HISTORY OF

ECONOMIC IDEAS
LECTURE 1
 Ideas?
• What are economic ideas?

• Are they theories and empirics?

• What do we mean by history of economic ideas?

• Where is the Origin of Economics?

• What is Economics?

• Is this apart from Politics?

 Wealth is the Centre
• Question is how to increase wealth?

• Wealth lies in precious metals.

• Precious metals meant money.

• Money as a store of value.

• Increase in the value of money can only come through

trade

• Exchange creates value

 Mercantilism
• Trade regulation
• Protectionism through Import quotas, export subsidies,
tariffs and export duties on imported goods
• Merchants create wealth

• Importance of Colonies

• Promote National Power

• Guaranteed Markets
 Physiocrats
• Where lies the wealth?

• Who creates wealth?

• Land and cultivation: Post hunter-gatherer, post

trading society

• Emergence of classes: landlords, merchants, peasants

• Bourgeoisie and Labourer

 Ideas and Ideology
• Ideology: historically –relative character of ideas
• Analytical separation between the two is not possible
• Ideology refers to a whole system of thought, or
coordinated set of beliefs and ideas
• Ideology is a framework
• When we discuss Ideas, the reference to framework
and ideology is inseparable
• Philosophical Standpoint
 Role of Ideology in Economic
Theory
• Contrasted with scientific core of the subject, by
implication being regarded as accretion of ethical
postulates and so-called value judgments

• Objective vs Subjective

• Normative vs Positive

• Metaphysical Analysis does not have a place in

scientific theory
 Schumpeterian View
• Vision : Complex shape of reality and of the nature of
problems confronting mankind in any given historical
situation is ideological

• Ideology enters in pre-analytic cognition

• Ideology before Ideas

• Can we distinguish between the way in which we see

things from the way in which we wish to see things?
 Behind Economic Thought
• Economic thought is ideologically conditioned

• Economic analysis is independent and objective?

• History of the formal structure of economic ideas

• Where are the propositions coming from?

• Is there independence between economic content and

meaning of propositions?

• Necessity of study of history of economic ideas

 Towards Classical Political
Economy
• Mercantilists in 17th and early 18th centuries spoke in
terms of favourable balance of trade
• Idea of generation of surplus
• Favourable to firms engaged in foreign trade
• Trade meant power and wealth
• Implied state intervention in trade and economy
• This provided the background to intellectual protests
of Physiocratic School
 Towards Classical Political
Economy
• Physiocrats believed that agriculture was the only
genuinely productive sector of the economy.

• Agriculture is the generator of surplus

• Agriculture was seen as multiplicative compared to

Industrial Production

• Quesnay’s Tableau Economique communicated this

finding.

• Surplus was diffused through transactions

 Surplus and Power
• Where does economic power and source of wealth lie?

• Concept of class

• This was the centre stage of contribution of Classical

Political Economy by Adam Smith, David Ricardo
and Karl Marx

• Generation of Neoclassical Economic Ideas