History of Economics

1
History of Economics

• Safe History of the economy
• Dangerous History of thinking about the economy
• Keynes scribblers

2
John Maynard Keynes

• "The ideas of economists and political
  philosophers, both when they are right and when
  they are wrong, are more powerful than is
  commonly understood. Indeed, the world is ruled
  by little else. Practical men, who believe
  themselves to be quite exempt from any
  intellectual influences, are usually the slaves
  of some defunct economist. Madmen in authority,
  who hear voices in the air, are distilling their
  frenzy from some academic scribbler of a few
  years back. I am sure that the power of vested
  interests is vastly exaggerated compared with the
  gradual encroachment of ideas. But, soon or
  late, it is ideas, not vested interests, which
  are dangerous for good or evil"

3
Nasty, brutish and short

• How does our present world economy come about?
• Why are things the way they are?
• Leviathan The basic building blocks of a
  non-Hobbesian world
• Industry
• Finance
• Freedom from brigandism, force, and fraud
• Limited liability corporations, partnerships and
  sole proprietorships
• Government and taxation, laws and regulation
• Employment
• Unions and other pressure groups

4
History of the Economy

• Gathering and hunting
• Farming - in caves, in villages, in towns, and
  then the advent of cities
• From barter to money, the key to trade
• From brigands to feudal lords
• Entrepreneurship - the farm becomes the firrrrm
• Mercantilism
• From family enterprises to group enterprises to
  corporations
• The firm, the market and the law (anti-trust and
  regulation)
• Government economies (capitalism vs. socialism)
• Welfare (Fabianism and social democracy)

5
History of Economics, Part 2 The 140 year war
socialism vs. capitalism

• Marx and Engels
• Lenin
• Stalin
• Pigou
• Keynes and FDR
• Fabianism
• Cold war
• Korea and Vietnam
• Detente
• European social democracy

• Smith
• Marshall
• Coase and company
• Friedman
• Reaganomics
• Corporate globalization
• The Clinton compromise

1944 Bretton Woods The great compromise
6
John Maynard Keynes

• 1883-1946

7
John Maynard Keynes, 1883-1946 Portrait of the
economist as a young man Socialite,
intellectual, historian, bisexual, economist The
Economic Consequences of the Peace, 1919 The
General theory of Employment, Interest and Money,
1936
8
John Maynard Keynes June 5, 1883-April 21, 1946
9
Imperial War Museum
10
The Versailles Conference of 1919 Official
photograph
11
"Day of Versailles - Day of Dishonor" a
demonstration against the Peace Treaty of
Versailles. For many, the defeat of Germany was
difficult to accept, and the reparations for war
damages Germany had to pay under the treaty were
considered a great injustice. Photograph taken
opposite the Royal Palace in Berlin in the
1920s. German Government archives
12
"Muzzled" from the Literary Digest 9/13/1919
13
Sources German government, The Economist
14
Over-stamped thousand mark note, Germany,
1920s Source Wikipedia
15
Unemployed workers queuing for scarce jobs or
free meals were a common sight in the 1920s.
After demobilization at the end of World War I,
millions of Germans were unable to find work, and
many sank into poverty. At the peak of the
economic crisis in the late 1920s, 30 percent of
the German work force was unemployed.
Photograph from the 1920s German Archive Photo
16
From Quiet Helpers Quaker Service In Postwar
Germany Exhibition, American Friends Service
Committee
17
What to do in case of a depression?

• Not prozac

18
Keynes General Theory

• The level of employment in a modern economy is
  determined by three factors
• The marginal propensity to consume (the
  percentage of any increase in their income that
  people chose to spend on goods and services),
• The marginal efficiency of capital (dependent on
  anticipated rates of return) and,
• The rate of interest.
• Keynes's key arguments included that in an
  economy bedeviled by weak demand (e.g. a
  depression) then the government (more broadly
  the public sector) could increase aggregate
  demand by increasing its expenditures, including
  by borrowing to finance the expenditures.
• Source Wikipedia.com

19
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20
From Nouriel Roubini and David Backus Lectures in
Macroeconomics
21
Source Library of Congress
22
Hooverville, squatters shack. Source Library of
Congress
23
Hooverville, Bakersfield, CA. Source Library of
Congress
24
Faith-based responses Hoovers solution Source
www.wvculture.org
25
Government responses CCC advertisement from the
1930s. Source US Govt.
26
THE GROWTH OF THE FEDERAL GOVERNMENT IN THE
1920s. Randall G. Holcombe. Source Cato
Institute
27
Machine Shop The Colored CCC Source US Govt
28
CCC Poster National Park Service photo
29
Farm-to-market road. Source WPA
30
Farm to Market Road work in Shenandoah County,
Virginia, south of Route No. 263 and connecting
Routes 613 and 612. WPA project undertook
relocation of eight-tenths miles of state road,
eliminating two stream fords. Shot shows new read
and entrance to old abandoned road, the latter
leading to ford shown in next photo. Source WPA
31
WPA artist at work Library of Congress
32
Public works the Hoover Dam
33
Public works the Hoover Dam
34
FDR at CCC Camp Source CCC
35
Federal Office Building, San Francisco,
CA Source US Govt.
36
Source Professor McClymer, Assumption College
37
Work and Bread an election poster of the Nazi
party. When Hitler came to power in 1933, the
worst crisis was over, but the population
credited the Nazis with the success. Nazi
Party election poster from the early 1930s
Source Joke Kniesmeyer
38

• Facism
• (by McClymer, Assumption College)
• Mobilizing Passions
• The primacy of the group, toward which one has
  duties superior to every right, whether universal
  or individual.
• The belief that one's group is a victim, a
  sentiment which justifies any action against the
  group's enemies, internal as well as external.
• Dread of the group's decadence under the
  corrosive effect of individualistic and
  cosmopolitan liberalism.
• Closer integration of the community within a
  brotherhood (fascio) whose unity and purity are
  forged by common conviction, if possible, or by
  exclusionary violence, if necessary.

39
Nazi Rally at Nuremburg
40
photos courtesy of Prescott Kelly
41
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42
Drilling on a Liberator Bomber, Consolidated
Aircraft Corp., Fort Worth, Texas. Hollem, Howard
R., photographer. Library of Congress