1.
Capitalism
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Capitalism is an economic system based on private ownership of the means of production and their operation for profit. Characteristics central to capitalism include private property, capital accumulation, wage labor, voluntary exchange, a price system, economists, political economists, and historians have adopted different perspectives in their analyses of capitalism and have recognized various forms of it in practice. These include laissez-faire or free market capitalism, welfare capitalism, different forms of capitalism feature varying degrees of free markets, public ownership, obstacles to free competition, and state-sanctioned social policies. Most existing capitalist economies are mixed economies, which elements of free markets with state intervention. Capitalism has existed under many forms of government, in different times, places. Following the decline of mercantilism, mixed capitalist systems became dominant in the Western world, Capitalism has been criticized for prioritizing profit over social good, natural resources, and the environment, and that is a cause of inequality and economic instabilities. Supporters believe that it provides better products through competition, and creates strong economic growth, the term capitalist, meaning an owner of capital, appears earlier than the term capitalism. It dates back to the mid-17th century, capitalist is derived from capital, which evolved from capitale, a late Latin word based on caput, meaning head – also the origin of chattel and cattle in the sense of movable property. Capitale emerged in the 12th to 13th centuries in the sense of referring to funds, stock of merchandise, sum of money, by 1283 it was used in the sense of the capital assets of a trading firm. It was frequently interchanged with a number of other words – wealth, money, funds, goods, assets, property, the Hollandische Mercurius uses capitalists in 1633 and 1654 to refer to owners of capital. In French, Étienne Clavier referred to capitalistes in 1788, six years before its first recorded English usage by Arthur Young in his work Travels in France, David Ricardo, in his Principles of Political Economy and Taxation, referred to the capitalist many times. Samuel Taylor Coleridge, an English poet, used capitalist in his work Table Talk, Pierre-Joseph Proudhon used the term capitalist in his first work, What is Property. To refer to the owners of capital, benjamin Disraeli used the term capitalist in his 1845 work Sybil. The initial usage of the term capitalism in its modern sense has been attributed to Louis Blanc in 1850, Karl Marx and Friedrich Engels referred to the capitalistic system. And to the capitalist mode of production in Das Kapital, the use of the word capitalism in reference to an economic system appears twice in Volume I of Das Kapital, p.124, and in Theories of Surplus Value, tome II, p.493. Marx did not extensively use the form capitalism but instead those of capitalist, and capitalist mode of production, also according to the OED, Carl Adolph Douai, a German-American socialist and abolitionist, used the phrase private capitalism in 1863. Capital has existed incipiently on a scale for centuries, in the form of merchant, renting and lending activities. Simple commodity exchange, and consequently simple commodity production, which are the basis for the growth of capital from trade, have a very long history
2.
Business cycle
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The business cycle or economic cycle is the downward and upward movement of gross domestic product around its long-term growth trend. The length of a cycle is the period of time containing a single boom. These fluctuations typically involve shifts over time periods of relatively rapid economic growth, and periods of relative stagnation or decline. Business cycles are usually measured by considering the rate of real gross domestic product. Despite the often-applied term cycles, these fluctuations in economic activity do not exhibit uniform or predictable periodicity, the common or popular usage boom-and-bust cycle refers to fluctuations in which the expansion is rapid and the contraction severe. Prior to that point classical economics had either denied the existence of cycles, blamed them on external factors, notably war. Sismondi found vindication in the Panic of 1825, which was the first unarguably international economic crisis and they advocated government intervention and socialism, respectively, as the solution. He devoted hundreds of pages of Das Kapital to crises, in Progress and Poverty, Henry George focused on lands role in crises – particularly land speculation – and proposed a single tax on land as a solution. In 1860 French economist Clement Juglar first identified economic cycles 7 to 11 years long, interest in the different typologies of cycles has waned since the development of modern macroeconomics, which gives little support to the idea of regular periodic cycles. There were great increases in productivity, industrial production and real per capita product throughout the period from 1870 to 1890 that included the Long Depression, there were also significant increases in productivity in the years leading up to the Great Depression. Both the Long and Great Depressions were characterized by overcapacity and market saturation, the effect of technological progress can be seen by the purchasing power of an average hours work, which has grown from $3 in 1900 to $22 in 1990, measured in 2010 dollars. There were similar increases in wages during the 19th century. See Financial crisis, 19th century for listing and details, the first of these crises not associated with a war was the Panic of 1825. Business cycles in OECD countries after World War II were generally more restrained than the business cycles. This was particularly true during the Golden Age of Capitalism, in this period, the economic cycle – at least the problem of depressions – was twice declared dead. The first declaration was in the late 1960s, when the Phillips curve was seen as being able to steer the economy, however, this was followed by stagflation in the 1970s, which discredited the theory. The second declaration was in the early 2000s, following the stability, notably, in 2003, Robert Lucas, in his presidential address to the American Economic Association, declared that the central problem of depression-prevention been solved, for all practical purposes. Unfortunately, this was followed by the 2008–2012 global recession, various regions have experienced prolonged depressions, most dramatically the economic crisis in former Eastern Bloc countries following the end of the Soviet Union in 1991
3.
Entrepreneurship
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What appears as a real opportunity ex ante might actually be a non-opportunity or one that cannot be actualized by entrepreneurs lacking the necessary business skills, financial or social capital. Traditionally, an entrepreneur has been defined as a person who starts, organizes and manages any enterprise, especially a business, usually with considerable initiative and risk. Rather than working as an employee, an entrepreneur runs a business and assumes all the risk and reward of a given business venture, idea. The entrepreneur is commonly seen as a leader and innovator of new ideas. They act as the manager and oversee the launch and growth of an enterprise, Entrepreneurship is the process by which an individual identifies a business opportunity and acquires and deploys the necessary resources required for its exploitation. For Schumpeter, the changes and dynamic disequilibrium brought on by the innovating entrepreneur, the ‘norm’ of a healthy economy. Entrepreneurial spirit is characterized by innovation and risk-taking, for example, in the 2000s, the field of social entrepreneurship has been identified, in which entrepreneurs combine business activities with humanitarian, environmental or community goals. In the 2010s, entrepreneurship can be studied in college or university as part of the disciplines of management or business administration, Entrepreneur, is a loanword from French. First used in 1723, today the term entrepreneur implies qualities of leadership, initiative, economist Robert Reich has called team-building, leadership, and management ability essential qualities for the entrepreneur. Historically the study of entrepreneurship reaches back to the work in the late 17th and early 18th centuries of Richard Cantillon and Adam Smith, which was foundational to classical economics. In the 20th century, entrepreneurship was studied by Joseph Schumpeter in the 1930s and other Austrian economists such as Carl Menger, Ludwig von Mises, the term entrepreneurship was coined around the 1920s, while the loan from French of the word entrepreneur dates to the 1850s. According to Schumpeter, an entrepreneur is willing and able to convert a new idea or invention into a successful innovation, thus, creative destruction is largely responsible for long-term economic growth. The idea that leads to economic growth is an interpretation of the residual in endogenous growth theory. For Schumpeter, entrepreneurship resulted in new industries and in new combinations of currently existing inputs, Schumpeters initial example of this was the combination of a steam engine and then current wagon making technologies to produce the horseless carriage. In this case the innovation, the car, was transformational and it did not immediately replace the horse-drawn carriage, but in time, incremental improvements reduced the cost and improved the technology, leading to the modern auto industry. Despite Schumpeters early 20th-century contributions, traditional microeconomic theory did not formally consider the entrepreneur in its theoretical frameworks, in this treatment, the entrepreneur was an implied but unspecified actor, consistent with the concept of the entrepreneur being the agent of x-efficiency. For Schumpeter, the entrepreneur did not bear risk, the capitalist did, Schumpeter was of the opinion that entrepreneurs shift the Production Possibility Curve to a higher level using innovations. Cantillon emphasized the willingness of the entrepreneur to assume risk and to deal with uncertainty, thus, he draws attention to the function of the entrepreneur, and distinguishes clearly between the function of the entrepreneur and the owner who provides the money
4.
Mercantilism
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Mercantilism was an economic theory and practice that was dominant in Western Europe during the 15th to the mid-18th centuries. Mercantilism is a form of economic nationalism and its goal is to enrich and empower the nation and state to the maximum degree, by acquiring and retaining as much economic activity as possible within the nations borders. Manufacturing and industry, particularly of goods with military applications, were prioritized, Mercantilism sought to ensure the nation produced as much volume and variety of output as possible, so as to limit its dependence upon foreign suppliers. Economic autarky was an element of mercantilism. These aims were primarily accomplished by, Imposing high tariffs on the importation of finished goods, Imposing low, or no taxes on the export of finished goods, and imposing high taxes on the exportation of raw materials. Seeking new markets for manufactured products, so as to artificially increase the demand for domestic production. These policies generally resulted in a balance of trade, which led to the accumulation of precious metals. Historically, such policies sometimes led to war and may have motivated colonial expansion, high tariffs, especially on manufactured goods, are an almost universal feature of mercantilist policy. Mercantilism has been linked to bullionism ever since Adam Smith made the accusation, however, due to the fact that no author self-consciously used the label to refer to their own thoughts mercantilist authors can only be identified retrospectively. It is the supply of things necessary for life and suitable for clothing, the core of mercantile policy was a coherent national industrial policy, which was aimed at generating as much material wealth within the nation as possible. Doing so, it was thought, was the best way to increase the states military, the term mercantile system was used by its foremost critic, Adam Smith, but mercantilism had been used earlier by Mirabeau. Many nations applied the theory, one example being France which was the most important state economically in Europe at the time. King Louis XIV followed the guidance of Jean Baptiste Colbert, his general of finances. Mercantilism was the dominant school of thought in Europe throughout the late Renaissance. Evidence of mercantilistic practices appeared in early modern Venice, Genoa, however, as a codified school of economic theories, mercantilisms real birth was marked by the empiricism of the Renaissance, which first began to quantify large-scale trade accurately. England began the first large-scale and integrative approach to mercantilism during the Elizabethan Era, queen Elizabeth promoted the Trade and Navigation Acts in Parliament and issued orders to her navy for the protection and promotion of English shipping. It was written in the 1620s and published in 1664, numerous French authors helped cement French policy around mercantilism in the 17th century. This French mercantilism was best articulated by Jean-Baptiste Colbert, though policy liberalised greatly under Napoleon, in Europe, academic belief in mercantilism began to fade in the late 18th century, especially in Britain, in light of the arguments of Adam Smith and the classical economists
5.
Welfare capitalism
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Welfare capitalism is capitalism that includes social welfare policies. Welfare capitalism is also the practice of businesses providing services to their employees. Welfare capitalism in this sense, or industrial paternalism, was centered on industries that employed skilled labor. Today, welfare capitalism is most often associated with the models of capitalism found in Continental and Northern Europe, such as the Nordic model, social market economy, in the 19th century, some companies—mostly manufacturers—began offering new benefits for their employees. This began in Britain in the early 19th century and also occurred in other European countries, including France and these companies sponsored sports teams, established social clubs, and provided educational and cultural activities for workers. Welfare corporatism in the United States developed during the industrial development of 1880 to 1900 which was marked by labor disputes and strikes. One of the first attempts at offering philanthropic welfare to workers was made at the New Lanark mills in Scotland by the social reformer Robert Owen, the general condition of the people was very unsatisfactory. Many of the workers were steeped in theft and drunkenness, and other vices were common, education and sanitation were neglected, the respectable country people refused to submit to the long hours and demoralising drudgery of the mills. Many employers also operated the system, whereby payment to the workers was made in part or totally by tokens. These tokens had no value outside the mill owners truck shop, the owners were able to supply shoddy goods to the truck shop and charge top prices. A series of Truck Acts eventually stopped this abuse, by making it a not to pay employees in common currency. Owen opened a store where the people could buy goods of sound quality at more than wholesale cost. He sold quality goods and passed on the savings from the purchase of goods to the workers. These principles became the basis for the stores in Britain that continue to trade today. Owens schemes involved considerable expense, which displeased his partners, tired of the restrictions on his actions, Owen bought them out in 1813. New Lanark soon became celebrated throughout Europe, with many leading royals, statesmen and they were astonished to find a clean, healthy industrial environment with a content, vibrant workforce and a prosperous, viable business venture all rolled into one. Owen’s philosophy was contrary to contemporary thinking, but he was able to demonstrate that it was not necessary for an enterprise to treat its workers badly to be profitable. Owen was able to show visitors the village’s excellent housing and amenities, boarding houses were built near the factories for the workers accommodation
6.
Austrian School
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The Austrian School is a school of economic thought that is based on methodological individualism – the concept that social phenomena result from the motivations and actions of individuals. It originated in late-19th and early-20th century Vienna with the work of Carl Menger, Eugen Böhm von Bawerk, Friedrich von Wieser and it was methodologically opposed to the Prussian Historical School. Current-day economists working in this tradition are located in different countries. Austrians are likewise critical of mainstream economics, in 1883, Menger published Investigations into the Method of the Social Sciences with Special Reference to Economics, which attacked the methods of the Historical school. Gustav von Schmoller, a leader of the Historical school, responded with a review, coining the term Austrian School in an attempt to characterize the school as outcast. The label endured and was adopted by the adherents themselves, the school originated in Vienna, in the Austrian Empire. Carl Mengers 1871 book, Principles of Economics, is considered the founding of the Austrian School. The book was one of the first modern treatises to advance the theory of marginal utility. The Austrian School was one of three founding currents of the marginalist revolution of the 1870s, with its major contribution being the introduction of the subjectivist approach in economics. ”Mengers contributions to economic theory were closely followed by those of Böhm-Bawerk and Friedrich von Wieser. These three economists became what is known as the first wave of the Austrian School, several important Austrian economists trained at the University of Vienna in the 1920s and later participated in private seminars held by Ludwig von Mises. These included Gottfried Haberler, Friedrich Hayek, Fritz Machlup, Karl Menger, Oskar Morgenstern, Paul Rosenstein-Rodan Abraham Wald, by the mid-1930s, most economists had embraced what they considered the important contributions of the early Austrians. Fritz Machlup quoted Hayeks statement, the greatest success of a school is that it stops existing because its teachings have become parts of the general body of commonly accepted thought. Mises student, Israel Kirzner recalled that in 1954, when Kirzner was pursuing his PhD, after the 1940s, Austrian economics can be divided into two schools of economic thought, and the school split to some degree in the late 20th century. Henry Hazlitt wrote economics columns and editorials for a number of publications, hazlitts thinking was influenced by Mises. His book Economics in One Lesson sold over a million copies, and he is known for The Failure of the New Economics. Hayeks work was influential in the revival of laissez-faire thought in the 20th century, according to economist Bryan Caplan, by the late twentieth century, a split had developed among those who self-identify with the Austrian School. Caplan wrote that if Mises and Rothbard are right, then economics is wrong, Austrian economist Walter Block says that the Austrian school can be distinguished from other schools of economic thought through two categories – economic theory and political theory. However, both criticisms from Hoppe and Block to Hayek seem to apply to the founder of the Austrian School, Carl Menger, Hoppe emphasizes that Hayek, which for him is from the English empirical tradition, is an opponent of the supposed rationalist tradition of the Austrian School
7.
Supply-side economics
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Supply-side economics is a macroeconomic theory that argues economic growth can be most effectively created by investing in capital and by lowering barriers on the production of goods and services. It was started by economist Robert Mundell during the Ronald Reagan administration, typical policy recommendations of supply-side economists are lower marginal tax rates and less government regulation. The term supply-side economics was thought, for time, to have been coined by journalist Jude Wanniski in 1975. Its use connotes the ideas of economists Robert Mundell and Arthur Laffer, the Laffer curve is one of the main theoretical constructs of supply-side economics. However, the Laffer curve only measures the rate of taxation, not tax incidence, in addition, some studies have shown that tax cuts done in the US in the past several decades seldom recoup revenue losses and have minimal impact on GDP growth. It drew on a range of economic thought, particularly the Chicago School. Classical Liberals opposed taxes because they opposed government, taxation being the latters most obvious form and their claim was that each man had a right to himself and his property and therefore taxation was immoral and of questionable legal grounding. Supply-side economists, on the hand, argued that the alleged collective benefit provided the main impetus for tax cuts. As in classical economics, supply-side economics proposed that production or supply is the key to economic prosperity, john Maynard Keynes, the founder of Keynesianism, summarized Says Law as supply creates its own demand. He turned Says Law on its head in the 1930s by declaring that demand creates its own supply. S, monetary policy under Nixon in the 1970s. Wanniski advocated lower tax rates and a return to some kind of gold standard, in 1983, economist Victor Canto, a disciple of Arthur Laffer, published The Foundations of Supply-Side Economics. This theory focuses on the effects of tax rates on the incentive to work and save. While the latter focus on changes in the rate of growth in the long run. This led the supply-siders to advocate large reductions in income and capital gains tax rates to encourage allocation of assets to investment. Jude Wanniski and many advocate an zero capital gains rate. The increased aggregate supply would result in increased demand, hence the term Supply-Side Economics. Supply-side economics holds that increased taxation steadily reduces economic trade between economic participants within a nation and that it discourages investment, taxes act as a type of trade barrier or tariff that causes economic participants to revert to less efficient means of satisfying their needs. As such, higher taxation leads to lower levels of specialization, the idea is said to be illustrated by the Laffer curve
8.
Age of Enlightenment
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The Enlightenment was an intellectual movement which dominated the world of ideas in Europe during the 18th century, The Century of Philosophy. In France, the doctrines of les Lumières were individual liberty and religious tolerance in opposition to an absolute monarchy. French historians traditionally place the Enlightenment between 1715, the year that Louis XIV died, and 1789, the beginning of the French Revolution, some recent historians begin the period in the 1620s, with the start of the scientific revolution. Les philosophes of the widely circulated their ideas through meetings at scientific academies, Masonic lodges, literary salons, coffee houses. The ideas of the Enlightenment undermined the authority of the monarchy and the Church, a variety of 19th-century movements, including liberalism and neo-classicism, trace their intellectual heritage back to the Enlightenment. The Age of Enlightenment was preceded by and closely associated with the scientific revolution, earlier philosophers whose work influenced the Enlightenment included Francis Bacon, René Descartes, John Locke, and Baruch Spinoza. The major figures of the Enlightenment included Cesare Beccaria, Voltaire, Denis Diderot, Jean-Jacques Rousseau, David Hume, Adam Smith, Benjamin Franklin visited Europe repeatedly and contributed actively to the scientific and political debates there and brought the newest ideas back to Philadelphia. Thomas Jefferson closely followed European ideas and later incorporated some of the ideals of the Enlightenment into the Declaration of Independence, others like James Madison incorporated them into the Constitution in 1787. The most influential publication of the Enlightenment was the Encyclopédie, the ideas of the Enlightenment played a major role in inspiring the French Revolution, which began in 1789. After the Revolution, the Enlightenment was followed by an intellectual movement known as Romanticism. René Descartes rationalist philosophy laid the foundation for enlightenment thinking and his attempt to construct the sciences on a secure metaphysical foundation was not as successful as his method of doubt applied in philosophic areas leading to a dualistic doctrine of mind and matter. His skepticism was refined by John Lockes 1690 Essay Concerning Human Understanding and his dualism was challenged by Spinozas uncompromising assertion of the unity of matter in his Tractatus and Ethics. Both lines of thought were opposed by a conservative Counter-Enlightenment. In the mid-18th century, Paris became the center of an explosion of philosophic and scientific activity challenging traditional doctrines, the political philosopher Montesquieu introduced the idea of a separation of powers in a government, a concept which was enthusiastically adopted by the authors of the United States Constitution. Francis Hutcheson, a philosopher, described the utilitarian and consequentialist principle that virtue is that which provides, in his words. Much of what is incorporated in the method and some modern attitudes towards the relationship between science and religion were developed by his protégés David Hume and Adam Smith. Hume became a figure in the skeptical philosophical and empiricist traditions of philosophy. Immanuel Kant tried to reconcile rationalism and religious belief, individual freedom and political authority, as well as map out a view of the sphere through private
9.
Feudalism
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Feudalism was a combination of legal and military customs in medieval Europe that flourished between the 9th and 15th centuries. Broadly defined, it was a way of structuring society around relationships derived from the holding of land in exchange for service or labour, since the publication of Elizabeth A. R. There is no commonly accepted definition of feudalism, at least among scholars. Since the publication of Elizabeth A. R, outside a European context, the concept of feudalism is often used only by analogy, most often in discussions of feudal Japan under the shoguns, and sometimes medieval and Gondarine Ethiopia. The term feudalism has also been applied—often inappropriately or pejoratively—to non-Western societies where institutions, the term féodal was used in 17th-century French legal treatises and translated into English legal treatises as an adjective, such as feodal government. In the 18th century, Adam Smith, seeking to describe systems, effectively coined the forms feudal government. In the 19th century the adjective feudal evolved into a noun, the term feudalism is recent, first appearing in French in 1823, Italian in 1827, English in 1839, and in German in the second half of the 19th century. The term feudal or feodal is derived from the medieval Latin word feodum, the etymology of feodum is complex with multiple theories, some suggesting a Germanic origin and others suggesting an Arabic origin. Initially in medieval Latin European documents, a grant in exchange for service was called a beneficium. Later, the term feudum, or feodum, began to replace beneficium in the documents, the first attested instance of this is from 984, although more primitive forms were seen up to one-hundred years earlier. The origin of the feudum and why it replaced beneficium has not been well established, the most widely held theory is put forth by Marc Bloch. Bloch said it is related to the Frankish term *fehu-ôd, in which means cattle and -ôd means goods. This was known as feos, a term that took on the meaning of paying for something in lieu of money. This meaning was then applied to itself, in which land was used to pay for fealty. Thus the old word feos meaning movable property changed little by little to feus meaning the exact opposite and this Germanic origin theory was also shared by William Stubbs in the 19th century. Another theory was put forward by Archibald R. Lewis, Lewis said the origin of fief is not feudum, but rather foderum, the earliest attested use being in Astronomuss Vita Hludovici. In that text is a passage about Louis the Pious that says annona militaris quas vulgo foderum vocant, another theory by Alauddin Samarrai suggests an Arabic origin, from fuyū. Samarrais theory is that early forms of fief include feo, feu, feuz, feuum and others, indeed, the first use of these terms is in Languedoc, one of the least Germanic areas of Europe and bordering Muslim Spain
10.
Industrial Revolution
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The Industrial Revolution was the transition to new manufacturing processes in the period from about 1760 to sometime between 1820 and 1840. The Industrial Revolution began in Great Britain and most of the important technological innovations were British, aided by these legal and cultural foundations, an entrepreneurial spirit and consumer revolution drove industrialisation in Britain, which would be emulated in countries around the world. A change in marrying patterns to getting married later made able to accumulate more human capital during their youth. The Industrial Revolution marks a turning point in history, almost every aspect of daily life was influenced in some way. In particular, average income and population began to exhibit unprecedented sustained growth, mechanised textile production spread from Great Britain to continental Europe in the early 19th century, with important centres of textiles, iron and coal emerging in Belgium, and later in France. Since then industrialisation has spread throughout much of the world, the precise start and end of the Industrial Revolution is still debated among historians, as is the pace of economic and social changes. Economic historians are in agreement that the onset of the Industrial Revolution is the most important event in the history of humanity since the domestication of animals and plants. The term Industrial Revolution applied to change was becoming more common by the late 1830s. Friedrich Engels in The Condition of the Working Class in England in 1844 spoke of an industrial revolution, however, although Engels wrote in the 1840s, his book was not translated into English until the late 1800s, and his expression did not enter everyday language until then. Credit for popularising the term may be given to Arnold Toynbee, some historians, such as John Clapham and Nicholas Crafts, have argued that the economic and social changes occurred gradually and the term revolution is a misnomer. This is still a subject of debate among some historians, the commencement of the Industrial Revolution is closely linked to a small number of innovations, beginning in the second half of the 18th century. By the 1830s the following gains had been made in important technologies, Textiles – mechanised cotton spinning powered by steam or water greatly increased the output of a worker, the power loom increased the output of a worker by a factor of over 40. The cotton gin increased productivity of removing seed from cotton by a factor of 50, large gains in productivity also occurred in spinning and weaving of wool and linen, but they were not as great as in cotton. Steam power – the efficiency of steam engines increased so that they used between one-fifth and one-tenth as much fuel, the adaptation of stationary steam engines to rotary motion made them suitable for industrial uses. The high pressure engine had a power to weight ratio. Steam power underwent an expansion after 1800. Iron making – the substitution of coke for charcoal greatly lowered the fuel cost for pig iron, using coke also allowed larger blast furnaces, resulting in economies of scale. The cast iron blowing cylinder was first used in 1760 and it was later improved by making it double acting, which allowed higher furnace temperatures
