In the 15th century, the society conducted its activities based on the traditions governing them, and they handled tasks from one generation to the other depending on usage and customs. Practical affairs globally were based on social, political, and religious life. Nobody in the society would sell the family, for it was a taboo. Later in the 17th century selling a good more than its worth was prohibited, and anybody found to have collected more profit from their customers would be jailed. Coming up with a new idea that had never been heard was highly fined, and economists were not found not until the 18th century. In the 19th century, there was a shift of economists from macro to micro economists where they stopped working on getting national wealth but personal wealth. They quitted unemployment growth and foreign trade, and they wanted to focus on the allocation of resources. In the digital world, there are two types of economic systems which are socialism and capitalism. In a capitalist society, people work for personal achievements, for when individuals focus on their interests, the organization achieves the best. The prices of goods, as well as money and labor, are guided by rules of the market (Sherrade and Neil, 2016).
On the other hand, socialism is carried out depending on personal needs. Society’s resources are distributed according to the needs a person has and not their contribution. In this kind of economic system, no one is entitled to own the means of production apart from the government.
Feudalism was a dominant economic system after the fall of the Western Roman Empire. There comes a landlord who owned a serf in the land that resembled slavery and the property together with the serf. There were also peasant farmers grazing in the common ground. The economic activity carried out by this person revolved around the life of a manor, and a large self –satisfied agricultural plantation took care of by a landlord. Serfs and peasant farmers cultivated it. In the middle ages, small villages had come up near the manor. These small homes come as a result of civilization experienced from a developed world. Scholars were eager to know the economic behaviors that occur as a result of the Bible and Aristotle too. According to Aristotle, justice is when things that are exchanged are comparable. Thus, he comes up with the idea of money, where he said it is essential for exchange.
The Bible views the economic behavior was that people should not look for wealth for its own sake. The Bible is the book of Matthew shows clearly that riches are not necessary while looking for the kingdom of God for a camel can go through the eye of a needle that a reach person to enter the country. It also warns people against serving God and money in the book of Luke, for they will help one, master, and despise the other. St Augustine supports the bible verses and says that when people prefer worldly things more than God, then they don’t trust in Him. People should not help others and expect a reward, and the rich should lend money to the poor, and they should not ask for interest from them.
Scholasticism view is that the value of food good should be fair or just. When determining the only price of a good, Aquinas says that God ranked his creatures from the most superior to the inferior ones. The first test for products and service exchange was if the transaction or not the exchange challenged the class hierarchy. The price termed as just was that which supported the seller’s social status was. When the demand for the goods and services is high and the supply is low, then the seller has the right to raise the prices of the goods and services. Thus the thought of Aristotle mends that excellent use of money is when exchanging products and services. Paying with interest or usury was cheating the borrower. inn many Islamic and Jewish communities’ usury is illegal for it makes the financing party investment.
From 1500AD to 1750 AD, there was decay in religion, and the European Renaissance brought a humanistic view. Just price during the Mercantilism was still a concern. Landlords fenced the common land to raise flocks of sheep, for there was a rapid growth in the woolen industry. Farmers who were grazing on the common land became proletarians. With the use of new weapons, the government started governing people from feudal landlords. There were no market systems for maintaining and sustaining the society until the 16th century. The flow of silver and gold through Portuguese and Spanish lands also caused the floating of market systems. Again merchants become powerful and formed a good relationship with the government after the collapsing of feudalism. Nation wealth was linked to its accumulation of silver and gold that was used as money. The state was to discourage domestic consumption, keep wages and interests low, prohibit or limit the export of silver and gold, and reduce imports by putting tariffs on them.
At that time, the value of a commodity was determined by the portion of quantity to the supply. When the demand for a commodity is constant, then the supply will make the price of the commodity fall. The rate of interest given reflects the amount and application of the product. When the interest’s rate is kept low by the government, money lenders will use their money for other activities, and those who urgently need the cash have to borrow it in a black market. Thus they will be given a higher interest rate.
Currently, neumercantalists still keep international relations as far as security and the economy are concerned. They are concerned with states’ gain and not absolute increase and thus maintaining it, and the state should promote economic development by protectionism, industrialization, and government intervention. Then can then support free trade when the country has achieved supremacy in industries (Slater and Tom, 2017p.120). Economic activities are run by human psychology, and thus, if there are psychological laws, then there are economic laws. According to reductionism, psychological laws are based on biochemical laws that regulate the brain activities of a human being, which are, in turn, based on fundamental laws.
The French revolution began in 1789 and ended in the 1790s where peasants were against landlords after exploiting them for a year. The revolution seized French monarchy and feudalism. It also leads to the promotion of equal opportunities, representative government, and freedom of expression. Unlike Mercantilism, physiocrates see trade and industries as unproductive activities and examine farming as the only productive activity. In sectors, manufacturer’s competition will keep profits equal to wages with a capital return of zero. In agriculture, the farmers get surplus over the cost of production, which they circulate through the economy, and landlords get the excess as rent. In a society, three classes are: the income flow of these classes determines landlords, farmers, and manufacturers and their success. Physiocrates terms capital as a series of advances where farmers invest their money in seeds and industries invest in raw materials.
Revolution of industries took place from the 18th to the 19th century. It was the period in which rural societies in America and Europe transformed into urban and industrial areas. It indicated a shift of individual machines, power, mass production, and numerous factories. There was an improvement in the means of communication and transportation. The living standard of the upper-middle classes was also improved while the lives of the poor and working classes worsened. Wages were low, and the working conditions were tedious and dangerous. Unskilled workers would be terminated, making their lives difficult. There was child labor where children were forced to work for long hours, and yet the tasks were too difficult for them. Due to the invention of machines, some of the workers were replaced by robots as they perform similar functions as people.
The industrialized areas could not keep pace with the flow of new workers leading to inadequate housing and pollution, and thus, the condition was hampering diseases. In the 19th century, the working-class terms started improving due to the trade unions formed and the formulation of laws that protected the worker. The market price of a commodity is equal to the actual price at which the good is commonly sold. The demand and supply of merchandise determine market prices. When the application of products is too high, and the supply is low, the market price rises, and when the order is small, and the amount is high, and the market price goes down.
When the government decides to drop the gold many and use paper currency, excessive paper money will lead to inflation. Thus the remedy is to request the central bank to change the paper money into gold. The total output is equivalent to the cost of production. To get the cost of production is gotten when one adds up wages, profit, and rent. According to a commodity model, as the numbers of laborers, as well as the total, fees grow, the lease also increases, but the profit rectangle decreases. The model thus implies that the interest of the landlord is opposed to that of capitalists. When there are rules that wages and rent cannot be increased, then profit increase can be gotten through importing the commodity at a cheap cost than it is sold in the local market and improving the agriculture sector. When the population grows in the cultivation land, the land under cultivation will be used; rent will go back to their original price. Profits will, therefore, be higher, and thus, more capital will be achieved. The cultivation margins are extended to the less fertile land of another crop rather than the previous one. The rent would, therefore, shoot to a higher price than their original levels. When importation is prohibited, the lead would be elevated than the reasonable price while profits achieved would be low. For accumulation will depend on benefits, stopping importation will be responsible for dormant progress in wealth and also growth in population.
The main difference between the classical economists and their successors is that their former engages on wage funds. Wage funds are part of the capital that capitalists use to hire workers. When labor is the commodity, several workers and wages are subject to demand and supply. The value of a good or service is similar to the energy applied to its production. However, according to classical economics, the value of a commodity is identical to its cost, which is similar to rent, wage and profit combined (Vergara‐Camus and Cristobel Kay, 2017 p.240).
On a marginal land, capital and output are low while on fertile soil, the money and production are high. Due to the competition, profit and wealth will be similar. According to Ricardo, rising in wage cannot raise the prices; thus, profit will be left unchanged, or it would instead lower the benefits. When a piece of land has an alternative use, the farmer ought to pay the landlord some amount to compensate the amount the landlord would earn a forgone opportunity. Less labor is used to produce the same amount of infertile commodity land, and thus, due to this difference, the cost of rent shoots. The higher the difference in fertility levels of two different farms, the more significant the difference in rent. More profit can be incurred when doing the business of the commodities locally than the cost made abroad.
Taxation on wages will raise the payments, but it should be raised to a certain level, and thus, the profits will go down. When taxing rent, there will be no rise in rent experienced because the landlord pays the tax. Capitalists pay tax on profits, but the wages should remain at the same level. When levying taxes on commodities, the benefits will go down for they are necessities, and customers will pay them if they are luxury commodities.
Marx developed the theory of dialect materialism, and it is bound on culture, law, politics, and art. The main impact of political movements and social changes in the mode of production. They include property laws, organization production, technology, and resources. In capitalism, struggles are between workers and capitalists. These struggles lead to a change in the mode of production, which causes variation in all human cultures. Due to the competition for jobs by workers, wages are kept equal to the subsistence. To get profits, employers give labors less price in fees than their work. Thus when they sell their products, they can sell them at their desired prices and still get profits.
Savings give room to loan funds used for investment. When the savings are high, there will be more investments, and thus employment rate is high too; whenever an increase in interest occurs, saving levels increase, and therefore, the employment rate increases. An increase in savings will reduce the long term interest rate, but it will encourage more investments. The free labor market achieves full employment with no help from the government. But the government has the capabilities of increasing the short term interest to get more savings and thus increase the level of investments (Ehrenberg and Robert, 2017).
According to Keynes, work had no value in itself; people only worked for consumption. The significant difference between neoclassicism and criticism is that savings in neoclassicism are leased for investments, and lowering interest rates will increase the investment levels. Investments are from savings, and the government needs to improve people’s income to get more savings. Thus the government should increase investments in the private sector. Lowering the rate of interest may make some people use their savings for investments, but there might be a reduction of consumption to saving more. Thus income level determines the investment or consumption levels as well. No relationship is witnessed between investment level and interest rate. The investment level will depend on the profit incurred in the business and does not rely on the interest rate. Income levels are the critical determiners of consumption or investment level. Nation income level and employment level is determined by the intersection of aggregate supply and demand.
Keynes argued that unemployment and inflation had a negative correlation. High wages were equated to less unemployment. However, in the 1970s, inflation and unemployment rate increased. An increase in the money supply increases the demand for goods and services, and thus, the will be equal to the boom in price. When the real wage is maintained, unemployment will not be price levels will rise immediately. When people expect prices to rise, the demand for rates and services shoot higher. To meet the increased demand, manufacturers should do more works that they may produce more commodities for increased customers. The decrease in employment is a short term impact and, thus, any inflation in wages experienced. The money supply is increased through in- bank systems as well as out- bank systems. Inside the banks, some of the deposit is loaned to customers while in the outside bank system’s the government can give bonds to central banks which they lend to commercial banks. Therefore, wealth, prices, wages, land, and investment have relationships. The rise of one will depend on either the fall or rise of another, and one commodity can lead to the other.
Ehrenberg, Ronald G., and Robert S. Smith. Modern labor economics: Theory and public policy. Routledge, 2017.
Sherraden, Michael, and Neil Gilbert. Assets and the Poor: New American welfare policy. Routledge, 2016.
Slater, Tom. “Planetary rent gaps.” Antipode 49 (2017): 114-137.
Vergara‐Camus, Leandro, and Cristóbal Kay. “Agribusiness, peasants, left‐wing governments, and the state in Latin America: An overview and theoretical reflections.” Journal of Agrarian Change 17.2 (2017): 239-257.