Modern Economics

This week, in our HCJ lecture we focused on economics. Money.
In the past we have looked at money in some ways, such as Adam Smith, and his look at free trade. We also looked at Smith's satirical solution to the financial problems in Ireland in 1729.

We have a desire to consume which outweighs our desire to produce. We have a number of 'wants' in our life, and finance usually means we have to decide which 'wants' to satisfy. People often say that they 'need this' and 'need that'. Humans don't 'need' anything. They simply 'want' it.
Economics ignores 'needs'. Need has no reference point.

Utility- To economics it is fundamental
- A phenomenon
- The reference of human wants
Humans maximise their utility.
'Utilitarianism'

Marx = Ricardo (Value theory) + Neo Malthusian

Value Theory
Embedded labour power

Eg- Piano = 5000 bins
Takes more work to make the biron - 5000 times more labour.

Malthus - the iron law of population
You should have 2 children, so that they can replace you.
- More than 2 children means a population increase.
- Less than 2 children means a population decrease.

Neo-Malthusian - the iron law of wages
- Internal contradiction of capitalism
- Inability of system to scoialize surplus vaue = crisis of revolution
= Crisis and revolution
- Neo- Malthusian means over productions and under consumption ecause of profit.

The answer to unemployment is growth.

Simple Economy (an example)
All that's made is 1 apple.
Value of the apple = £3
Producer of the apple is paid = £2
Profit would be = £1

However, if the producer of the apple went to the shop and wanted to buy the apple, he wouldn't have enough money.

They would then try to solve the problem -
Cut wages to = £1
Cut price of Apple to = £2
But this doesn't solve the problem.

Source - Flickr: Images_of_Money

Old economists thought of money as transparent.
Modern economists eel that money exerts popwer on the real world - irrational.
Karl Marx - Communist Manifesto
People didn't have enough money

1850's - The gold rush in America.
Until recently - gold had no real value/purpose.
Anthropology - Superstitions about gold.
Gold supply has varied through the decades.
But gold mines caused economic recession.

Paper (money) circulation is a small percent of that used today. It is now mainly electronic.
In some ways this means that the 'Economy is based on confidence'.

- 1880's onwards - Germany, America, Britain - The welfare state.
State education came at around the 1870's.
- Government bonds (gilts)

Why pay taxes?
Taxes help to pay interest on the bonds, because governments get charged interest on the bonds/gilts that they recieve.

Problem - Inflation
German hyper-inflation - resulting from 'printing money' (not backed by gold standard)
Too much money chasing too few items.

Two types of economists
1- Keynesian
- Don't care about inflation.
- Plan economic growth

2- Monatarism
- Followers of Adam Smith
- Classical in the sense of Smith
- Pre-modern and Pre-Freudian
- Think people accurately work out what the want.

'Know the price of everything, and the value of nothing'

People should accept cuts in their wages to help the economoy, but they won't.

National Health Service - helpful in avoiding inflation, as the government needs too keep spending money to keep people employed.
However, they need to keep public spending within the public sector.
Eg - War
- No private sector
- Means investing in public sector of war doesn't put anybody out of business (thier is priate sectar for war, so it doesn't damage any private companies).
Eg - Space programmes
Eg - Digging holes

Y = C + I + G

C = Household spending
I  = Private investment (eg - savings)
G = Government spending
If Y decrease, then thier wont be enough money to keep people employed unless they take pay cuts.

If banks won't take bonds, we end up with the situation currently in Greece. They are no longer trusted to eventually pay back the money.
Answer - print more money. Germany have taken out a lot of money and handed it to Greece to help them financially.
Germany has more ability to raise money, so they can continue to take out bonds.
Once banks default on bonds = Mass unemployment

In the long term, we can try to keep doing this and 'kicking the can' further and further forever. Alternatevly, we could try and wipe all debt, or could face a global economic crisis.
In the long term we're dead, and the problem moves onto the next generation, and so on.

When I was young I used to think that money was the most important thing in life. Now that I am old, I know it is.

Oscar Wilde

Wealth is the parent of luxury and indolence, and poverty of meanness and viciousness, and both of discontent.

Plato 

A wise man should have money in his head, but not in his heart.
Jonathan Swift

Money is better than poverty, if only for financial reasons.
Woody Allen

Posted in: HCJ, history and context of journalism, journalism, university of winchester, winchester journalism