Hey >>>/biz/, can you give me a tl;dr on the two topics, please?
>Adam Smith Theory
i'd love a "pros vs cons" of the 2 as well.
thanks for enlightening a noob.
The three most important economists were Adam Smith, Karl Marx, and John Maynard Keynes.
Adam Smith and His Invisible Hand of Capitalism -
Deep examination of the world of business affairs led Smith to the conclusion that collectively the individuals in society, each acting in his or her own self-interest, manage to produce and purchase the goods and services that they as a society require. He called the mechanism by which this self-regulation occurs “the invisible hand,” in his groundbreaking book, The Wealth of Nations, published in 1776, the year of America's Declaration of Independence.
tl;dr - selfish pricks end up creating things that the whole society requires.
because, i guess, i have to do my own work. and i must.
the butcher, the baker, and the candlestick maker individually go about their business. Each produces the amount of meat, bread, and candlesticks he judges to be correct. Each buys the amount of meat, bread, and candlesticks that his household needs. And all of this happens without their consulting one another or without all the king's men telling them how much to produce. In other words, it's the free market economy in action.
This is known as classical economics.
The key doctrine of classical economics is that a laissez-faire attitude by government toward the marketplace will allow the “invisible hand” to guide everyone in their economic endeavors, create the greatest good for the greatest number of people, and generate economic growth.
He looked at capitalism from a more pessimistic and revolutionary viewpoint. Where Adam Smith saw harmony and growth, Marx saw instability, struggle, and decline. Marx believed that once the capitalist (the guy with the money and the organizational skills to build a factory) has set up the means of production, all value is created by the labor involved in producing whatever is being produced. In Marx's view, presented in his 1867 tome Das Kapital (Capital), a capitalist's profits come from exploiting labor—that is, from underpaying workers for the value that they are actually creating.
tl;dr - It's Exploitation!
>the worker is the reason why the factory exists.
>the factory owner is paying the worker much less than he should.
>the factory belongs to the workers not the one who actually paid to build the factory.
This situation of management exploiting labor underlies the class struggle that Marx saw at the heart of capitalism, and he predicted that that struggle would ultimately destroy capitalism. To Marx, class struggle is not only inherent in the system—because of the tension between capitalists and workers—but also intensifies over time. The struggle intensifies as businesses eventually become larger and larger, due to the inherent efficiency of large outfits and their ability to withstand the cyclical crises that plague the system. Ultimately, in Marx's view, society moves to a two-class system of a few wealthy capitalists and a mass of underpaid, underprivileged workers.
tl;dr - owner and worker must be treated and paid equally, or else the divide between the rich (factory owner) and the poor (worker) will keep on increasing.
classic communism ffs.
Marx predicted the fall of capitalism and movement of society toward communism, in which “the people” (that is, the workers) own the means of production and thus have no need to exploit labor for profit.
tl;dr - workers will take arms, form unions and demand an equal share in the profits, so that every one is equal in the end.
In practice, however, two events have undermined Marx's theories. First, in socialist, centrally planned economies have proven far less efficient at producing and delivering goods and services—that is, at creating the greatest good for the greatest number of people—than capitalist systems. Second, workers' incomes have actually risen over time, which undercuts the theory that labor is exploited in the name of profit. If workers' incomes are rising, they are clearly sharing in the growth of the economy. In a very real sense, they are sharing in the profits.
kek, take that Marx, you pathetic, useless jew!
John Maynard Keynes
Keynes's theories mainly involve people's propensity to spend or to save their additional money as their incomes rise, and the effects of increases in spending on the economy as a whole.
tl;dr - the more you earn, the more you spend. classic goys.
Keynes believed that there was only one way to get past the Great Depression, and that was for the American government to start spending in order to put money into private-sector pockets and get demand for goods and services up and running again.
Keynesian economics is an approach to economic policy that favors using the government's power to spend, tax, and borrow to keep the economy stable and growing.
tl;dr - government must use tax payer money to keep the economy growing.
yeah, and fuck people's 401ks
ITT: people who have never actually read Adam Smith and instead go by what today's right-wing shills say Adam Smith meant
if you read OP, you'll see that i specifically requested all /biz/nessmen anons' personal views on the topics.
the rest of my posts are just copy-pasted from what i found on google.
let's see what you know about these.
Can anyone tl;dr the pic related's bullshit?
Which should be quoted more often (the pic) , not only do they pay lower tax rates than poor people but they benefit the most from all of our socialist policies like "working roads' and "public education"
Don't make inaccurate comments.
Keynes advocated government spending during recessions and government saving during boom cycle.
Keynes theories were developed to smooth out the business cycle
And now we have companies with government bailouts built into their business model and a fed which will do anything to keep the indexes going up. Fantastic ideas those man had, truly.
Yunno, I think our problem is we never distinguished breakthrough economic theory with stumbling around in the dark
Before we had chemistry, there was alchemy. No disrespect to alchemists, they worked within the limits of their time period and had to start somewhere, but no one would call an alchemist a chemist or take his theory seriously today. We don't take mercantilism and feudalism seriously today. Marx is taken seriously in academia, but mostly in political science and hardly in economics.
except keynes only ever advocated two things to stimulate the economy
1. A reduction in interest rates (monetary policy), and
2. Government investment in infrastructure (fiscal policy).'
Actual economist here: Adam Smith mentions the 'invisible hand' exactly once and didn't raise self-interest to the hyperbolic status that later economists did (Smith stated that in some cases self-interest might not be the worst alternative. Seriously. If you want to see this idea taken to its illogical extreme, check out the controversies around Pareto optimality). His theory was set more as in introduction to concepts such as various modes of production, return on investment, and division of labor.
Keynes said a lot of things that his direct students didn't understand, and has since been bastardized to oblivion. Take every paraphrasing of his works with a grain of salt; they're generally 50/50 true and false. Consumption smoothing was important yes but so was the behavior of investors and the equilibrium criteria for savings. It's much more technical than his critics would lead you to believe, and if it's his Austrian critics in particular, they just can't do the math.
Adam Smith saw society divided between capitalists/labourers/rentiers and had a labour theory of value as the source of all revenue.
Capitalists = profit
Labourers = wages
Rentiers = rent
Wages and profit were proportional (e.g. higher profits lower wages, higher wages lower profits) but rent seeking activity sucked from both and was a purely unproductive activity. He was the first to see profit as an income uniquely associated with the use of fixed-capital along side the employment of wage-labour.
Keynes was a marginalist and had a subject theory of value. He thought the central issue with capitalism was money demand chronically lags behind production, therefore the state must urge private investment or directly engage in public investment to combat the tendency towards unemployment and crisis.
>"The full employment policy by means of investment is only one particular application of an intellectual theorem. You can produce the result just as well by consuming more or working less. Personally I regard the investment policy as first aid. In US it almost certainly will not do the trick. Less work is the ultimate solution (a 35 hour week in US would do the trick now). How you mix up the three ingredients of a cure is a matter of taste and experience, i.e. of morals and knowledge." -- Keynes
My Marxist understanding of Keynes is: Individual savings takes away from purchasing power and results in an over accumulate of capital which results in the production of commodities which cannot be sold at a profit and the build up of debt (your savings are just someone elses debt) which cannot be payed off due to the decline in the rate of profit inevitably resulting in a liquidity crisis because all the "growth" was purely fictitious.
In the good times everyone sees money as purely a means-of-exchange and anything can function as money, everyone will take your credit and fiat currency because everything is growing and exchange is easy but when the crisis breaks out people start viewing money more as a store-of-value and seek out gold and commodity money and credit becomes worthless because people want real value.
It doesn't, it shows Keynes believed reduction in work-time was an option alongside others to get out of a crisis.
>Individual savings takes away from purchasing power and results in an over accumulate of capital which results in the production of commodities which cannot be sold at a profit and the build up of debt etc. etc.
Mm.. It's a tough one. See this conflicts with my belief that saving is good and spending frivolously on things you don't need or even really want because otherwise the economy would slow down is silly and wasteful (and that borrowing money to do this is worse still or outright stupid). But then at the same time apparently when everyone saves too heavily everyone starves which isn't really desirable either, so I'm not really sure where I stand on this.
He's talking about things you don't understand. Saving is inherently wasteful in a broad sense because nothing is being DONE with that money. It sits, stagnant. It does not stimulate the economy. Spending and investment do stimulate the economy by definition.
>Saving is inherently wasteful in a broad sense because nothing is being DONE with that money.
That isn't inherently bad. I'd say it's more neutral than wasteful. Destroying things, and using resources unnecessarily is wasteful.
The point of wages, in pure theory, is to be spent on living expenses. Wages form the market for capitalists profit to be realized back into money and reinvested in expanding their production. When workers save more of their wages it decreases the size of this market.
If all wages are spent this would obviously boost the rate of profit for companies, if not this would decrease it. More spending = more profit. This is what capitalists ideally want, workers to spend and stay workers and never exit the working class and become capitalists.
When more individuals are saving it means companies have to borrow more funds at interest to expand instead of out of their profit, which increases their over-head costs and debt build up. Remember the return you get on your savings are because the economy is growing and people think it will keep on growing and its easy to get credit. The second a hiccup comes and companies start to become illiquid because of all the debt build-up it requires to operate and cannot pay back their debts when it's called in a general crisis potiently can break out and a massive devaluation of all capital across the board will begin and the economy can enter a death spiral.
This could result in a general breakdown of capitalism and mass unrest, the only time this really almost happened was during the great depression but the government intervened to prop up the monetary profitability of companies by managing the supply and demand of the core goods of the economy. There is no reason to think there's a floor and things could restart once you enter into a death spiral and all industries start to become unprofitable and a burden to their owners.
Yeah I just get a little offended at the notion that people saving is a problem because the only reason they have money is to prop up the economy with their frivolous spending. For one it's backward: the economy exists to serve the needs of the people, the needs of the people don't exist to serve the needs of business. For two it's fucking retarded. It's like saying to a business "well you're making too much profit your role here is to buy stock and pay wages not make profit, knock it off will you?"
>workers' incomes have actually risen over time
Relative to capitalist income? It's gone down.
But that's beyond the point because it's always been the same. The rich get richer and the poor get poorer in comparison -- a regular middle class worker has far better standards of living than medieval kings, yet the people above him are standing way, way higher than kings were over their workers.
>Relative to capitalist income? It's gone down.
>But that's beyond the point because it's always been the same. The rich get richer and the poor get poorer in comparison
Saving is just the purchase of some asset with the idea of making a monetary gain with it. It's just the essence of capitalism... something for noting... but it's ultimately an illusion. Increasing the monetary value of assets by driving up their market value doesn't actually generate the magnitude of real tangible wealth necessary to pay off the interest bearing debt created in the process.
What actually expands an economy and generates profit under capitalism, as Adam Smith knew, was exclusively the investment in fixed-capital and wage-labour... this expands production and output onto a higher scale and allows the generation of more profit.
You can capitalize on future earnings potential as easily as past
So fool the people to spend during the bust cycle where they're supposed to reallocate their capital, and.make them save during the boom cycle where they're supposed to reinvest their now newly acquired capital?
So investment into things like real-estate or other assets like it can be thought of as "saving"? Does that mean that Keynes was in line with Classical, and even Marxist, thought which saw it as inevitable that what we now know as the "FIRE" sector would be subordinated to industrial interests?
it sounds nice, but look at what happened when hoover and roosevelt spent all that money on public works programs-the economy continued to stagnate and they made what should have been a 3-4 year downturn into a decade long depression