Historical Context
What revolution was taking place during the foundations of the classical school?
The Industrial Revolution
Adam Smith
What are the major tenets of the classical school?
1. Minimal government intervention
2. Self motivated economic behavior
3. Harmony of interests
4. Liberalism
5. Benefits of competition
Adam Smith believed ___ versus ____ created social harmony.
Adam Smith believed self interest versus competition created social harmony.
Ricardo and Malthus both agreed that overpopulation posed a threat to society, but could not agree on a resolution.
True
What were two major laws implemented at this time?
The Corn laws and the Poor laws
What were Adam Smiths two major publications?
The Wealth of Nations
Theory of Moral Sentiments
How does the meaning of liberalism during the classical school differ from todays meaning?
Liberalism during the classical school era meant freedom from the government and personal freedom.
Liberalism today commonly refers to democracy.
What is the "Invisible Hand"?
The private interests and passions of men are led in the direction which is most agreeable to the interest of the whole society.
Bentham's message to the government was "stay silent!"
False
Bentham's message to the government was "be quiet!"
What did the Corn Laws enforce and why?
Placed tariffs on imported goods to encourage domestic production
Jeremy Bentham was the founder of ____ which promoted____.
Jeremy Bentham was the founder of Utilitarianism which promoted the greatest level of happiness for the greatest amount of people.
What were two major economic laws developed from this school of thought?
Law of diminishing return
Comparative advantage
What were 2 major points in Adam Smith's Wealth of Nations?
1) the need for specialization and the divisions of labor
2) the exchange of goods leads us to create better goods
3) people should have disposable income
4) Focus on supply and demand in the market
The previous schools of thought were feudalism, mercantilism, and the physiocratic school.
True
What did the Poor laws enforce and why?
Allowed the government to adjust taxes to pay for welfare and sought to soften the fear of poverty at the time
What were the major laws Ricardo and Malthus disagreed on and why?
Ricardo opposed the Corn laws and supported the Poor laws while Malthus supported the corn laws and opposed the poor laws.
Ricardo believed the corn laws did not help common citizens and only benefited the government and landowners.
Malthus believed the corn laws helped support domestic markets and wanted to diminish the power of the poor and their ability to have children because he feared overpopulation would result in not having enough resources for everyone.
Who did the classical school want to benefit?
Individuals, everyone that works, the middle class
What was the Theory of Moral Sentiments?
A book on morality and achieving a good life, which helped economic thought to understand that money is not the only important thing in life.
The industrial revolution was a pivotal moment in decreasing child labor.
False, a major issue of the Industrial Revolution was the increase of child labor.
How did the Industrial Revolution change society?
It spiked economic activity
Created transportation and increased production of goods allowing the trade of surplus
Utilized specialization which increased productivity
Increase of child labor
Introduced leisure time.
Why did John Stuart Mill advocate universal education?
He believed the spread of education and political empowerment would create more partnerships within society, rather than authorization.
Which tenets lasted?
Specialization in production
law of diminishing returns
law of comparative advantage
creation of more liberal economy
The market became a mechanism for recording the interests of individuals with those of society
What were Smiths view's on trade?
1) trade is based on comparative advantage and specialization
2) the influence of the invisible hand on the market
3) competition benefits society
4) divisions of labor
5) wages should be sustainable and sufficient
The Corn Laws placed tariffs on exported goods to encourage domestic production.
False, the Corn Laws placed tariffs on imported goods.