Macroeconomics

Assignment 1
1. Adam smith – Adam Smith is known primarily for a single work—An Inquiry into the
Nature and Causes of the Wealth of Nations (1776), the first comprehensive system
of political economy—which included Smith’s description of a system of market-
determined wages and free rather than government-constrained enterprise, his
system of “perfect liberty”—later know as laissez-faire capitalism.

2. David Ricardo - David Ricardo and several other economists also simultaneously and
independently discovered the law of diminishing marginal returns. His most well-
knonn work is the Principles of Political Economy and Taxation (1817).

3. Thomas Malthus - Malthus' most well known work 'An Essay on the Principle of
Population' was published in 1798, although he was the author of many pamphlets and
other longer tracts including 'An Inquiry into the Nature and Progress of Rent' (1815) and
'Principles of Political Economy' (1820).

4. Karl Marx – Famous for Historical Materialism. This theory posits that society at any
given point in time is ordered by the type of technology used in the process of production.
Under industrial capitalism, society is ordered with capitalists organizing labor in factories or
offices where they work for wages.
5. John Stuart Mill - Mill is most well-known for his 1848 work, "Principles of
Political Economy," which combined the disciplines of philosophy and economics and
advocated that population limits and slowed economic growth would be beneficial to the
environment and increase public goods.

6. John Keynes - Keynesian economics is a theory that says the government should
increase demand to boost growth. Keynesians believe consumer demand is the primary
driving force in an economy. As a result, the theory supports expansionary fiscal policy.

7. Jeremy Bentham - British economist Jeremy Bentham is most often associated with
his theory of utilitarianism, the idea that all social actions should be evaluated by the axiom
“It is the greatest happiness of the greatest number that is the measure of right and wrong.”
In his early years Bentham professed a free-market approach.

8. William Petty - Petty wrote three main works on economics, Treatise of Taxes and
Contributions (written in 1662), Verbum Sapienti (1665) and Quantulumcunque Concerning
Money (1682). These works, which received great attention in the 1690s, show his theories
on major areas of what would later become economics.
9. Alfred Marshall - Marshall's Principles of Economics (1890) was his most
important contribution to economic literature. In this work Marshall emphasized that the
price and output of a good are determined by supply and demand, which act like “blades of
the scissors” in determining price.

10. François Quesnay - He is known for publishing the "Tableau économique"

(Economic Table) in 1758, which provided the foundations of the ideas of the Physiocrats.

11. Piero sraffa - Sraffa's Production of Commodities by Means of Commodities was an

attempt to perfect classical economics' theory of value as originally developed by Ricardo
and others. He aimed to demonstrate flaws in the mainstream neoclassical theory of
value and develop an alternative analysis. In particular, Sraffa's technique of aggregating
capital as "dated inputs of labour" led to a famous scholarly debate known as the Cambridge
capital controversy.

12. Friedrich Hayek - After the British depression of the 1920s, Hayek promoted the idea
that private investment, rather than government spending, would promote sustainable
growth. In 1974 Hayek won the Nobel Prize for Economics for his pioneering work in
the theory of money and economic fluctuations.
13. Robert owen - Owen is best known for his efforts to improve the working conditions
of his factory workers and his promotion of experimental socialistic communities.

14. Friedrich engels - Engels helped develop the foundations of the labor theory of value
and exploitation of labor prior to meeting Karl Marx years later. Together, Marx and
Engels would produce many pieces of work critiquing capitalism and developing an
alternative economic system in communism.

15. Jon locke - Locke was more a theory of value and natural law thinker. Free Trade was
a part of Dudley North and Mandeville's political economy who extended Locke's thinking
that society is an abstraction and that individual appetites and interests were the basis of
economics.

16. Davıd Hume - Hume's argument was essentially the monetarist quantity theory of
money: prices in a country change directly with changes in the money supply.
Hume erroneously advanced the notion of “creeping inflation”—the idea that a gradual
increase in the money supply would lead to economic growth.
17. James Mill - The English philosopher and economist John Stuart Mill (1806-1873)
was the most influential British thinker of the 19th century. He is known for his writings on
logic and scientific methodology and his voluminous essays on social and political life.

18. Leon Walras - French economist Leon Walras developed the idea of marginal utility
and is thus considered one of the founders of the “marginal revolution.”
But Walras's biggest contribution was in what is now called general equilibrium theory.

19. Milton Friedman - strong belief in free-market capitalism. During his time as a
professor at the University of Chicago, Friedman developed numerous free-market theories
that opposed the views of traditional Keynesian economists.

20. Carl Menger - Menger contributed to the development of the theory of marginalism
(marginal utility), which rejected the cost-of-production theories of value, such as were
developed by the classical economists such as Adam Smith and David Ricardo.

21. Claude-Frédéric Bastiat - Bastiat developed the economic concept of opportunity

cost and introduced the parable of the broken window. As an advocate of
classical economics and the economics of Adam Smith, his views favored a free market and
influenced the Austrian School.
22. Edmund Burke - Burke was a proponent of underpinning virtues with manners in
society and of the importance of religious institutions for the moral stability and good of the
state. These views were expressed in his A Vindication of Natural Society.

23. Henri de Saint-Simon - In 1817 Saint-Simon published a manifesto

called the "Declaration of Principles" in his work titled L'Industrie
("Industry"). The Declaration was about the principles of an ideology called industrialism
that called for the creation of an industrial society led by people within what he defined
as the industrial class.

24. Thomas J. Sargent - He was awarded the Nobel Memorial Prize in Economics in 2011
together with Christopher A. Sims for their "empirical research on cause and effect in the
macroeconomy".

25. Robert Merton Solow - Solow is best known for his work on growth theory, which
helped him work in collaboration to develop the Solow-Swan Neo-Classical Growth Model,
a groundbreaking theory within economics. He was awarded the Presidential Medal of
Freedom in 2014 for his outstanding contributions within economic theory and practice.

26. Robert Emerson Lucas Jr. - Widely regarded as the central figure in the development
of the new classical approach to macroeconomics, he received the Nobel Prize in
Economics in 1995 "for having developed and applied the hypothesis of rational
expectations, and thereby having transformed macroeconomic analysis and deepened our
understanding of economic policy".

1. Please watch the BBC documentary on Great Depression

(https://www.youtube.com/watch?v=FXNziew6C9A) and answer the following questions:

a. Why is the “great depression” so important in the annals of the world economic
history?

Answer:The great depression had the repercussions to entire globe. Many lessons can be
learned by studying great depression, the most important is the human greed. Even though
many lessons were learnt from great depression, many market failures occurred after that
and reasons were on similar lines. Few influencing minds caused severe poverty and deaths
across globe. Millions of people became jobless and homeless. The governments were
changed, political system changed, authoritarian powers came up which gave rise to
nationalism in different countries and later caused world war. So, Great depression is
studied till date and considered very important in annals of history.

b. Reasons of “great depression”?

Answer:Before great depression many new inventions took place, like aeroplanes, radio,
telephone, etc. Investing culture popularized which created many new businesses. However,
without much needed government regulation in the stock markets, the human greed slowly
started to spoil the play. Manipulation and colluding by big investors, influencing bankers,
brokers and politician caused viscous circle and later created a bubble which was bound to
burst. Important lessons can be learned from the great depression, following are stated:

 Buying on margin as high as 10 times the investment.

 Very less to no government regulations.
 Rampant manipulation by brokers and bankers.
 Powerful bankers influencing government policies.
 Investing based on Speculators without assessing risk.

Answer 2 :- Direct federal relief to the unemployed ran counter to President Herbert
Hoover's strong beliefs about the limited role of government. As a result, he responded to
the economic crisis with a goal of getting people back to work rather than directly granting
relief. In October 1930, he established the President's Emergency Committee for
Employment (later renamed the President's Organization for Unemployment Relief) to
coordinate the efforts of local welfare agencies

3.which American president said that” business of America is business” and in what
context he said this?

Answer:- President Calvin Coolidge said business of America is business. It was spoken
during an address President gave to the American Society of Newspaper Editors in
Washington, D.C. on January 17, 1925. Given that the speech was before a news trade
group, Coolidge was talking about the role of the press in a modern, democratic America
and included warnings about the evils of propaganda. But more specifically, he was talking
the role of the press in free-market America.

4a. what is painting the tape mean ? and is it legal .?

Answer:- Painting the tape is a form of market manipulation whereby market players
attempt to influence the price of a security by buying and selling it among themselves to
create the appearance of substantial trading activity and it is not legal.

4b.What is mean by “daisy chain” and circular trading in stock market ??

Answer:-Dais chain in stock market is the term used for the dishonest and unscrupulous
investor who do fictitious trading. And they artificially increase the price of the security.
circular trading in stock market refer to the dishonest or fraudulent practice scheme where
buy/sell orders are entered by a person or by persons acting in collusion with each other to
operate the price of the underlying security

2. The above video states that in the wake of depression and the financial crisis, President
Roosevelt set up the 1st Securities and Exchange Commission to regulate the excesses of
Wall Street. He named his old friend and supporter Joe Kennedy as its first Chairman.
Critics argued that it was like putting the fox in the chicken coop.

a. Who was Joe Kennedy better known as?

Answer:Joe Kennedy, better known as Joseph P Kennedy was the first chairman of SEC. He
had gained huge fortunes from the market before the great depression mostly buy unethical
practices like manipulation and other fraudulent activities.

b. Why did the critics made such statement against him?

Answer:He was well known in the corporations and so President Roosevelt wanted to have
trusted member for corporations to feel good. Also, as Kennedy had used every trick in the
book to gain from market before depression he was aware of where to draw regulations
and close the loopholes in the market. As, it is on similar analogy of “it takes thief to catch a
thief” it was said by critics that “fox guarded chicken coop”.