Smith, Marx and Ricardo are giants of economic theory. Here, economics professor Linda Yueh imagines what advice they'd give us todayby Linda Yueh / April 13, 2018 / Leave a comment
Adam Smith: build a smart state
Smith’s writing famously urged a limited role for government—but he should not be caricatured of as believing in pure laissez-faire. He argued that the state should step in where markets don’t work. It should, for example, maintain good transport facilities, as that would break monopolies and encourage competition. He also thought government should provide universal education. So, it isn’t impossible to imagine a modern-day Smith decrying excessive educational fees and a poorly-run privatised railway system.
A truly Smithian state would intervene whenever it will improve competition, and particularly the quality of the society in which we live. Smith was, after all, a professor of moral philosophy as well as an economist. Our own times are incomparably more abundant than his, and perhaps the single lesson he would most press on economics today is to remember that it is the quality and not just the quantity of economic growth that matters.
David Ricardo: How (and why) to avoid a trade war
Ricardo debunked the old 18th century mercantilist doctrine —which is today being reborn in some respects as Trumpism. It assumed the path to prosperity was for nations to amass gold and silver through a favourable balance of trade and money. Ricardo pointed out, instead, that the important thing was to get the economy producing more goods. He argued, too, that increasing the volume of trade could help with that: it could make allnations more productive.
He explained how through his theory of comparative advantage. Even countries who are less efficient than others in producing everything could gain, thanks to to specialisation—nations which were open to trade would do more of what they were relatively better at, spurring their growth.
Today, Ricardo would again be teaching us to concentrate on making the domestic economy more productive. Fixating on a better trade balance without first examining how to make exports more desirable to the rest of the world would have struck Ricardo as upside-down. Increasing exports by removing trade barriers would be the Ricardian way to proceed.
Read Howard Reed on why it’s time for a new economics
Karl Marx: How markets can yet pave a way…