Continuity/Discontinuity of History of Economics

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Table of Contents

Introduction
Continuity vs. Discontinuity
Conclusion
Works Cited

Introduction

Alfred Marshall (“Principles of Economics” 21) gave his interpretation to the classical economists as ideally early and crude supply and demand theorists, with the demand side in its earlier stages of development. It is from this interpretation that the continuity debate emerged.

As Marshall indicates, the classical economics approach to the theory of value and distribution was different from that of the Marginalists. Whereas the Marginalists in their framework symmetrically treated profits and wages, the classical economists explained profits in terms of two data sets; real wage and production in progress. Profits are therefore considered as residual income.

Continuity vs. Discontinuity

The classical economists more specifically Ricardo and Smith were more interested in the laws that govern the capitalist system characterized by class structure: landowners, workers, and the growing class if capitalists. Under the classical, the theory of value was formulated to ascertain the dominating factors at work and assess their interaction.

For them matter cannot be created by man instead it can only be changed from one form or moved. Production of goods involves destruction and the actual cost of a commodity is reflected in terms of the commodity destroyed while in the process of its production.

The Neoclassical Economics (NEC) gained its prominence between 1880 and 1890. From this period onwards it remained largely static. Major writings of Alfred Marshall, Richard T. Ely and E.R.A Seligman were rewritten over a period of four decades with very few changes. Neoclassical economics in practice has evolved into a dismal science of choice with most of its choices bad.

Under the neoclassical economics if you want something good, then you must give up something good in exchange. The major theme underlying the neoclassical approach is trade off, in order to achieve efficiency, equity must be sacrificed, to attract business then the government must lower its tax rate, and to prevent inflation a considerable majority of the population must remain unemployed.

To a large extent neoclassical economics represents a continuity of the classical ideas. There is a close relationship between modern capitalism and the notion of free markets, private tenure and common land rights and demand and supply of goods and services. Productivity is a necessity in the modern world as goods and services are exchanged at a price in the market.

The price used for the exchange of goods and services is determined by various factors. As explained by Scissor ……….., the prices that producers are willing to receive in exchange of the goods and services it determined by the cost of producing the goods and services and they may include all resources used such as exertions of different kinds of labor and waiting on the capital used in production.

The goods are exchanged in a market in which it is regarded as a place in which manufacturer sell goods to wholesalers that in return sale to retailers or final consumers. The motivating factor to the exchange of the goods and services is the price that could also be determined by the future expectations.

Marshal Scissor notes that the market price of commodities in any given market could also be determined by the stability of equilibrium of a given normal demand and supply (“Principles of Economics” 21).

The equilibrium price of commodities in the market keep on fluctuating based on underlying factors. For instance, increased supply of goods and services leads to an decrease in the equilibrium price while an increase in the demand of the same commodity could result in an increase in the equilibrium price unless it is closely associated with an equivalent increase in supply (Heilbroner 165).

Individuals that were made landless by the expansion of the European land tenure are compensated. The analysis of classical economics begins with the distinction between a commodity market price which tends to continuously fluctuate on a daily basis and the natural price of the same good which has a mea upon which the market price revolves.

From this viewpoint, classical economy offers two explanations on the determinants of a commoditys natural price. Basic economics recognizes the fact that there are 3 factors used in the production to generate social wealth. The principle of substitution that exist in the neo-classical economics is a continuation of classical economics since it is applied in almost every field of economic enquiry.

The meaning of labor remains the same both in the classical and the neoclassical school of thought. However, the outcomes gained due to the human business which is based on combination of land and labor are meant to include land now. In the contemporary neoclassical economics, land as a factor of production has been eliminated from the equation altogether but demand and supply has taken its place.

However, there are sufficient grounds to revisit the use of the terms rent and land as they were in the classical economics of the 19^th century. Rent refers to the additional output produced by the collective enterprise that has the potential to provide the required revenue to support public services, if it were to be collected in the form of taxes.

Shifting taxes from taxes and labor to land markets would be more efficient and would be less painful to the tax payers. Economic rent is the excess output created by the society and it rotates in the market until the time when it finally rests on land sites. This has the effect of raising land prices. Economic rent is a consequence of the societys collective action rather than the individual enterprise of the title holder.

The classical economists had a more favorable view of land value taxation. Smith (230) wrote about ordinary land rent in addition to ground rents. These represent revenue sources that can best bear taxes if they are imposed on them.

It is possible to argue that the failure to tax all elements of economic rent has destructive impacts. According to the classical economists, rent collection should be the sum of interest and inflation at the bare minimum. If this does not happen, then the public has the incentive to speculate in a way that will disrupt urban settings more than they constitute in equity.

Conclusion

In volume one of capital, Marx (56) formulates an influential image of the working day in an attempt to explain the link between reproduction and exploitation in the capitalist economy. He develops a conceptual framework that explains the link between reproduction and exploitation under the capitalist system.

He considers the entire social labor time as the single work day of an average worker, viewed from three different standpoints; the profitability accruing to the capitalist viewed in terms of the division of the value added between profits and wages, reproduction standpoint in terms of the necessary and surplus labor time and finally exploitation in terms of the unpaid and paid labor time.

Works Cited

Heilbroner, Robert. The worldly Philosophers. 7 edn. New York: Touchstone. 1997. Print.

Marx, Karl. Capital, Volumes I, II, II. New York, NY: Random House. 1976. Print.

“Principles of Economics.” Principles of Economics. Ed. Alfred Marshall. 8th ed. London: Macmillan and Co., Ltd., 1920. Library of Economics and Liberty. Web.

Smith, Adam. An Inquiry into the Nature and Causes of the Wealth of Nations. New York, NY: Random House, 1937. Print.

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Continuity/Discontinuity of History of Economics

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