The Worldly Philosophers Analysis
Gerrit Schaafsma
Eastern Oregon University
Abstract:
Although there are many different views, and opinions on economics one impactful book on western economics is “The Worldly Philosopher”. This book talks mainly about economic theory.
Chapter one
The first chapter in the book, otherwise called the introduction is short but talks about several interesting topics. This chapter talks about the impact each of the contributing economists had on the world and economies within. “What they did was more decisive for history than many acts of statesman who basked in brighter glory, often more profoundly disturbing than the shuttling of armies back and forth across frontiers, more powerful for good and bad than the edicts of kings and legislatures. It was this: they shaped and swayed men’s minds.” (The Worldly Philosopher. Pg, 10). From the very beginning the book emphasizes the power of ideas given to the minds of men.
Chapter two
The second chapter starts to talk about different economic theory. It discusses how in the past there was no true need for economics due to the fact that all people had either ensembles themselves into either traditional, or command economic systems. “For countless centuries man dealt with the problem of survival according to one or the other of these solutions. And as long as the problem was handled by tradition or command, it never gave rise to that special field of study called “economics”’(Pg, 14) The traditional system being where a father passes his trade down to his sons. Additionally the command system being when economic survival was ensured by rule or dictatorship telling people when and where to work. Either way, humans had found ways to work together and form agreements that were mutually beneficial. This chapter also covers the fear that if people stop working where the are ‘told’ then society will fall apart.
Chapter three
The third chapter talks about Adam smith and his accomplishments, including the completion of his famous book “Wealth of Nations”. The book speaks about Adam Smith's economic laws; “self-interest acts as a driving power to guide men to whatever work society is willing to pay for.” (Pg, 34) “But self-interest is only half the picture. It drives men to action. Something else must prevent the pushing of profit-hungry individuals from holding society up to exorbitant ransom: a community activated only by self-interest would be a community of ruthless profiteers. This regulator is competition, the conflict of the self-interested actors on the marketplace. For each man, out to do his best for himself with no thought of social consequences, is faced with a flock of similarly motivated individuals who are engaged in exactly the same pursuit. Hence, each is only too eager to take advantage of his neighbor's greed. A man who permits his self-interest to run away with him will find that competitors have slipped in to take his trade away; if he charges too much for his wares or if he refuses to pay as much as everybody else for his workers, he will find himself without buyers in the one case and without employees in the other.
Although Adam Smith was a brilliant young economist, his beliefs that self-interest wouldn’t be able to tear apart a capitalistic system. “Smith’s vision is more like a blueprint for a whole new mode of social organization, a mode called Political Economy, or, in today’s terminology, economics” (pg, 33)
Chapter Nine
The United States prior to the great depletion was in a state of prosperity never before seen. The general mood was that of positivity towards the future. However, when the Great Depression hit everyone was taken by surprise. Average folk, politicians, and even economists did not see the downturn coming whatsoever. The biggest component being the stock value in the USA. Most people expected a radical named Marx to offer a solution to the devastation. However, the man who offered a solution was John Maynard Keynes. He was from England and grew up with the luxuries of fancy schooling and received many awards for his brilliance. He studied many things but was most famous for his education in economics and theory. He published many books which received reconation that created his fame. He tries to explain how the economy works with its ups and downs with his book ‘A Treatise on Money’(1930) He warns that saving can result in depression. He believes that the true wealth of a country doesn’t belong to the amount of cash it holds, but rather the amount of income it circulates through its economy. He talks about how saving money used to hurt an economy because it wasn’t being used, but now modern economies benefit from savings because banks will just use that money to reinvest for capital growth. Although Keynes did not come up with the theory of see-saw savings, and investment, he helps explain it. Keynes explains that as savings goes up investment goes down and the opposite is also true. So the theory goes that a depression hits because of a drop in investment on one side and an increased accumulation of of savings on the other. However its temporary because a increased amount of savings reduces interest rates which makes a higher rate of return on investment. So the economy bounces back.