Economic Thought – Flashcards

question
Industrial Revolution
answer
An era of rapid industrial development, which followed the agricultural Revolution. Began in Great Britain.
question
Factors of production
answer
A favorable combination of land, capital, and labor. Land refers to all natural resources (G.B had a rich supply of resources such as coal and iron ore) Capital includes money, tools, machinery, and inventory. Labor → fueled by a growth of population an migration.
question
Mechanization
answer
Automatic machinery being used to increase production.
question
Factory system
answer
is a method of manufacturing first adopted in England at the beginning of the Industrial Revolution in the 1750s and later spread abroad. It replaced the putting-out system. The main characteristic of the factory system is the use of machinery, originally powered by water or steam and later by electricity.
question
Middle Class (characteristics)
answer
Well educated. Consisted of bankers, lawyers, engineers, professors, and merchants. Over time gained economic standing and increased social influence and political power. Their children attended school, where they were trained for high-level jobs.
question
capitalism
answer
describes an economic system in which individuals or corporations, rather than governments, control the factors of production. Businesses and the means of production are privately owned and operated.
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commercial capitalism
answer
Happened before the Industrial revolution. When most capitalists were merchants who bought and sold goods
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industrial capitalism
answer
Happened during the Industrial revolution. When capitalists became more involved in producing and manufacturing goods.
question
Division of labor
answer
Factory owners divided the manufacturing process into steps. They hired unskilled labor and assigned a step to each worker. This division of labor increased production.
question
interchangeable parts
answer
are parts (components) that are, for practical purposes, identical. They are made to specifications that ensure that they are so nearly identical that they will fit into any assembly of the same type. One such part can freely replace another, without any custom fitting
question
mass production
answer
The system of producing large numbers of identical items
question
corporations
answer
Business formed groups, allowed people to buy stock in their companies. - Made it much easier to raise the money needed to run and expand a business. -Were attractive to investors -Banks played an increasingly important role in financing corporations.
question
monopoly
answer
When a corporation gained almost complete control of a production or sale of a single good or service.
question
cartels
answer
Business combination that are able to control every stage of entire industries.
question
depression
answer
is a sustained, long-term downturn in economic activity in one or more economies
question
Mercantilism
answer
Mercantilism was the economic theory based on the belief that the world contained only a fixed amount of wealth. In order to increase its wealth a country had to take some wealth away from another country.
question
Adam Smith
answer
was a Scottish political philosopher and early pioneer of the political economy. He wrote many books, but is most famous for writing The Wealth of Nations in 1776 - Smith theorized that people's natural selfishness would be good for the economy as long as the government did not try to control it. Without government control, he predicted that people would naturally produce goods that were most skilled at producing and trade for other goods and services. Called the specialization of labor. -Laws of supply and demand would regulate prices and people would change their production and trade patterns accordingly, so that they would make the most money. -People's self interest would lead to the economic betterment of the whole society.
question
free enterprise
answer
An economic system where few restrictions are placed on business activities and ownership. People would be free to engage in whatever business they chose. They would be able to run the business for their greatest advantage . The result would be that investors, and owners would make profit, laborers would have jobs, and consumers would buy better goods at lower prices. This system justified competition unrestricted laws by laws, regulations, or government controls.
question
Thomas Malthus
answer
an anglican clergyman. He wrote that population increases present the greatest obstacle to human progress. Despite famines, epidemics, and wars, he argued people still multiply more rapidly than the food supply increases. Believed that human misery and poverty are inventible
question
David Ricardo
answer
British economist. Wrote that the working class poverty is inevitable. He stated in his novel "Principles of Political Economy and Taxation" (1817) supply and demand determine wages. When labor is plentiful, wages remain low. When labor is scarce, wages rise. As population grows, more and more workers become available, and wages drop . Known as the IRON LAW OF WAGES
question
'iron law of wages'
answer
Ricardo's idea: As population grows, more and more workers become available, and wages drop. When labor is scare, wages rise
question
Jeremy Bentham
answer
He put forth the theory of utilitarianism. He argued that a law was useful, and therefore good, if it led to "the greatest happiness of the greatest number" of people. He believe people should be educated so they could decide what things were good for them or would make them happy. He also called for a reform of the nation's justice and prison system.
question
John Stuart Mill
answer
English philosopher. He believed that a government should work for the good of all its citizens. Called for government to protect working children and to improve housing and factory conditions. Argued for full democracy and for equality of all men and women, regardless of social class.
question
Utilitarianism
answer
is a theory in normative ethics holding that the proper course of action is the one that maximizes utility, usually defined as maximizing total benefit and reducing suffering or the negatives. This theory is an economic analysis that is human-centered (or anthropocentric) and has a moral foundation.
question
means of production
answer
include the capital and equipment used to produce and exchange goods- for example, lands, railroads, mines, factories, stores, banks, and machines.
question
'Dismal Science
answer
new social science of economy. Established by Ricardo and Malthus, painting a grim picture of workers as inevitably poor and suffering.
question
'Laissez-faire'
answer
means "let it be" or "leave things alone".THE SYSTEM WHERE THE GOVERNMENT TAKES NO PART IN REGULATING THE ECONOMY. Ideas which were summed up which wanted government not to meddle in the operations of business and you wanted to buy labor as cheaply as possible
question
Socialism
answer
government's own the means of production and operate them for the benefit of all people, rich, or poor. Socialist wanted to establish an economic system that would do away with the profit motive and competition. They believed everyone not just capitalist and factory owners had the right to share in the profits.
question
Utopian Socialists
answer
Early socialist believed that people could live peacefully with each other in small cooperative settlements in which everyone would work for the common good. They worked out plans for model towns and encouraged people to set them up. -Modeled after the ideal community described in 1516, Sir Thomas More's Utopia
question
Robert Owen
answer
The most influential utopian socialist. He believed people who lived in a good environment would stop acting selfishly. He felt responsible for his workers and spent much time and money to make their lives happier and more secure. He encouraged his workers to form unions.
question
Karl Marx
answer
He believed that all great changes came from economic conditions. Thought that all human history was the struggle between the upper class and the lower class. He believed that the wealthy class ran the economy purely for their own benefit and that the lower class would eventually violently overthrow them and set up a new system called socialism. -There workers would run the government and the economy and would seize control of factories and wealth. -Believed the entire capitalist system should be destroyed. The capitalist system of competition created greed and inequality.
question
Friedrich Engels
answer
He published "The Communist Manifesto" (1848)
question
proletariat
answer
is a term used to describe the class of wage-earners (especially industrial workers) in a capitalist society whose only possession of significant material value is their labour-power
question
Communism
answer
Authoritarian socialism. characterized by the absence of social classes, money, and the state; as well as a social, political and economic ideology and movement that aims to establish this social order.
question
Democratic Socialism
answer
People retain partial control over economic planning through the election of government officials. Individuals may own private property, but the government owns at least some of the means of production. Unlike communism
question
Command Economy
answer
A system where the government, rather than the free market, determines what goods should be produced, how much should be produced and the price at which the goods will be offered for sale.
question
Market Economy
answer
An economic system in which economic decisions and the pricing of goods and services are guided solely by the aggregate interactions of a country's citizens and businesses and there is little government intervention or central planning. This is the opposite of a centrally planned economy, in which government decisions drive most aspects of a country's economic activity.
question
Free Market
answer
A market economy based on supply and demand with little or no government control. A completely free market is an idealized form of a market economy where buyers and sellers are allowed to transact freely (i.e. buy/sell/trade) based on a mutual agreement on price without state intervention in the form of taxes, subsidies or regulation.
question
Agricultural Revolution (general factors of change and impact)
answer
In 1500s and 1600s common lands in England began to be enclosed, or fenced off into individual plots. Smaller landholdings were combined into more efficient, larger holdings. This enclosure movement continued into the 1700s. It reached its height by the early 1800s in Great Britain as the growing population increased demand and raised prices for agricultural products. It benefited wealthy landowners while small landowners lost their lands. Impacts: As large landowners added to their holdings, former small-plot owners were forced to become tenant farmers and move to the cities. Improvements increased production and made farm labor easier. Iron plows replaced wooden ones.
question
Transportation changes and its impact on Industrial Revolution
answer
Transportation changed from the Middle Ages to the Industrial revolution. Stagecoaches, pack horses, and heavy, clumsy horse-drawn wagons were very common. As the industrial revolution increased, factories needed more raw materials and finished goods had to reach the markets quickly. Ships and steamboats became more common, they moved goods quickly and cheaply.
question
Factors that affected Wage System
answer
Several factors determined worker's wage. 1. Factory owners wanted to produce goods as cheaply as possible, thus employers set wages in relation to other costs of production. e.g if the cost of land increased then the owners wage lowered. 2. The number of workers affected wages.An oversupply of workers brought the wages down 3. Wages were higher
question
General conditions of Factory Workers Lives
answer
Factory workers had strict laws to follow. They had to arrive at the factory on time, they could eat and take breaks only at set times. They could leave only with permission. Breaking any of the laws would result in heavy fine, pay cuts, or even job loss. Sanitary facilities were poor. Early machines had no safety devices, so accidents occured frequently. Workers spent up to 14 hours a day, six days a week , on the job. Abuses in factories scandalized Britain. (Child labor) . Life at home was not much better than in factories. Workers lived in tenements, shabby apartment buildings. A dozen people were crammed into a single room.
question
Physiocrats impact on Economic Theory (how did it differ from Mercantilist thought)
answer
A group of economists called the Physiocrats attacked the ideas of merchantilism. Mercantilism was the economic theory based on the belief that the world contained only a fixed amount of wealth. Physiocrats disagreed with this. They believed that natural laws should be left to govern economic life. Any attempt to interfere with these natural economic laws would bring disaster. They founded classical economics.
question
Laws of Economics
answer
SMith reasoned that 2 natural laws governed all business and economic activity. The first law of supply and demand. Smith said that prices and profits depended on both the amount of avaliable goods and the demand for those goods. If an item was scarce and in great demand, people would pay a high price for it and profits would rise. The second law - the law of competition. He said that as manufacturers compete with each other to sell their products, they must reduce prices. Manufacturers who cut prices too much, however, might lose money and even go out of business. SUPPLY tends to go down and prices rise.
question
'The Invisible Hand' (Adam Smith)
answer
The theory that through specialization of labor and supply and demand, the economy will regulate itself so that everyone is prosperous
question
Alienation (Karl Marx's view of how it is created)
answer
describes social alienation of people from aspects of their human nature as a consequence of living in a society stratified into social classes.
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question
Industrial Revolution
answer
An era of rapid industrial development, which followed the agricultural Revolution. Began in Great Britain.
question
Factors of production
answer
A favorable combination of land, capital, and labor. Land refers to all natural resources (G.B had a rich supply of resources such as coal and iron ore) Capital includes money, tools, machinery, and inventory. Labor → fueled by a growth of population an migration.
question
Mechanization
answer
Automatic machinery being used to increase production.
question
Factory system
answer
is a method of manufacturing first adopted in England at the beginning of the Industrial Revolution in the 1750s and later spread abroad. It replaced the putting-out system. The main characteristic of the factory system is the use of machinery, originally powered by water or steam and later by electricity.
question
Middle Class (characteristics)
answer
Well educated. Consisted of bankers, lawyers, engineers, professors, and merchants. Over time gained economic standing and increased social influence and political power. Their children attended school, where they were trained for high-level jobs.
question
capitalism
answer
describes an economic system in which individuals or corporations, rather than governments, control the factors of production. Businesses and the means of production are privately owned and operated.
question
commercial capitalism
answer
Happened before the Industrial revolution. When most capitalists were merchants who bought and sold goods
question
industrial capitalism
answer
Happened during the Industrial revolution. When capitalists became more involved in producing and manufacturing goods.
question
Division of labor
answer
Factory owners divided the manufacturing process into steps. They hired unskilled labor and assigned a step to each worker. This division of labor increased production.
question
interchangeable parts
answer
are parts (components) that are, for practical purposes, identical. They are made to specifications that ensure that they are so nearly identical that they will fit into any assembly of the same type. One such part can freely replace another, without any custom fitting
question
mass production
answer
The system of producing large numbers of identical items
question
corporations
answer
Business formed groups, allowed people to buy stock in their companies. - Made it much easier to raise the money needed to run and expand a business. -Were attractive to investors -Banks played an increasingly important role in financing corporations.
question
monopoly
answer
When a corporation gained almost complete control of a production or sale of a single good or service.
question
cartels
answer
Business combination that are able to control every stage of entire industries.
question
depression
answer
is a sustained, long-term downturn in economic activity in one or more economies
question
Mercantilism
answer
Mercantilism was the economic theory based on the belief that the world contained only a fixed amount of wealth. In order to increase its wealth a country had to take some wealth away from another country.
question
Adam Smith
answer
was a Scottish political philosopher and early pioneer of the political economy. He wrote many books, but is most famous for writing The Wealth of Nations in 1776 - Smith theorized that people's natural selfishness would be good for the economy as long as the government did not try to control it. Without government control, he predicted that people would naturally produce goods that were most skilled at producing and trade for other goods and services. Called the specialization of labor. -Laws of supply and demand would regulate prices and people would change their production and trade patterns accordingly, so that they would make the most money. -People's self interest would lead to the economic betterment of the whole society.
question
free enterprise
answer
An economic system where few restrictions are placed on business activities and ownership. People would be free to engage in whatever business they chose. They would be able to run the business for their greatest advantage . The result would be that investors, and owners would make profit, laborers would have jobs, and consumers would buy better goods at lower prices. This system justified competition unrestricted laws by laws, regulations, or government controls.
question
Thomas Malthus
answer
an anglican clergyman. He wrote that population increases present the greatest obstacle to human progress. Despite famines, epidemics, and wars, he argued people still multiply more rapidly than the food supply increases. Believed that human misery and poverty are inventible
question
David Ricardo
answer
British economist. Wrote that the working class poverty is inevitable. He stated in his novel "Principles of Political Economy and Taxation" (1817) supply and demand determine wages. When labor is plentiful, wages remain low. When labor is scarce, wages rise. As population grows, more and more workers become available, and wages drop . Known as the IRON LAW OF WAGES
question
'iron law of wages'
answer
Ricardo's idea: As population grows, more and more workers become available, and wages drop. When labor is scare, wages rise
question
Jeremy Bentham
answer
He put forth the theory of utilitarianism. He argued that a law was useful, and therefore good, if it led to "the greatest happiness of the greatest number" of people. He believe people should be educated so they could decide what things were good for them or would make them happy. He also called for a reform of the nation's justice and prison system.
question
John Stuart Mill
answer
English philosopher. He believed that a government should work for the good of all its citizens. Called for government to protect working children and to improve housing and factory conditions. Argued for full democracy and for equality of all men and women, regardless of social class.
question
Utilitarianism
answer
is a theory in normative ethics holding that the proper course of action is the one that maximizes utility, usually defined as maximizing total benefit and reducing suffering or the negatives. This theory is an economic analysis that is human-centered (or anthropocentric) and has a moral foundation.
question
means of production
answer
include the capital and equipment used to produce and exchange goods- for example, lands, railroads, mines, factories, stores, banks, and machines.
question
'Dismal Science
answer
new social science of economy. Established by Ricardo and Malthus, painting a grim picture of workers as inevitably poor and suffering.
question
'Laissez-faire'
answer
means "let it be" or "leave things alone".THE SYSTEM WHERE THE GOVERNMENT TAKES NO PART IN REGULATING THE ECONOMY. Ideas which were summed up which wanted government not to meddle in the operations of business and you wanted to buy labor as cheaply as possible
question
Socialism
answer
government's own the means of production and operate them for the benefit of all people, rich, or poor. Socialist wanted to establish an economic system that would do away with the profit motive and competition. They believed everyone not just capitalist and factory owners had the right to share in the profits.
question
Utopian Socialists
answer
Early socialist believed that people could live peacefully with each other in small cooperative settlements in which everyone would work for the common good. They worked out plans for model towns and encouraged people to set them up. -Modeled after the ideal community described in 1516, Sir Thomas More's Utopia
question
Robert Owen
answer
The most influential utopian socialist. He believed people who lived in a good environment would stop acting selfishly. He felt responsible for his workers and spent much time and money to make their lives happier and more secure. He encouraged his workers to form unions.
question
Karl Marx
answer
He believed that all great changes came from economic conditions. Thought that all human history was the struggle between the upper class and the lower class. He believed that the wealthy class ran the economy purely for their own benefit and that the lower class would eventually violently overthrow them and set up a new system called socialism. -There workers would run the government and the economy and would seize control of factories and wealth. -Believed the entire capitalist system should be destroyed. The capitalist system of competition created greed and inequality.
question
Friedrich Engels
answer
He published "The Communist Manifesto" (1848)
question
proletariat
answer
is a term used to describe the class of wage-earners (especially industrial workers) in a capitalist society whose only possession of significant material value is their labour-power
question
Communism
answer
Authoritarian socialism. characterized by the absence of social classes, money, and the state; as well as a social, political and economic ideology and movement that aims to establish this social order.
question
Democratic Socialism
answer
People retain partial control over economic planning through the election of government officials. Individuals may own private property, but the government owns at least some of the means of production. Unlike communism
question
Command Economy
answer
A system where the government, rather than the free market, determines what goods should be produced, how much should be produced and the price at which the goods will be offered for sale.
question
Market Economy
answer
An economic system in which economic decisions and the pricing of goods and services are guided solely by the aggregate interactions of a country's citizens and businesses and there is little government intervention or central planning. This is the opposite of a centrally planned economy, in which government decisions drive most aspects of a country's economic activity.
question
Free Market
answer
A market economy based on supply and demand with little or no government control. A completely free market is an idealized form of a market economy where buyers and sellers are allowed to transact freely (i.e. buy/sell/trade) based on a mutual agreement on price without state intervention in the form of taxes, subsidies or regulation.
question
Agricultural Revolution (general factors of change and impact)
answer
In 1500s and 1600s common lands in England began to be enclosed, or fenced off into individual plots. Smaller landholdings were combined into more efficient, larger holdings. This enclosure movement continued into the 1700s. It reached its height by the early 1800s in Great Britain as the growing population increased demand and raised prices for agricultural products. It benefited wealthy landowners while small landowners lost their lands. Impacts: As large landowners added to their holdings, former small-plot owners were forced to become tenant farmers and move to the cities. Improvements increased production and made farm labor easier. Iron plows replaced wooden ones.
question
Transportation changes and its impact on Industrial Revolution
answer
Transportation changed from the Middle Ages to the Industrial revolution. Stagecoaches, pack horses, and heavy, clumsy horse-drawn wagons were very common. As the industrial revolution increased, factories needed more raw materials and finished goods had to reach the markets quickly. Ships and steamboats became more common, they moved goods quickly and cheaply.
question
Factors that affected Wage System
answer
Several factors determined worker's wage. 1. Factory owners wanted to produce goods as cheaply as possible, thus employers set wages in relation to other costs of production. e.g if the cost of land increased then the owners wage lowered. 2. The number of workers affected wages.An oversupply of workers brought the wages down 3. Wages were higher
question
General conditions of Factory Workers Lives
answer
Factory workers had strict laws to follow. They had to arrive at the factory on time, they could eat and take breaks only at set times. They could leave only with permission. Breaking any of the laws would result in heavy fine, pay cuts, or even job loss. Sanitary facilities were poor. Early machines had no safety devices, so accidents occured frequently. Workers spent up to 14 hours a day, six days a week , on the job. Abuses in factories scandalized Britain. (Child labor) . Life at home was not much better than in factories. Workers lived in tenements, shabby apartment buildings. A dozen people were crammed into a single room.
question
Physiocrats impact on Economic Theory (how did it differ from Mercantilist thought)
answer
A group of economists called the Physiocrats attacked the ideas of merchantilism. Mercantilism was the economic theory based on the belief that the world contained only a fixed amount of wealth. Physiocrats disagreed with this. They believed that natural laws should be left to govern economic life. Any attempt to interfere with these natural economic laws would bring disaster. They founded classical economics.
question
Laws of Economics
answer
SMith reasoned that 2 natural laws governed all business and economic activity. The first law of supply and demand. Smith said that prices and profits depended on both the amount of avaliable goods and the demand for those goods. If an item was scarce and in great demand, people would pay a high price for it and profits would rise. The second law - the law of competition. He said that as manufacturers compete with each other to sell their products, they must reduce prices. Manufacturers who cut prices too much, however, might lose money and even go out of business. SUPPLY tends to go down and prices rise.
question
'The Invisible Hand' (Adam Smith)
answer
The theory that through specialization of labor and supply and demand, the economy will regulate itself so that everyone is prosperous
question
Alienation (Karl Marx's view of how it is created)
answer
describes social alienation of people from aspects of their human nature as a consequence of living in a society stratified into social classes.
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