ECON 3520 Fall 2012 FINAL EXAM REVIEW QUESTIONS

ECON 3520
Fall 2012
History of Economic
Thought
Professor Dyer
Final Exam Review
Questions

The final will consist of five questions drawn from the list of nine below. You must answer
three out of the five questions.
Your grade will be based on the historical accuracy, use of lecture and
reading materials, and the relevance, clarity, and thoughtfulness of your
answers.

1. Adam Smith built his theory of markets around the concept
of natural price, where:
The natural price, therefore, is, as it were, the central price, to
which the prices of all commodities are continually gravitating. (Adam Smith from Heilbroner, page 89)
Explain Smith’s theory of prices. Explain why he thought it
was necessary to modify his theory in order to account for the private
ownership of land and capital.

2. The following
passage from Smith’s Wealth of Nations describes one
consequence of the division of labor that he felt called for government action.
The torpor of his[the worker’s]
mind renders him, not only incapable of relishing or bearing a part in rational
conversation, but of conceiving any generous, noble, or tender sentiment, and
consequently of forming any just judgment concerning many even of the ordinary
duties of private life. (Adam Smith from Heilbroner, page 102)
Explain the role of the division of
labor in Smith’s theory of economic growth. What is his recommendation for
government action in order to counteract its harmful effects?

3. The following quote from Thomas
Malthus’s essay on population summarizes his general conclusion:
That population does invariably increase
when the means of subsistence increase. And that the superior power of the
population is repressed, and the actual population kept equal to the means of
subsistence, by misery and vice. (Heilbroner, page 110)
Briefly explain the reasoning behind
Malthus’s conclusion about this dismal fate of society, in general, and the
working class, in particular. Using specific ideas from the theories of David
Ricardo and Karl Marx show how Malthus’s conclusion is reflected in their work.

4. David Ricardo is often credited
(along with Malthus) with introducing the idea of diminishing marginal
productivity into economic analysis through his theory of rents. For example:
It is only, then, because land is not
unlimited in quantity and uniform in quality, and because in the progress of
population, land of an inferior quality…is called into cultivation, that rent
is ever paid for the use of it. (Heilbroner page 114)
Provide a detailed explanation of how
he uses this idea to show that increasing rents, caused by renewing the Corn
Laws, must come at the expense of decreasing profits.

5. What were T. Malthus’ objections to
Ricardo’s attack on the Corn Laws in 1815?
How did Ricardo respond to these objections in his Principles of Political Economy
and Taxation and how did this response “strengthen” his conclusions
about the Corn Laws in 1815?

6. John Stuart Mill argued that the
nature of the laws regulating how we produce are different from the laws that
regulate how we distribute the fruits of that production.
Unlike the laws of Production, those of Distribution are partly of
human institution; since the manner in which wealth is distributed in any given
society, depends on the statutes or usages therein obtaining. (Mill from Heilbroner
page 131)
Discuss the details of specific
examples (2-3) from the 19th century English labor movement of how
the laws of distribution were undergoing change.

7. The following quote is from Marx’s Capital.
Labour is, in the first place, a process in
which both man and Nature participate and in which man of his own accord
starts, regulates, and controls the material re-actions between himself and
Nature. …By thus acting on the external world and changing it, he at the same
time changes his own nature. (Heilbroner page 174)
In the context of this quote explain
why labor is so important to Marx’s understanding of human self-realization.
Discuss the role of the history of German philosophical ideas in shaping Marx’s
idea of human self-realization through labor.

8. Here is Marx on the difference
between the value of labor-power and value created by labor-power:
The fact that half a day’s labour is necessary to keep the labourer
alive during 24 hours, does not in any way prevent him from a working a whole
day. Therefore, the value of labour-power, and the value which the labour-power
creates in the labour-process, are two entirely different magnitudes; and this
difference of the two values was what the capitalist had in view when he was
purchasing the labour-power. (Heilbroner page 177)
Provide a detailed explanation of the
origins of profits, according to Marx. Begin your explanation with a discussion
of how value is transformed in the production process; be certain to include
the relationship Marx discusses in the above quote. According to Marx’s theory,
why must the rate of profit inevitably fall?

9. Discuss each of the following. Be certain to explain fully each idea and
describe its significance to the development of economic thought.

Employments of capital (Smith)

Composition of capital (Ricardo)

Abstinence theory of profit (Mill)

Relations of Production (Marx)