. For instance, if a government chooses to build dams at $ 100 million, then half of the money, is likely to end up in the public pockets, where the labour force will take the amount that will remain after saving to for various business activities.

Similarities Between Adam Smith and John Maynard Keynes on the Fiscal Policy

Keynes and Smith have different views which seemed diametrical opposite, but they all contributed towards economic prosperity with many of their opinions looking similar. Both of them knew that the main success of commercial was the circulation of money. They all propagated through better living and creation of employment to people. Adam brought the idea of having a division of labour where most experienced people can be employed corresponding to their expertise (Rosenberg, 1965). Therefore, their other labour force would also have employment and have a chance to get money for their daily needs. On the other hand, Keynes diagnosed rage issues un their shortage of aggregated demand and came up with the problem that the government would control the shortfall in spending and borrowing. He contributed most significant ti to the United States economy just before entry in, to the Second World War

Both Keynes and Adam made several governments gave economic policies credit and materials. They also could be labelled as political players who were more fueled to help the society of the impacts of the economy. Adam brought the idea of the wealth of the nation as a political, economic revolution that made people connect to economic growth but for their self-interest. Both Adam and Keynes started their theories and views to help their own countries. They did not know that their opinions would enjoy global interest and application. Both of them facilitated the ideas of capitalism, and also they both were the greatest economist of all time.

Different Between Adam Smith and John Maynard Keynes on the Fiscal Policy

Adam believed that when the government does away with restriction and regulation, people will work in a free-market scenario. Further, it would prompt them to operate competitively and have a higher production input. On the other hand, John Keynes thought that re government need to introduce tariffs to trade internationally. Borrow loans and regulate spending. Keynes believed that the government is supposed to help the countries financial status. According to Keyes's, people should save their additional income for future prosperity and increase their spending on the country's economy as a whole.

On the other hand, Adam Smith believed that government intervention would not work in a free market where an individual would be encouraged by self-interest. He further said that the government would act as the invisible hand to foster people to prosperity endeavours and create goodness to people. His idea was related to the general expansion in the accumulation of wealth, labour market, and productivity.

Instead of the invisible hand as per the view of Adam smith Keynes, governments would engage in economic prosperity by spending. It is only in an event where the need is to put money in the private sector pockets so that the demand for goods and services could contribute to higher. The ideas were also evident and functional as President Franklin D. Roosevelt gave the same remedy during the entry of the Second World War. The countries intended to provide ammunition and guns to other countries because it was the time the demand was very high. Adam believed that it was not for the benevolence of the butcher that people would have meat on their table but the self-interest of the butcher. These views seem to be the same; it is only that it is opposed to John Maynard Keynes.

What The Views of Modern Economists on Fiscal Policy Are As Published In Today's Textbooks And Professional Journal Articles?

Today the are several ideas on the fiscal policies and the way it is applied. Much work is all about the reflection of the works already mentioned earlier by the political economist of ancient times (Keynes, 2018). Today, the central banks and international organization are the major players in the economic status of the countries (Keynes, 2018). Some of the ideas brought today come from the past learnt lesson, and therefore, they are discussed by traders and government organizations. The high depression in the United States lead to economic crises, and there were a lot of people who were left without jobs, but after remedying the ideas given by John Keynes, the US enjoyed its rise economically and became dominant after the Second World War (Keynes, 2018). Many people like Pail Krugman have hailed the Keynesian theory, which seems to be used by many countries today (Mankiw, 1991). Modern Macroeconomics is based on the new Keynesian model pf fiscal policy to provide the public with social welfare programs and public works to facilitate a better place to work and realize better revenue.

The new model or rather the fashioned Keynesian model of fiscal policy works in determining the government decision after a budget is made annually (Wray, 2015). Further, the government knows when the country's economy is experiencing a recession or a or an asset bubble. For instance, countries like China and Australia are about to experience an economic bubble beca...