Philosophy
1.Introduction
Philosophers have been often involved in economics (David Hume, John Locke, Adam Smith and
Isaac Newton)
Isaac Newton theory: the law of inertia
- Angels pushing the planets/make them go around (14th century)
- Newton: air pressure, planets can move around because there is nothing holding them back
(sort of a vacuum)
➔ self-sufficient system (u don’t need angels), God made the system but doesn’t interfere
in it; ‘good clockmaker doesn’t need to keep repair the clock to make it work’
Adam Smith: father/founder of economics (18th century)
- Professor of Moral Philosophy
- Friend of David Hume
- Theory of Moral Sentiments (the invisible hand)
o The rich are lead by an invisible hand to make nearly the same distribution of the
necessaries of life as they would have done if the earth had been divided so that
everyone received the same amount
o The rich have help the poor
o They like to spend and when they do that their wealth is passed down -> they spent
on their own pleasure, but somebody must sell something
➔ indirectly they create employment
o Even the selfish ‘bastards’ have to spend money to pass it down to people/to give
them work
o They benefit from the poor -> unfair
o Spending money = giving indirect employment
- Theory: The Wealth of Nations
o Anyone engaged in buying and selling
o Both sides acting for their own benefit (money -> employment)
o We don’t expect dinner from butcher, baker, … but from their own interest (by
buying)
o System works if the invisible hand is left to do its work
o The economy takes care of itself
- Two ideas worked together
o Francois Quesnay (France)
o Doctor; treated the mistress of Louis XV
o He wrote: Tableau economique (18th century)
▪ Picture of blood circulated around the body (products being sold, money, …)
▪ The formulae set out in it show how the products of agriculture would be
distributed among the community and how payments would flow from one
party of a ‘healthy’ economy to another
▪ It might be compared to formulae used to describe the way blood circulates
through veins and arteries to various organs in a healthy body
1
, ▪ Blood flowing around the body or Newton’s planets orbiting around the sun
▪ Surgeon deals with a system that can go wrong and needs intervention from
time to time
Which model should we follow? Should the economist leave things to be invisible hand?
Or try to ‘put things right’? -> visible hand
Sometimes economic crises like the Great Depression need someone to intervene and put them
right instead of juts waiting and be ‘patient’
o Ha-Joon Chang (Korean)
o Article: Should we protect our infants?
o Kicking away the ladder (book)
▪ Those who climb up the ladder then kick it away so no one else can join
them -> countries institute protectionism to make themselves rich then ‘kick
away the ladder’ by denying the right of anyone else to adopt protectionist
measures
o Protectionism the truth is on a $10 bill
▪ You protect small children, you hold their hands and help them -> we should
do the same with infant industries (hold their hands too)
• Its’s seen as a ‘bad thing’ by the economists; the opposite is ‘free
trade’ – we all want to be free
• But we also want to be protected – so how can we approach the
idea of protecting industry?
▪ $10 bill because it shows Alexander Hamilton
▪ Free trade
▪ Economists modified this in order to boost trade even more
• Developed ‘comparative advantage’
• It meants that it was in the interests of a country even to trade with
another country that was worse than it at everything
• Even this would benefit both countries, so long as the country that
was bad at everything specialised in what it was ‘lest bad’ at.
▪ The leaders in Korea didn’t like this: they want to make technology like they
do in the west instead of making cheap clothes or toys.
• Got money from Japan (WW2) and USA -> industries
▪ Advice: even if you’re not good at something it may still make sense to
invest in that but to do that you need protection because otherwise
everyone else will say ‘you have to stop that’
o Advice:
▪ Get the state of support investment in the latest technology – even if you
are fa behind the others – and then protect your ‘infant industries’ while
they grow. In the long run it will be worth it
▪ But ‘protection’ has mean tariffs. Otherwise, there will be no domestic
market, because people will prefer to buy cheaper and better-made goods
from aboard.
2
, o Example:
▪ Robinson Crusoe; fishing
▪ Man Friday; climber, collecting coco melons
▪ In the other Crusoe’s bad at everything but what he’s least bad at is fishing
▪ ➔ At the end of the day they share (working together benefits both)Do
what you’re least bad at and concentrate on doing that (even something
simple)
o Colonies wanted to do the same, develop their own industry
o Decreasing demand for the product and is constant -> higher demand; higher price
o Alexander Hamilton
o Founding fathers of the USA
o First treasury secretary
o In favour of tariffs to protect industries
o Influenced European thinkers like the German Fredrich List who also advocated
tariffs
o David Ricardo
o His book famous for his argument for free trade
▪ On the Principles of Political Economy and Taxation in 1817
o Argument for free trade
▪ (Each country concentrates in their speciality)
▪ The Russians grow a lot of fine wheat on their open spaces
▪ The Portuguese have a climate that makes for fine wines and sherries
▪ The English produce manufactures (industrial revolution begins)
▪ Let the Russians specialise in wheat, the Portuguese in wine and English on
manufacturing -> can happily trade with each other
▪ Each concentrates on their ‘speciality’ in which they are better than all the
others
o Lots of things can go wrong if you ‘protect’ some of the industries
o Conclusion: not history of philosophy
o We compare ideas
o How we are affected by the modules we choose
3
, 2.The hand of money
It’s said that ‘money makes the world go round’
Does it?
There is something a little crazy about it
Why do we have money?
- David Graeber
o Studied how societies operated in the past
o How they may operate in present
- The standard answer in economics textbooks is:
o Barter came first, then Money and finally Credit. You start by exchanging tusks, then
you get money, then you get derivatives…
- The double coincidence of wants….
o I have an orchard. I make apples. You are a shoemaker. I take my apples to you and
say: let’s swap. You say: ‘I’m allergic to apples. I like pears, though’. So I go to a
friend who has a pear tree. I say: I’ll give you apples if you give me pears.’ The friend
says: ‘What I really want is milk.’ So I go to another friend who has cows, swap my
apples for milk, then swap the milk for pears, then go back to the shoemaker and
swap pears for shoes… and then I think: ‘There must be a simpler way of doing
this!!!’ Out of all this hassle comes money…
- Money as means of exchange
o Portable
o Endouring
o Rare (pebbles -> silver/gold)
o Possible to sub-devide
- Originate
o People used pebbles, beads, shells, feathers, silver – first used for adornment?
o ‘Primitive currencies’ used for exchanges, buying and selling
o Beads: used by Chumash Indians of California
- Used as money or adornment? (shells)
o Same/similar size would suggest money
o On the other hand same size for adornment -> money may have come later than we
think
The presumption of economists is that money originated ‘from below’, from the needs of the
market.
- But there have been other theories about the origin of money
- Not that it has to be ‘one or the other’ – it could be both.
- Another theory is offered by David Graeber in his Five thousand years of debt. Graeber was a
social anthropologist rather than economist – and he thought that some societies developed
money in a different way to that suggested by the double coincidence of wants.
4
1.Introduction
Philosophers have been often involved in economics (David Hume, John Locke, Adam Smith and
Isaac Newton)
Isaac Newton theory: the law of inertia
- Angels pushing the planets/make them go around (14th century)
- Newton: air pressure, planets can move around because there is nothing holding them back
(sort of a vacuum)
➔ self-sufficient system (u don’t need angels), God made the system but doesn’t interfere
in it; ‘good clockmaker doesn’t need to keep repair the clock to make it work’
Adam Smith: father/founder of economics (18th century)
- Professor of Moral Philosophy
- Friend of David Hume
- Theory of Moral Sentiments (the invisible hand)
o The rich are lead by an invisible hand to make nearly the same distribution of the
necessaries of life as they would have done if the earth had been divided so that
everyone received the same amount
o The rich have help the poor
o They like to spend and when they do that their wealth is passed down -> they spent
on their own pleasure, but somebody must sell something
➔ indirectly they create employment
o Even the selfish ‘bastards’ have to spend money to pass it down to people/to give
them work
o They benefit from the poor -> unfair
o Spending money = giving indirect employment
- Theory: The Wealth of Nations
o Anyone engaged in buying and selling
o Both sides acting for their own benefit (money -> employment)
o We don’t expect dinner from butcher, baker, … but from their own interest (by
buying)
o System works if the invisible hand is left to do its work
o The economy takes care of itself
- Two ideas worked together
o Francois Quesnay (France)
o Doctor; treated the mistress of Louis XV
o He wrote: Tableau economique (18th century)
▪ Picture of blood circulated around the body (products being sold, money, …)
▪ The formulae set out in it show how the products of agriculture would be
distributed among the community and how payments would flow from one
party of a ‘healthy’ economy to another
▪ It might be compared to formulae used to describe the way blood circulates
through veins and arteries to various organs in a healthy body
1
, ▪ Blood flowing around the body or Newton’s planets orbiting around the sun
▪ Surgeon deals with a system that can go wrong and needs intervention from
time to time
Which model should we follow? Should the economist leave things to be invisible hand?
Or try to ‘put things right’? -> visible hand
Sometimes economic crises like the Great Depression need someone to intervene and put them
right instead of juts waiting and be ‘patient’
o Ha-Joon Chang (Korean)
o Article: Should we protect our infants?
o Kicking away the ladder (book)
▪ Those who climb up the ladder then kick it away so no one else can join
them -> countries institute protectionism to make themselves rich then ‘kick
away the ladder’ by denying the right of anyone else to adopt protectionist
measures
o Protectionism the truth is on a $10 bill
▪ You protect small children, you hold their hands and help them -> we should
do the same with infant industries (hold their hands too)
• Its’s seen as a ‘bad thing’ by the economists; the opposite is ‘free
trade’ – we all want to be free
• But we also want to be protected – so how can we approach the
idea of protecting industry?
▪ $10 bill because it shows Alexander Hamilton
▪ Free trade
▪ Economists modified this in order to boost trade even more
• Developed ‘comparative advantage’
• It meants that it was in the interests of a country even to trade with
another country that was worse than it at everything
• Even this would benefit both countries, so long as the country that
was bad at everything specialised in what it was ‘lest bad’ at.
▪ The leaders in Korea didn’t like this: they want to make technology like they
do in the west instead of making cheap clothes or toys.
• Got money from Japan (WW2) and USA -> industries
▪ Advice: even if you’re not good at something it may still make sense to
invest in that but to do that you need protection because otherwise
everyone else will say ‘you have to stop that’
o Advice:
▪ Get the state of support investment in the latest technology – even if you
are fa behind the others – and then protect your ‘infant industries’ while
they grow. In the long run it will be worth it
▪ But ‘protection’ has mean tariffs. Otherwise, there will be no domestic
market, because people will prefer to buy cheaper and better-made goods
from aboard.
2
, o Example:
▪ Robinson Crusoe; fishing
▪ Man Friday; climber, collecting coco melons
▪ In the other Crusoe’s bad at everything but what he’s least bad at is fishing
▪ ➔ At the end of the day they share (working together benefits both)Do
what you’re least bad at and concentrate on doing that (even something
simple)
o Colonies wanted to do the same, develop their own industry
o Decreasing demand for the product and is constant -> higher demand; higher price
o Alexander Hamilton
o Founding fathers of the USA
o First treasury secretary
o In favour of tariffs to protect industries
o Influenced European thinkers like the German Fredrich List who also advocated
tariffs
o David Ricardo
o His book famous for his argument for free trade
▪ On the Principles of Political Economy and Taxation in 1817
o Argument for free trade
▪ (Each country concentrates in their speciality)
▪ The Russians grow a lot of fine wheat on their open spaces
▪ The Portuguese have a climate that makes for fine wines and sherries
▪ The English produce manufactures (industrial revolution begins)
▪ Let the Russians specialise in wheat, the Portuguese in wine and English on
manufacturing -> can happily trade with each other
▪ Each concentrates on their ‘speciality’ in which they are better than all the
others
o Lots of things can go wrong if you ‘protect’ some of the industries
o Conclusion: not history of philosophy
o We compare ideas
o How we are affected by the modules we choose
3
, 2.The hand of money
It’s said that ‘money makes the world go round’
Does it?
There is something a little crazy about it
Why do we have money?
- David Graeber
o Studied how societies operated in the past
o How they may operate in present
- The standard answer in economics textbooks is:
o Barter came first, then Money and finally Credit. You start by exchanging tusks, then
you get money, then you get derivatives…
- The double coincidence of wants….
o I have an orchard. I make apples. You are a shoemaker. I take my apples to you and
say: let’s swap. You say: ‘I’m allergic to apples. I like pears, though’. So I go to a
friend who has a pear tree. I say: I’ll give you apples if you give me pears.’ The friend
says: ‘What I really want is milk.’ So I go to another friend who has cows, swap my
apples for milk, then swap the milk for pears, then go back to the shoemaker and
swap pears for shoes… and then I think: ‘There must be a simpler way of doing
this!!!’ Out of all this hassle comes money…
- Money as means of exchange
o Portable
o Endouring
o Rare (pebbles -> silver/gold)
o Possible to sub-devide
- Originate
o People used pebbles, beads, shells, feathers, silver – first used for adornment?
o ‘Primitive currencies’ used for exchanges, buying and selling
o Beads: used by Chumash Indians of California
- Used as money or adornment? (shells)
o Same/similar size would suggest money
o On the other hand same size for adornment -> money may have come later than we
think
The presumption of economists is that money originated ‘from below’, from the needs of the
market.
- But there have been other theories about the origin of money
- Not that it has to be ‘one or the other’ – it could be both.
- Another theory is offered by David Graeber in his Five thousand years of debt. Graeber was a
social anthropologist rather than economist – and he thought that some societies developed
money in a different way to that suggested by the double coincidence of wants.
4
