Key Concepts in Classical and Neoclassical Economics
- The zero-sum game is a situation where one country’s economic gain comes from the economic loss of another.
- The nation-state should be considered an organization between individual interests and the government to promote the progress of business, which would lead to a wide range of control by the monarchy.
- Use value refers to the ability of goods to satisfy needs, and exchange value is its ability to be exchanged for other goods.
- The measure of exchange value is the price of goods or the actual price of the goods.
- The *labor embodied* refers to the amount of labor required to produce goods, and the *labor commanded* is the amount of work that is available when exchanging one commodity for another.
- For Smith, productive labor is one that adds value to the object on which you work. This type of work, while reproducing the value of the means of subsistence (wages), produces surplus (profit). Productive work is paid work that is exchanged for capital.
- Capital accumulation, according to Smith, is the generation of growing masses of surplus to be used to recruit increasing volumes of productive workers.
- Fixed capital (tools, machinery, equipment, etc.) is *not* fully consumed in the production process but is consumed (depreciates) in installments. In contrast, working capital (wages) is used and consumed in each production period and therefore must be replaced completely.
- Use value refers to the usefulness of the goods, and exchange value is its ability to be exchanged for other goods.
- The cost prices of goods are covered by the prevailing surplus (profit); however, only wages are included as production costs, ignoring other costs incurred in the production process.
Political economy—as Ricardo saw it—is about determining the laws that explain the distribution of income among different social classes.
According to Say, “political economy is the formation, distribution, and consumption of wealth to meet the needs of societies.”
- Surplus value is the value of the unpaid work of the wage earner above the value created by their labor and that the capitalist appropriates freely.
- The labor force, or working capacity, is the set of physical and mental faculties that exist in the corporeal, the personality of a living human being, that he sets in motion when he produces use-values of any kind.
- The social product includes the full range of material goods (machinery, tools, fuels, cereals, etc.) occurring in society at a given time.
- Jevons understood the degree of marginal utility as the value of the last amount (very small or infinitely small) added to the existing amount.
- Walras conceived wealth as a set of tangible and intangible things that have the following features: useful, scarce, and limited.
- Marshall saw the economy, on the one hand, as a science of wealth, and on the other, as that part of social science that studies human action in society; that is, its efforts to meet their needs.
- For Marshall, wealth consists of desirable things, i.e., things that satisfy, directly and indirectly, requirements; these things are called goods.
The demand for a commodity is the amount that the consumer would be willing to buy for each of the prices that can be offered to you.
The offer represents the amount that the producers would be willing to produce at different prices, assuming other factors remain constant.
The price elasticity of demand is defined as the percentage variation in the quantity demanded of one good divided by the percentage change in the price of that good.
Consumption expenditure is defined as families engaged in the acquisition of goods and services for final use and consumption.
The interest rate, according to Keynes, is the price that balances the desire to possess wealth in cash with the available quantity of it.
The mode of production constitutes the totality of relations of production; it constitutes the economic structure of society, the real foundation on which stands the legal and political superstructure and to which correspond definite forms of social consciousness.