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Chp 8 : The Classical School : Bentham,Say,Senior & Mill (Jean…
Chp 8 : The Classical School : Bentham,Say,Senior & Mill
Jeremy Bentham
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Utiliarianism
Is the ethical doctrine that the moral worth of an action is determined solely by its contribution to overall utility
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Bentam argued that virtually all humans seek to maximize their "happiness", defined as the surplus of pleasures over pains
He also posited that all human actions arise from the hedonic calculus. Hedonistic thought is that all actions can be measured on basis of how much pleasure and how little pain they produce.
In seeking individual happiness, they may not necessarily cause the greatest collective happiness- Goverment and law, moral and social sanctions, are designed to direct individual pursuit into maximum social utility.
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Utilility Maximization
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Bentham provided a first statement of what has since become a commonplace idea - "economic analysisi would be enriched if it makes use of and explores the implication of the assumption that human being do what they do in order to maximize utility, which is the excess of pleasure over pain
Criticisms
Bentham chose money as his cardinal measure but people have different subject valuations of things which cannot be compared
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Jean Baptiste Say
Introduction
In 1803, he wrote Traite d'Economie ( Treatise on Political Economy)
Say work with a group of laissez-faire economist, who sought to relaunch the spirit of Enlightenment liberalism in republican France
Value Theory
Say opposed the labor theory of value by classical and replace with supply and demand which in turn are regulated by cost of production and utility
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Emphasized that labor, land and capital are all involved in production
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Cost of Monopoly
Monopoly not only create efficiency loss but also use scarce resource to obtain and protect their monopoly positions
Entrepreneurship
Like Cantillon before him and the austrian School after him, say also placed great emphasis on the risk-taking entrepreneur and even tried to include him as the 'fourth' factor of production in his analysis
Law of Markets
Say's Law claims that total demand in an economy cannot exceed or fall below total supply in that economy or as james Mill was to restate it "supply creates its own demand"
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Nassau William Senior
Introduction
Spesifically, senior can be credited with the initiation in Great Britain of utility-based demand and the cost of production-based supply scheme, thus an important predecessor of Marginalist Revolution
Believed we should separate the science of political economy from value judgement, leading to the modern notion of positive economics
On 1825, he became the first professor of political economy at Oxford
Positive Economics
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Economist should concern on analyzing the production and distribution of wealth, not the promotion of happiness
Positive economics is the branch of economics that concerns the description and explanation of economic phenomena
It focuses on facts and cause-and-effect relationship and includes the development and testing of economics theories. Earlier terms were value-free economics and its German counterpart wertfei economics
Positive economics as such avoids economic value judgement. For example, a positive economic theory might describe how money supply growth affects inflation,but it does not provide any instruction on what policy ought to be followed
Four Proposition
Principle of income or utility maximization - People wish to maximize wealth at the lowest sacrifice
Principle of population - The population is limited only by moral or physical evil, or by the fear of a deficiency of wealth that each class of inhabitants think they need
Principle of capital accumulation - labor productivity is not limited, but increase as capital is brought to bear
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Abstinence
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It implied a value judgement about the sacrifices taken by capitalist in postponing consumption of wealth
Abstinence Theory
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The cost of production are the labor of workers and the abstinence of capitalist. (people have to be paid to abstain from consumption to give up their buying power to purchase capital)
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Policy
A proponent of laissez-faire, Senior was a active participant in Whig politics, beings one of the commisioners responsible for the Poor Law Amendment Act of 1834
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Factory Acts
Favored child labor laws, but did not favor laws restricting the hours of adults
John Stuart Mill
Introduction
Made contribution to economics, philosophy, logic political science
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