e:\world\five\industry\capital.smith.dp
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Herbert Hoover
1. Adam Smith. Adam Smith was born in 1723, the son of a Scottish judge Advocate and Comptroller of Customs. He was educated at the universities of Glasgow and Oxford and became professor first of logic and then of moral philosophy at Glasgow. Eric Roll, A History
Of Economic Thought (Homewood, Illinois: Richard D. Irwin Inc. 1973), 142. / Main Ideas:
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Adam Smith was a student in Glasgow College and he graduated with the MA degree. He remained at Balliol College, Oxford, from 1740 until 1746, and earned a B.A. degree in 1744. His LL.D. was conferred by Glasgow in 1762. He was named professor of Glasgow in
January, 1751, and thus began a teaching career that lasted or thirteen years. Logic included rhetoric and belles-lettres. He received the chair of moral philosophy in 1752. He also lectured on jurisprudence and politics. John Fred Bell, Professor of Economics University of Illinois, A History Of Economic Thought (New York: Ronald Press Company, 1953), 152-3.
Adam Smith was born in Kirkcaldy, Scotland in 1723. He studied math and philosophy at the University of Glasgow and Oxford University. He taught at the Universities of Edinburg and Glasgow. Richard M. Hodgetts, Florida International University, Terry L. Smart, Trinity
University, San Antonio, Economics (Menlo Park, New Jersey: Addison Wesley, 1993), 9.
2. Invisible Hand. According to the law of supply and demand, people will buy only those products they want and pay only what they are willing to pay. Thus industrialists must manufacture products for which there is a demand and must charge just enough to make a fair profit. Wages are regulated in a similar way. If workers are not paid enough, they will work for another employer. If they are paid too much, their employer will not make a profit. Thus, as Adam Smith explained, everyone gains from this system. Industrialists make a fair profit. Workers receive a fair wage. Products are manufactured as efficiently as possible and sold at fair prices. All receive benefits through the "invisible hand" that regulates capitalism. Richard M. Hodgetts, 9. / Main Ideas:
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It is this deceptive quality of wealth "which rouses and keeps in continual motion the industry of mankind." The rich "consume little more than the poor. In spite of their natural selfishness and rapacity, though they mean only their own convenience, though the sole end which they propose from the labor of all the thousands whom they employ, be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements. They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants. Without intending it, without knowing it, advance the interest of the society." Henry William Spiegel, Professor of Economics at Catholic University of America, The Growth Of Economic Thought (Englewood Cliffs, New Jersey: Prentice-Hall, Inc., 1971), 230-1.
Producers of various goods must compete in the market for the dollars of consumers. The, producer who offered a better-quality product would attract more consumers. Self-interest would, therefore, lead to constant improvement of the quality of the product. The producer could also increase profits by cutting the cost of production to a minimum. Thus a free market, in which producers competed for consumers' money in an egoistic quest for more profits, would guarantee the direction of capital and labor to their most productive uses and ensure production of the goods consumers wanted and needed most (as measured by their ability and willingness to pay for them). Moreover, the market would lead to a constant striving to improve the quality of products and to organize production in the most efficient and least costly manner possible. All these beneficial actions would stem directly from the competition of egoistical individuals, each pursuing his or her self-interest. E. K. Hunt, University of Utah, Howard J. Sherman, University of California, Riverside, Economics: An Introduction to Traditional and Radical Views (New York: Harper & Row, Publishers, 1990), 43.
5. Thomas Malthus established two postulates, first, that food is necessary to man's existence, and second, that the passion between the sexes is necessary and will remain nearly in its present state. On the basis of these postulates he concludes that "the power of population is indefinitely greater than the power in the earth to produce subsistence for man." This is so because population, when unchecked increases in a geometrical ratio, whereas subsistence at best increases only in an arithmetical ratio. Nature, by making man's existence dependent on food, makes the two powers equal. It does so by checking the growth of population whenever it presses against food supplies. The two checks are vice and misery. Henry William Spiegel, 271. / Main Ideas:
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Thomas Malthus' three propositions are: (a) population is necessarily limited by the means of subsistence; (b) population increases where the means of subsistence increase unless prevented by some powerful and obvious checks; (c) these checks and the checks which repress the superior power of population and keep its effects on a level with the means of subsistence - are all resolvable into moral restraint, vice, and misery. Excess population could be obviated by two kinds of checks: positive and preventive. The former were all those which increased the death-rate, like wars and famines. The latter, which diminished the birth-rate, were vice and moral restraint. Malthus proposed that people should be discouraged from helping to increase the population. They should be urged to exercise moral restraint, by which Malthus meant "abstention from marriage not followed by irregular gratification." The poor in particular should be enjoined to exercise great prudence and not to rush into marriage and the creation of a family without due regard for the future. As a consequence Malthus was a strong opponent of Poor Relief. Eric Roll, 196.
In the United States the population has been observed to double in twenty-five years. Such an increase is "short of the utmost power of population," but as it approximates it and reflects actual experience. Malthus accepts this as the basis of his rule "that population, when unchecked, goes on doubling itself every twenty-five years, or increases in a geometrical ratio." In the matter of agricultural production, Malthus had no empirical data on hand which would show the maximum that could be accomplished. The most that he can conceive is growth by an equal increment in each period, an increase in an arithmetical ratio. Population, if unchecked, would increase 512 times after 225 years, the food supply only ten times. Henry William Spiegel, 271.
Although the father (Daniel Malthus) was educated at Oxford, he sent his son (Thomas) to Cambridge (Jesus College) in 1784. There he took prizes in Greek, Latin, and mathematics and graduated in 1788. In 1791 he received the M.A. degree. He entered the ministry of the Church of England upon graduation and at the age of thirty-one took charge of a parish. John Fred Bell, 194.
7. Third World Results. According to the president of the Rockefeller Foundation, of the 2.5 billion people living in the world's less developed countries, 1.5 billion are malnourished, and 500 million are starving. The magnitude of the problem baffles the imagination. It would seem that vast populations have come into being far exceeding their own resources. Unless they can be induced to limit their increase any assistance afforded them implies starvation on a still greater scale. Jane Soames Nickerson, Oxford graduate and journalist, Homage To Malthus (Port Washington, New York: Kennikat Press, 1975), 133. / Main Ideas:
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The population increase is immense, and greatest in Asia, Africa, and Latin America; that is, the poorest, least developed nations are increasing the most rapidly. The United Nations Demographic Yearbook for 1972, published 1973, gives the rate of population increase for the twenty-two years from 1950 to 1972. The total increase in twenty-two years thus reaches the enormous figure of 1,296 million: that is to say that in one generation the population of the world has increased by over 50%. Jane Soames Nickerson, 10-1.
Many millions live on the edge of starvation already, and there is a vivid and terrible illustration of what can happen in these precarious circumstances in Africa. A disastrous drought, from Senegal and Mauritania on the Atlantic to Ethiopia on the Red Sea, caused in part by a southward shift in the monsoon rains, has caused great loss of life. News of the extent of the disaster in those remote dry countries has only gradually filtered out: there are various estimates of what proportion of the 25 million people who inhabit the area have died of starvation and disease brought on by malnutrition, but no accurate figures. It is believed that 70,000 may have perished. Jane Soames Nickerson, 12.
8. First World Results. In a pre-industrialized country the expectation of life at birth is less than 30 years. In a pre-industrialized country over half the average personal income is absorbed by the cost of living. In frequent years of famine the whole of the average personal income is not enough to buy the food needed simply for subsistence. In an industrialized country hunger has disappeared, food expenditure absorbs no more than a quarter of the average personal expenditure, expectation of life at birth is well above 60 years. Consumption and investment have increased dramatically and no matter what index is drawn up, a rise in the figures takes place corresponding to the Industrial Revolution, which has no precedent in history; a leap forward into a completely new world. Editor Carlo A Cipolla, Professor of Economic History at University of California at Berkley, The Fontana Economic History of Europe Volume 3: The Industrial Revolution, 1700-1914 (Sussex, England, Harvester Press/Barnes & Noble, 1976), 16. / Main Ideas:
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Critics have been tireless in pointing out that Thomas Malthus' economic predictions have been disproved by facts; the population of England and Scotland when he wrote was about ten and one-half millions: it since increased to more than forty millions, but the wealth and means of subsistence have increased much more than fourfold. John Fred Bell, 200.
Country / period considered / population
France / 1845-1950 / 0.1
Germany / 1865-1952 / 1.0
Italy / 1865-1932 / 0.7
United Kingdom / 1865-1950 / 0.8
Russia / 1870-1954 / 1.3
Switzerland / 1865-1952 / 0.7
United States / 1875-1952 / 1.7
Canada / 1875-1952 / 1.8
Japan / 1885-1952 / 1.3
Editor Carlo A Cipolla, 15.
Malthus fully appreciated that more education would be likely to lower the birthrate, as leading people to demand a higher standard of living for themselves and their children and equipping them with a greater measure of self-control in planning their families; whereas ill-educated, irresponsible people would be more likely to reproduce to the biological limit. Jane Soames Nickerson, 10.
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