И.П. Агабекян, П.И. Коваленко 10 страница

That Smith’s vision of the economy should ever have been considered original might seem strange to modern minds, but that would be because we now see economic phenomena in the light of his conception. As two leading scholars recently remarked, «The immediate «common sense» answer to the question, «What will an economy motivated by greed and controlled by a large number of different agents look like?» is probably: There will be chaos.» That is certainly the answer that would have been given by most of Smith’s contemporaries — before they read his book. The greatness of Smith’s accomplishment lies precisely in the fact that he, unlike his predecessors, was able to think away extraneous complications and so perceive an order in economic affairs that common sense did not reveal.

It is one thing, of course, to say that Smith’s conception of economic phenomena is original, another to suggest that it corresponds to contemporary experience. According to Smith, society in its economic aspect is a vast concourse of people held together by the desire of each to exchange goods and services with others. Each person is concerned directly only to further his own self- interest, but in pursuing that aim each «is led by an invisible hand» to promote the interests of others. Forbidden by law and social custom to acquire the property of other people by force, fraud, or stealth, each person attempts to maximize his own gains from trade by specializing in the production of goods and services for which he has a comparative advantage, trading part of his produce for the produce of others on the best terms he can obtain. As a consequence, the «natural forces» of market competition — the result of each person attempting to «buy cheap and sell dear» — come into play to establish equality between demand and supply for each commodity at rates of exchange (prices).

The economic system (so Smith and later writers argued) is a self-regulating mechanism that, like the human body, tends naturally toward a state of equilibrium if left to itself.

Vocabulary

allocation of manure — зд.

распределение органических удобрений revival — возрождение, возобновление wages — заработная плата to emerge — появляться, всплывать loan interest — процентная ставка по займу intervention — вмешательство

affair — дело impose — налагать, наложить

arbitrary — произвольный restrictions - ограничения to argue — спорить significance - значимость, значительность ill considered - необдуманный

realm - область, сфера impact — воздействие contemporaries — современники perceive — воспринимать predecessors — предшественники reveal — обнаруживать, открывать laissez-faire — невмешательство forbidden - запрещенный acquire - приобретать fraud - мошенничество stealth - кража to attempt — пытаться obtain - доставать, получать

consequence — последствие equilibrium — равновесие commodity — товар, продукт

General understanding:

1) What was economics first considered to be?

2) A branch of what discipline did economics become in the Middle ages?

3) What changes had happened by the beginning of the 18^th century?

4) When did economics, according to the text, become «an independent science»?

5) In what «age» did Adam Smith live?

6) What was Smith’s point of view on the role of government in economics?

7) Why does the author refer to Smith’s work as a «political tract»?

8) What was Smith’s great «accomplishment»?

9) What, according to the author, gave the book «lasting significance»?

10) What was Smith’s vision of «society», «each person*, ♦economic system»?

1. Economics through the history. Which of the following statements are true/false?

A. Economics is an intellectual discipline because it has it’s roots and branches in early Greece and Rome.

B. First it was considered as a branch of home economics.

C. The allocation of manure among alternative agricultural uses once was one of the questions of economics.

D. The ethics of loan rates and management of slaves were among the most important problems of economics during the Middle Ages.

E. Scottish moral philosopher Adam Smith published the first edition of his monumental work in 1767.

F. Adam Smith argued that laissez-faire could and should replace government direction and regulation in economics.

G. According to the author, Smith and Newton «opened minds» to the existence of a «grand design* in the fields of their studies.

H. Modern economists don’t find Smith’s vision of economics revolutionary.

I. According to Smith, people are motivated by «greed, fraud and stealth».

2. Explain in your own words the following:

a) home economics

a) moral philosophy

b) «justness»

c) economic affairs

d) independent science

e) political and economic liberties

f) common sense

3. How do you understand Adam Smith’s concept of:

a) laissez-faire

b) «natural forces of self-interest and competition*

c) «grand design»

d) society

e) rate of exchange (prices)

4. Explain the difference between the following:

a) branch of science — academic discipline

b) firs edition — first volume

c) authorities — government

d) common — frequent

,e) to acquire — to obtain-^- to gain

5. Give more synonyms and write 1—2 sentences with each to illustrate the differences in lexical meaning.

a) issue-subject...

b) vast-widespread-...

c) vision-sight...

d) immediate-sudden...

b) shape-form.„

c) obtain-acquire...

6. Do you agree or disagree with the following opinions? Why and why not? Write an essay of 150- 200 words to support your opinion.

1. «Before Adam Smith there had been much economic discussion; with him we reach the stage of discussing economics.»

2. «The immediate «common sense» answer to the question, «What will an economy motivated by greed and controlled by a large number of different agents look like?» is: There will be chaos.»

<^Text 2 THE CHALLENGE OF LORD JOHN MAYNARD KEYNES

Smith’s version of the economic system as a naturally self-organizing and self-adjusting «social mechanism»

— known latterly as classical or neoclassical economic doctrine (or sometimes, more shortly and perhaps satirically, as orthodox or conventional wisdom) - was never confirmed by factual evidence, as Newton’s laws of motion were; all the same, classical doctrine dominated economic thinking and national economic policy in all advanced economies for the next 150 years, and it plays a prominent role in many countries to this day.

Whether right or wrong, classical theory was first seriously challenged by the great English statesman and economist Lord John Maynard Keynes, who claimed to see in the Great Depression of the 1930s evidence that the economic system was not self-adjusting, and whose followers argued that without continued government intervention the economic system would typically operate at levels of activity substantially lower than required to achieve full employment of labor and other resources. Exactly what Keynes said, or what he meant, or what he really meant, has been hotly disputed among economists for more than 50 years, conveying to many noneconomists the notion that economists as a group are uniquely quarrelsome and doubtfully competent. There is no merit in this notion. What is true, as the great English economist Joan Robinson once observed, is that «in a subject where there is no agreed procedure for knocking out error, doctrine has long life.»

Perhaps time and further study will some day reveal whether the classical or the Keynesian conception of economic life accords more closely with experience.

Meanwhile, the great worry is that, in the absence of professional competence to make valid diagnoses, we will treat cases of economic toothache as cases of lockjaw and kill our patient: or, no less seriously, we will leave apparently minor economic lumps untreated and so, through inaction, fail to cure problems that turn out to be terminal. On a brighter note we may recall Lord Keynes’s wistful observation: «If economists could someday manage to get themselves thought of as humble, competent people, on a level with dentists, that would he splendid!» Perhaps that time will one day come. If it does, and if economists are then able accurately to diagnose and prescribe cures for economic ills, they will have little reason to feel humble.»

Vocabulary

self-organizing - самоорганизующаяся self-adjusting — саморегулирующаяся latterly — недавно, в последнее время to confirm — подтверждать laws of motion — законы движения advanced — развитой, прогрессивный prominent — выдающийся evidence - свидетельство to require - требовать required — требуемый full employment - полная занятость to dispute — спорить, оспаривать notion — понятие merit — достоинство to knock out — выбросить valid — действительный lockjaw — столбняк apparently - по всей видимости wistful — тоскливый

General understanding:

1. What is a classical economic doctrine?

2. What does the author say about Newton’s and Smith’s laws or doctrines?

3. Who first challenged the classical economics? When was that? Under what circumstances?

4. What were Keynes’ and his followers’ arguments against the self-adjusting market doctrine?

5. How had the noneconomists’ opinion changed toward the economist? How does the author comment that common opinion?

6. According to the author, which concept or doctrine accords more closely with experience?

7. What is author’s «great worry»?

8. Why should economists feel «humble»?

1. Adam Smith vs. Keynes. What of the following is true:

A. Smith’s version of the economic system was proved to be right for the advanced economies.

B. Keynes challenged both classical and neoclassical economic doctrines.

C. Lord John Maynard Keynes was not alone in his beliefs.

D. The reason why Smith’s theory of self-organizing and self-adjusting «social mechanism» had been criticized was the Great Depression of the 1930s.

E. According to the Keynes and his colleagues, continued government intervention is necessary to achieve required employment of labour and other positive results.

F. Keynes works were proved to be true and that was the reason why no one disputed them during the following 50 years.

G. Keynes himself wasn’t really sure that economics is an accurate science.

H. Keynes thought that dentists are more competent economists than Adam Smith followers.

2. Find the equivalents in Russian:

a) uniquely quarrelsome and doubtfully competent

b) intellectual discipline

c) concerned with such issues

d) government intervention in economic affairs

e) to impose arbitrary and oppressive restrictions

f) strong arguments

g) an economy motivated by greed and controlled by a large number of different agents

3. What did they really mean? Choose the answer and prepare arguments to support your choice.

1. By stating «in a subject where there is no agreed procedure for knocking out error, doctrine has long life» great English economist Joan Robinson meant that:

a) there is too little agreement between economists

b) the subject of economics is too widespread

c) economics is too empirical

d) errors happen because humans are imperfect.

2. «If economists could some day manage to get themselves thought of as humble, competent people, on a level with dentists, that would he splendid!» — wrote sir Keynes, implying that:

a) economists at Keynes’ time were not competent

b) Keynes thought that dentists are very competent people

c) Keynes thought that dentists are humble and economists aren’t.

3. «Perhaps that time will one day come.» — continued Lord Keynes, — « If it does, and if economists are then able accurately to diagnose and prescribe cures for economic ills, they will have little reason to feel humble.» He wanted to say that:

a) he believed in economics of the future

b) he thought that economics should «learn to cure ills» from medicine

c) he was sure that if future economists would be as skilled as doctors (dentists) they should be proud of themselves.

Questions for discussion. Why and why not:

1. Was the dreat Depression the only reason for Keynes’ criticism? Do we have to wait till the next crisis to come up with the new theory or it could be proved experimentally?

2. Why did it take 150 years for economists to realize that Smith’s theory was not correct?

3. Do you agree with the author that the «great worry» is that there is a lack of professional competence to make valid diagnoses? Is it a problem of economics as a science?

UNIT 3 Theories of economics

<^Text 1 CLASSICAL LIBERALISM

In the seventeenth century, liberalism emerged as the radical philosophy that attacked authoritarianism and paternalism in the political sphere by defending the rights of the individual against the commands of monarchs and other rulers. The seventeenth-century philosopher John Locke questioned claims to political authority based on birth, social status, privilege, and divine right. Political authority either derived from the consent of the governed or else was illegitimate.

Later in the eighteenth century, liberals added the notion of the «rule of law,» the idea that government in its legislative capacity had to enact general rules that apply to all citizens equally. The substitution of the rule of people for the rule of law created a capricious, uncertain, and sometimes cruel community life. This early variety of liberalism — often termed «classical liberalism»

— stimulated the development of the social sciences by insisting that what holds society together and promotes an orderly commercial economy is the mutual interplay of the passions and interests of ordinary citizens in the market.

A basic principle of liberal thought is that individuals are the best and most accurate judges of their own interests and can be relied upon to pursue those interests with great dedication and creativity. The mighty arm of the state with its web of regulations and bureaucratic agents often does more harm than good when trying to substitute administrative methods of organization for impersonal market processes that spring out of self- interested individual action.

The philosopher and American revolutionary, Thomas Paine, wrote that «society is created by our wants, government by our wickedness.»

Classical liberals are not anarchists and at the very least recommend a minimal state: a state that protects lives, defines property rights, and enforces private contracts. A great many classical liberals (such as Adam Smith and the later classical school of economists) went somewhat further and requested that the state build and maintain certain public works (bridges, canals, highways, harbors, recreational parks, and so on), maintain standing armies, provide basic education, promote invention and innovation, and intervene in the market on a limited scale for specific humane purposes such as the enactment and enforcement of child labor laws.

Generally, the classical liberal believes in the general rule of laissez-faire and wants to preserve self-regulating market processes as much as possible. The classical liberal is confident that with the enactment of strict constitutional safeguards and the elimination of monopoly and the never-ending varieties of special-interest legislation, peace and material progress are within the reach of all societies and all social classes.

The leading works of classical liberalism include Adam Smith’s Wealth of Nations (1776), Herbert Spencer’s The Man versus the State (1892), Friedrich A. Hayek’s Constitution of Liberty (1960), Ludwig von Mises’s Liberalism: A Socio-Economic Exposition (1962), and Milton Friedman’s Capitalism and Freedom (1962).

Vocabulary

authoritarianism — авторитаризм

paternalism - патернализм rulers — правители privilege — привилегия divine right — божественное право

derived — производное illegitimate — не легитимный

to enact - вводить capricious — прихотливый, капризный

to rely on (upon) — полагаться на кого-либо (что- либо)

dedication — посвящение spring out — происходить из wickedness - злобность harbo(u)r — бухта recreational parks — парки отдыха intervene — вмешиваться to enforce — следить за соблюдением confident - уверенный

General understanding:

1) When and why did liberalism emerge?

2) What did John Locke claim?

3) What notion had been added to the liberalism in 18^th century?

4) What is the basic principle of liberal thought?

5) How does the author refer to the state?

6) What was Thomas Paine’s vision of society and government?

Classical liberals

1. The classical liberal believes in:

a) ... the general rule of laissez-faire.

b) ... Karl Marx.

c) ... the state that protects rights, defines property rights and enforces private contracts.

d) ... near end of Capitalism.

e) ... the leading works of classical liberalism.

2. The classical liberal is confident that:

a) ... monopolies should be eliminated.

b) ... material progress is more important than public education.

c) ... constitution should work properly.

d) ... everyone can be rich and live in a peace.

3. Classical liberal recommends:

a) ... a minimal state.

b) ... invention of new weapons.

c) ... children to work.

d) ... maintain bridges, canals, harbours because water is nice.

4. Suggest Russian equivalents for:

a) liberalism emerged as the radical philosophy that attacked authoritarianism and paternalism in the political sphere

b) political authority based on birth, social status, privilege, and divine right

c) derived from the consent of the governed or else was illegitimate

d) government in its legislative capacity had to enact general rules

e) to substitute administrative methods of organization

f) enactment of strict constitutional safeguards and 'the elimination of monopoly

g) maintain standing armies, provide basic education, promote invention and innovation

h) special-interest legislation, peace and material progress

5. Explain the difference in English:

a) paternalism — pattern

b) common — ordinary

c) holy — divine

d) invention — innovation

e) human — humanity

f) confident — sure

6. Summarize the text paying special attention to personality and quotations.

Questions for discussion:

1. Do you think that liberalism is/was «radical» in post- Soviet Russia? Give one or two examples of radicalism.

2. Do you agree that classical liberalism «stimulated the development of the social sciences»?

3. Can you agree with Thomas Paine that: «society is created by our wants»?

^Text 2

NEOCLASSICAL ECONOMICS

The most remarkable feature of neoclassical economics is that it reduces many broad categories of market phenomena to considerations of individual choice and, in this way, suggests that the science of economics can be firmly grounded on the basic individual act of subjectively choosing among alternatives.

Neoclassical economics began with the so-called marginalist revolution in value theory that emerged toward the end of the nineteenth century. Strictly speaking, neoclassical economics is not a school of thought (in the sense of a well-defined group of economists following a single great master) but more a loose amalgam of subschools of thought, each revolving around such acknowledged masters as Alfred Marshall in England, Leon Walras in France, and Carl Menger in Austria. What these subschools have in common is the importance they attach to explaining the coordinating features of market processes in terms of plans and subjective evaluations carried out by individuals in the market subject to the constraints of technological knowledge, social custom and practice, and scarcity of resources.

The Subschools

In England, Marshall’s appointment to the chair of political economy at Cambridge University in 1885 marked the start of the Cambridge school — a variant of neoclassical economics that stressed continuity with the past achievements of the classical school, especially the economics of David Ricardo and John Stuart Mill. In 1890 Marshall published his Principles of Economics, which demonstrated how the forces that determine the normal prices of commodities can be explained by means of supply and demand in the context of firms struggling to survive within industries. Marshall’s disciples included

A. C. Pigou, D. H. Robertson, Ralph Hawtrey, and to some extent the controversial John Maynard Keynes. (During the 1930s, Keynes turned against his old master by explaining how subjective evaluations can lead to discoordinating market processes and the unemployment of labor and disuse of capital.)

In France, Walras founded the general equilibrium school with the publication of his Elements of Pure Economics (1874). This school would eventually take root in Lausanne, Switzerland, through the contributions of Vilfredo Pareto, especially in his Cours d’economie politique (1896—1897). Some of Walras’s teaching reached England by way of A. L. Bowley’s Mathematical Groundwork of Economics (1924). Like Marshall, Walras and his followers were concerned with a supply and demand account of market pricing, but Walras went somewhat beyond Marshall and investigated the mathematical conditions under which all markets could be in equilibrium simultaneously.

In Austria, Carl Menger founded the Austrian school with the publication'of his Principles of Economics (1871).

Subsequent professors at the University of Vienna, such as Friedrich von Wieser, Eugen von Bohm-Bawerk, and later Ludwig von Mises and Friedrich A. von Hayek, focused on the essential problems of economic organization by starting with Monger’s insights about the importance of economizing action in shaping economic institutions in the market. Among Austrians, the important task of economic reasoning is to disaggregate economic phenomena so that the events can be made intelligible in terms of basic market forces of supply and demand operating through the decisions of individuals.

Vocabulary

remarkable feature — отличительная черта to suggest - предлагать, предполагать to be firmly grounded — твердо основываться на чем-либо to revolve — вращаться to acknowledge - подтверждать, признавать attach — прикреплять, прилагать

struggling to survive — борь

ба за выживание (существование) controversial — противоре- чивый

beyond — сверх, больше, дальше simultaneously — одновременно

subsequent - последующий to disaggregate economic phenomena — расчленять- (нить) экономические явления

General understanding:

1. What is the most remarkable feature of the neoclassical economics?

2. When did neoclassical economics begin?

3. How does the author refer to the neoclassical economics and neoclassical economists?

4. What subschools and names are mentioned in the text?

5. What economists worked in:

a) England b) France c) Austria

1. Complete the table:

COUNTRY	PERSONALITY	TITLE OF WORK	YEAR
Austria	Carl Menger	«Principles of economics»

2. What is not true about the neoclassical economics

and economists:

A. Neoclassical economists simplified many broad categories of market'phenomena.

B. Neoclassical economics began when Adam Smith died.

C. Neoclassical economics is not a school of thought.

D. Marshall’s appointment to the chair of political economy at Oxford University was the beginning of the neoclas-sical economics.

E. A.C.Pigou, D.H. Robertson and Ralph Hawtrey were followers of Alfred Marshall.

F. Yilfredo Pareto took root in Lausanne, in France.

G. «Principles of economics» was written in 1871 by Carl Menger.

H. Ideas of Sir Walras were promoted in England by

A. L. Bowley.

3. Translate into Russian:

a) reduces many broad categories of market phenomena

b) the importance they attach to explaining the coordinating features of market processes

c) appointment to the chair of political economy at Cambridge University

d) firms struggling to survive within industries

e) general equilibrium school

f) his followers were concerned with a supply and demand account of market pricing

g) importance of basic market forces of supply and demand operating through the decisions of individuals.

h) economizing action in shaping economic institutions in the market

4. Write one sentence with each word:

a) attach — attachment

b) evaluate — evaluation

c) appoint — appointment

d) achieve — achievement

Questions for discussion:

1. Do you agree with the author that «the most remarkable feature of neoclassical economics is that it reduces many broad categories of market phenomena to considerations of individual choice»? Why and why not?

2. Do you think that neoclassical economics is a «loose amalgam of subschools of thought»?

3. Whose works are of the most importance for the development of economics?

^Text 3 CRITICISM OF NEOCLASSICAL ECONOMICS

ап the 1970s neoclassical economics came under attack for a variety of reasons. Reform liberals contend that the efficiency criterion ignores considerations of equity because market prices already imply a particular underlying distribution of wealth which the neoclassical writers take as a given. A complete policy analysis must start with an analysis of who ought to own wealth and for what purposes.

Another group of critics, the neo-Ricardian school, claims that neoclassical economics has betrayed the mission of the older classical school because of the neoclassical school’s insistence on the supply and demand model. According to Piero Sraffa and his disciples, relative demand or utility plays virtually no role in defining relative commodity prices in long-run equilibrium and, therefore, plays little part in determining the social distribution of wealth. Here the technological conditions that surround the production of certain types of goods, especially those consumed by the working class, affect the distribution of income, and, therefore, the task of economic theory is to explain how surplus value is extracted from the working class and used by others. According to the Sraffa group, neoclassical economics represents an aberration from the more profound analysis allegedly offered by David Ricardo and further developed by Karl Marx. The Sraffa-neo-Ricardian school is quite content to do away with individual^ valuation in the marketplace and concentrate instead on the objective or technological conditions of long-run equilibrium. The attempt is to show that the distribution of income after some basic subsistence allotment to the workers is politically determined and therefore plays no part in the reproduction of annual output within the framework of capitalist social institutions.

Among neoclassical writers, the modern Austrian school adherents such as Israel Kirzner, Murray N. Rothbard, and Ludwig Lachmann are less concerned with the details of equilibrium positions such as described at length in Paul Samuelson’s Foundations of Economic Analysis (1948) and more concerned with the process by which markets adjust or fail to adjust to change. Modern Austrians challenge attempts to measure opportunity costs by claiming that it is illegitimate to assume that market prices are equilibrium prices. They therefore reject the methodological basis of cost-benefit analysis.

In summary, the neoclassical school offers a remarkably diverse body of concepts to explain the operation of the market in terms of the twin forces of supply and demand. In terms of its admittedly limited concept of economic efficiency (estimated in econometric studies by assuming that market prices are indexes of costs and benefits), neoclassical economics offers a basis for criticizing the most wasteful of government policies by showing that less expensive alternatives existence their expanding needs and wants against the limited resources available to satisfy them.

⇐ Предыдущая 5 6 7 8 91011 12 13 14 Следующая ⇒