BC3041 Theoretical Foundations of Political Economy Weeks 1-7

Heilbroner's Three Economic Systems

Tradition, command, and market systems.

Heilbroner's "Economic Revolution"

The historical transition from custom and command to market-driven allocation.

Thomas Mun and Mercantilism

Defining national wealth by bullion accumulation and a favorable balance of trade.

William Petty's "Political Arithmetic"

Early use of quantitative, empirical methods in economic analysis.

François Quesnay and Physiocracy

The doctrine that economic wealth originates exclusively from agriculture.

Quesnay's Tableau Économique

A diagram illustrating the circular flow of wealth among economic classes.

Net Product (Produit Net)

Quesnay's term for the agricultural surplus generated above production costs.

David Hume's Price-Specie-Flow Mechanism

The automatic correction of trade balances via gold flows and price changes.

Amartya Sen's Approach

Distinguishing between ethics-related economics and the modern engineering approach.

Duncan Foley's "Adam's Fallacy"

The analytical separation of ethical considerations from economic behavior.

Quesnay's Sterile Class

Artisans and merchants who transform rather than produce net wealth.

Mercantilist Trade Policy

Maximizing exports, minimizing imports, and acquiring colonial markets.

Sympathy (Adam Smith, TMS)

The capacity to imagine ourselves in another's situation and share their feelings.

Mutual Sympathy and Propriety

The shared pleasure when a spectator's and agent's sentiments align.

Self-Command

The virtue of restraining passions to align with impartial spectator approval.

The Impartial Spectator

An idealized mental judge representing society's view of our conduct.

Praise vs. Praiseworthiness

Smith's distinction between actually being praised and genuinely deserving it.

Justice vs. Beneficence

Justice is a negative, enforceable virtue; beneficence is voluntary and praiseworthy.

Fair Play

The foundational standard of justice prohibiting injury to others for personal gain.

Rank, Status, and Corruption of Morals

The societal tendency to admire the rich and powerful while neglecting true virtue.

Self-Deceit and General Rules

Our self-bias, mitigated by adopting general moral rules.

The Earthquake and the Little Finger

Smith's example showing self-interest often outweighs distant human empathy.

The "Man Within the Breast"

Smith's internal arbiter representing the impartial spectator.

The Poor Man's Son

The illusion that wealth and trinkets of frivolous utility bring true happiness.

The TMS Invisible Hand

Unintended social benefits arising from individuals pursuing personal wealth or status.

Custom and Fashion

Powerful external forces shaping moral standards and perceptions of beauty.

Prudence (TMS)

The virtue combining caution and industry, vital for individual self-betterment.

The "Adam Smith Problem"

The perceived contradiction between self-interest in WN and sympathy in TMS.

Sophie de Grouchy's Critique

Emphasizing the social and political institutional origins of moral sentiments.

Mary Wollstonecraft on Education

Arguing that lack of proper education corrupts women's moral sentiments.

Division of Labor

The primary engine of productivity growth through task specialization.

The Pin Factory Example

Smith's illustration of how division of labor dramatically multiplies output.

Propensity to Truck, Barter, and Exchange

The innate human behavioral tendency driving commerce and markets.

Extent of the Market

The primary physical and structural limit on the division of labor.

Value in Use vs. Value in Exchange

The paradox of water (high use, low exchange) versus diamonds (low use, high exchange).

Labor Commanded Value Theory

Value determined by the amount of labor a commodity can purchase in exchange.

Natural Price vs. Market Price

Long-run equilibrium price covering costs versus short-run price set by supply and demand.

Component Parts of Price

Wages of labor, profits of stock, and rent of land.

Bargaining Power of Masters vs. Workers

Employers hold the upper hand in wage negotiations due to organization and staying power.

Productive vs. Unproductive Labor

Labor that adds to material value versus labor that perishes without reproduction.

Critique of the Mercantile System

Smith's attack on monopolies, tariffs, and colonial restrictions enriching merchants.

WN Invisible Hand Context

Merchants preferring domestic over foreign industry, unintentionally aiding the nation.

System of Natural Liberty

Foundational freedom where individuals pursue interests without government interference.

Three Duties of the Sovereign

Defense, justice, and public works/institutions.

Viner and Wakefield on Smith

Scholarly context debating Smith's views on colonial expansion and empire.

Thomas Malthus's Two Postulates

Food is necessary for existence; human passion between the sexes is constant.

Geometric Population vs. Arithmetic Subsistence

Population outstripping food supply exponentially versus linearly.

Preventive Checks (Malthus)

Moral restraint and delayed marriage limiting population growth.

Positive Checks (Malthus)

Famine, disease, war, and misery raising mortality rates.

Malthus on the Poor Laws

Critique arguing state relief encourages population growth among the poor and dependency.

William Godwin's Perfectibility

Enlightenment view of human progress and equality contested by Malthus.

David Ricardo on Distribution

Determining how national output is shared among landlords, capitalists, and workers.

Differential Rent (Ricardo)

Payment for superior natural fertility of land, rising as inferior margins are cultivated.

Margin of Cultivation

The least fertile land currently in use, yielding zero rent.

Diminishing Returns in Agriculture

As more labor is applied to land, incremental yield decreases.

Natural Wages (Ricardo)

The subsistence level required for workers to survive and reproduce.

Ricardo's Iron Law of Wages

The tendency of market wages to gravitate toward natural subsistence over the long run.

The Stationary State (Classical)

Long-run endpoint where capital accumulation ceases due to high rents and zero profits.

Corn Laws and Comparative Advantage

Ricardo's theory showing free trade benefits nations via specialization.

Harriet Martineau

Popularizer of classical political economy through illustrative tales.

Mill on Production vs. Distribution

Production laws are immutable natural laws; distribution is governed by human institutions.

Mill's Stationary State

A desirable condition of zero population and capital growth focused on human self-improvement.

Mill on Individuality

Essential for social progress and preventing the tyranny of majority opinion.

Despotism of Custom

Social conformity that suppresses individual creativity and freedom.

Harm Principle (Mill)

Power can be exercised over individuals only to prevent harm to others.

Mill on the Laboring Classes

Envisioning future cooperation and worker-owned associations over traditional wage labor.

Mill on Socialism and Communism

Sympathetic evaluation of cooperative alternatives provided liberty is preserved.

Laissez-Faire as a Presumption

Rule against state intervention, subject to major exceptions like education and public goods.

Harriet Taylor Mill's Critique

Rejection of rigid gender roles and women's structural economic dependence.

Wages-Fund Doctrine Recantation

Mill's abandonment of the idea that a fixed fund limits total wages.

Thaler and Sunstein's Libertarian Paternalism

Nudge theory influencing choices without eliminating personal options.

Historical Materialism

Society's historical development driven by changes in material economic conditions.

Base and Superstructure

The economic foundation determines legal, political, and ideological institutions.

Forces and Relations of Production

Technological capabilities versus social property relationships among people.

Fetters on Production

When existing relations of production hinder the further development of productive forces.

Alienation (Marx)

Worker estrangement from product, process, species-essence, and fellow workers.

Commodity (Marx)

A good produced for exchange on a market, possessing use-value and exchange-value.

Socially Necessary Labor Time

Labor time required to produce a commodity under normal social conditions.

Commodity Fetishism

The illusion that social relations between people are economic relations between things.

C-M-C vs. M-C-M′

Simple commodity circulation (sell to buy) versus capitalist accumulation (buy to sell dearer).

Workers "Free in Two Senses"

Free to sell labor-power contractually, and free (destitute) of ownership in means of production.

Necessary Labor vs. Surplus Labor

Working day portion reproducing labor-power's value versus extracted surplus value.

Surplus Value and Exploitation

Unpaid surplus labor extracted from workers by capitalists, generating profit.

Böhm-Bawerk's Counterpoint

Marginalist critique of Marx's labor theory of value and the transformation problem.

Accumulation as Compulsion (Marx)

Capitalists must constantly reinvest surplus value or perish in competitive markets.

The Golden Chain

Marx's term for higher wages failing to break the worker's structural subordination to capital.

Organic Composition of Capital

The ratio of constant capital (machinery/materials) to variable capital (labor).

Industrial Reserve Army

Unemployed population created by capital accumulation, keeping wages in check.

General Law of Capitalist Accumulation

Accumulation of wealth at one pole equals accumulation of misery/poverty at the opposite pole.

Rosa Luxemburg's Realization Problem

Capitalism's inability to realize total surplus value internally due to limited worker consumption.