Based from the material provided, give the point of view of the following classical economists on economic development. Explain the pros and cons. Economist Focus and viewpointAdam SmithDavid RicardoJohn Stuart MillThomas MalthusMarx and EngelsJosephSchumpeterReflection:Do you think the concepts and views of the economists are true and relevant for economicdevelopment? (cite the theories/ views of the economist/s that are relevant) HISTORY OF DEVELOPMENT, THEORY CLASSICAL SCHOOLIn 1776, Adam Smith ([1776] 1936) published his treatise, An Inquiry into Nature and Causes of theWealth of Nations , which was taken by many to be a theory of economic growth. Smith, however,was clearly concerned with economic development. The classical school of economic thought,predominantly modeled after Smith, is largely geared toward understanding and explaining economicdevelopment. Smith presented a supply driven model of growth, where output was related to labor,land, and capital. Thus, economic growth, which is the increase in output, was related to populationgrowth, investment, land growth, and increases in productivity. According to Smith, society wasdependent on the economy's ability to sustain its increasing workforce. Investment was dependent onthe rate of savings. Land growth was dependent on the ability to acquire more land (throughconquest) or on the increase in the productivity of existing land. He also believed in the division orspecialization of labor as a key factor in economic growth, enhanced by improved machinery andinternational trade. Smith argued that increased specialization would increase productivity andreduce per-unit costs, leading to increasing returns. However, he also thought that, in spite ofincreasing returns, such an economy would ultimately stagnate, wherein capital accumulation andpopulation growth will approach zero. Smith believed that the extension of markets was the key toeconomic growth largely through the role that market extension played in creating greaterspecialization. Smith emphasized specialization as leading to greater productivity. He also arguedthat the mercantilist system was holding back England by limiting its market and, hence, limiting thedivision of labor. The mercantilist system, while it promoted the expansion of markets beyond themore limited markets of feudalism, restricted and regulated markets in many ways that Smith foundobjectionable.David Ricardo ([1817] 1965) modified Smith's model by introducing diminishing returns to landcultivation. Diminishing returns implies that as you apply more of a variable input (labor) to a fixedinput (land), the productivity of each additional worker will eventually decline as long as technology isfixed. He claimed that land was of variable quality and finite. Thus, as an economy grows, populationgrows relative to land, and the productivity of the labor on the land will decline. According to Ricardo,the only way stagnation could be averted, at least temporarily, would be through the trade andimports of cheap food or wage goods. The essential doctrines of John Stuart Mill (1848) differed little, if at all, from those of Ricardo. He, likeSmith, believed in the doctrine of laissez-faire , but he also recognized the possibility of modifying thesystem. He displayed a leaning to the socialist ideal, growing closer as his life advanced. He believedthat we should sacrifice economic growth for the sake of the environment and limit population to fendoff the risk of starvation.This vision concerning population control was in direct contrast with Thomas Malthus's ([1798] 1959)prediction about population growth, which he said if left unchecked would lower economic growth andcause misery for mankind. Malthus stressed that population could easily outpace production. Theapprenticeship system was one such opportunity emphasized by Malthus. While few people soughthigher education in Malthus's day, there were other opportunities for people to invest in themselves by postponingfamily formation or remaining unwed. At a very young age, an apprentice would work for a mastercraftsman in return for board and room. He would gradually learn the trade, become a journeyman,and finally become a master craftsman. Only once he established his own trade would he marry. Thispostponement of marriage in order to obtain a better life made society more prosperous.Marx and Engels ([1848] 1967) argued that market-based capitalism was the most dynamic force inthe world. Originating in Western Europe, this economic system was based on capital accumulation,the spread of markets, and the exploitation of labor. This latter idea was based on the notion thatlabor is the source of all value in the production process, but labor is only recompensed part of thatvalue, in the form of wages; the rest goes to the owner of the capital as profit Under the capitalistmode of production, profit comes from the exploitation of human labor. Under the capitalist mode ofproduction, profit comes from the exploitation of human labor. However, the accumulation of capitaland new technology displaces labor.Joseph A. Schumpeter (1939, 1942, 1991) argued that growth was supply driven by the factors ofproduction, with entrepreneurial innovation the most important of these. He believed in a "rawinstinct" that drove entrepreneurs. He saw development as being driven by discontinuous changes inthe economic environment fuelled by cycles of innovation. Schumpeter did not believe in diminishingreturns to innovation. The only reason profits declined was competition.

Focus and viewpoint Adam Smith Adam Smith was one of the first thinkers of his day to assert that…

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Chapter1: Making Economics Decisions

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