• Morals• Justice• Property Rights

Concepts: Economics First Economic Revolution

• Division of Labour• Money• The Market Concepts: Retailing/ wholesaling

1. Study of the Institutions in the Long Run

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Adam Smith’s Theory

2. The Value of goods

● Production-cost value

or labour commanded value:

P = F (W, P, R) Concept: Interest rate

●Natural / Market price Current concepts: Demand/ supply curves

●Nominal / Real Price

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3. The Productivity

The increase of productivity is due to:

DIVISION OF LABOUR

Causes: Improves workers skillSaves timeFosters machine-invention

Limits:The extent of the market Workers “alienation”

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The increase of productivity is due also to:

THE DEFINITION OF PROPERTY RIGHTS

THE ACCUMULATION OF CAPITAL (savings)All savings are invested

Wages theory:Wages as an incentive

Wages-fund theory

Stationary state

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DL1

DL0

DL3

W

L

DL2

SL1SL2

SL0

SL3

W sub

.2.1.0.3

SLn-m

DLn-m

.n-m

CAPITAL ACCUMULATION

Growing path

Adam Smith

Stationary State

4. Against State Intervention• The Invisible-hand or

the principle of beneficial unintended consequences

• AGAINST MERCANTILISM

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RELATED CONTEMPORARY CONCEPTS:

Competition / collusion

Wealth; Gross National Product (GNP); Gross Domestic Product (GDP)

Consumer Price Index (CPI); Inflation

Unemployment rate (Keynesian Economics)

Mercantilism “Decalogue”

1. National Strenght

2. Zero sum game

3. Money is wealth

4. Positive Balance of Trade

5. Preference of Industry over agriculture

6. Protect infant industry

7. Royal factories

8. Utility of poverty

9. Population policies

10. Colonialism

ECONOMIC HISTORY

GDP nominal per capita world map IMF 2012

Singapore case

Inflation rates around the world in 2010

Countries by unemployment rate, 2009

http://www.heritage.org/index/ranking?src=home