the classical school

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THE CLASSICAL SCHOOL Bentham

SAY

SENIOR

MILL



GROUP MEMBERS



February 17486 June 1832 (aged 84)

18th & 19th century

School Utilitarianism

Main interests

Political philosophy, philosophy of law, ethics, economics

Notable ideas Greatest happiness

principle



CONTRIBUTION

English jurist, philosopher, and legal

and social reformer.

Welfarism.

Development of welfarism.He is best known for hisadvocacyof utilitarianism and animal rights,[1] and the idea of

the panopticon.

Bentham strongly believed that educationshould be more widely

available

Associated with the

foundation of the University of London,

specifically UniversityCollege London (UCL)



PANOPTICON

y The Panopticon is a type of prison building designed by

English philosopher and social theorist Jeremy Bentham in

1785.

y The concept of the design is to allow an observer to observe (-

opticon) all prisoners without the incarcerated being able to tellwhether they are being watched, thereby conveying what one

architect has called the "sentiment of an invisible omniscience.

y Bentham himself described the Panopticon as "a new mode of

obtaining power of mind over mind, in a quantity hithertowithout example.³

yR ather than PUNISH the criminals,REFOR M them



MAJOR TENETS OF THE

SCHOOL

UTILITA R IANISM

LEGAL POSITIVISM

LIBER ALISM



UTILITARIANISM

PR INCIPLE OF THE

GRE ATEST HAPPINESS

PUR SUE things provide pleasure,

AVOID thingsproduce pain

MAXIMIZE

Their totalpleasure

E XAMPLE

Marathon

&

100 Plus



u2



Slide 9

u2 trial ..

ghfguser, 2/9/2011



Born to a family of textile merchants of Huguenotextraction.

He had classically liberal views and argued in favor of competition, free trade, and lifting restraints on business.

In 1787, J.B Say worked at an insurance company in Pariswhich run by Clavière (later to become Minister of

Finance) and was overjoyed by the French Revolution.

Served as a volunteer in the 1792 military campaign torepulse the allied armies from France.

BIOGRAPHY



Work with a group of laissez-faire economists, known as the

ideologues, who sought to relaunch the spirit of Enlightenmentliberalism in republican France.

In 1803, he published his most famous work, Traite d¶Economie

(Treatise on P olitical E conomy).



Say opposed the labor theory of value by classical and

change it with supply and demand which in turn are

regulated by costs of production and utility.

But did not include development of schedules showing the price-quantity relationship.

Emphasized that labor, land, and capital are all involved in

production.

Thought that counties are rich and powerful in proportion tothe lowness of prices.

Equated value with utility.

VALUE THEORY



Monopoly not only create µ eff iciency loss¶ but also

use scarce resources to obtain and protect their

monopoly positions.

COSTS OF MONOPOLY



Like Cantillon before him and the Austrian School

after him, Say also placed great emphasis on the

µrisk-taking¶ent re preneur and even tried to include

him as the ³fourth´ factor of production in hisanalysis.

ENTREPRENEURSHIP



LAW OF MARKETS

Summarised as:

"Aggregate supply creates its own aggregate

demand","Supply creates its own demand",

"Supply constitutes its own demand",

"If you build it, they will come",

"Inherent in supply is the wherewithal for itsown consumption". (Direct translation from French

Traité d'économie politique.)



Say¶s Law claims that total demand in an economy

cannot exceed or fall below total supply in thateconomy or as James Mill was to restate it ³supply

creates its own demand´.

³«it is production which opens a demand for product.´

- Supply creates its own demand

- No one sells without an intent to buy



NASSAU WILLIAM SENIOR

26 TH SEPTEMBER

1790-

4 TH JUNE

1864



Educated at Eton and Magdalen College , Oxford.

Senior became the first professor of politicaleconomy at Oxford in 1825.

Believed we should separate the science of political

economy from value judgements, leading to the modernnotion of positive economics .



Positive Economics

Senior wished to separate the science of political economy fromall value jugdements.

According to Senior, economists should concern on analyzingthe production and distribution of wealth, not the promotion of happiness.

Senior stated:

But [ the economist¶s ] conclusions, whatever be their generalityand their truth, do not authorize him in adding a single syllableof advice. That privilege belongs to writer and statesman whohas considered all the causes which may promote or impede thegeneral welfare of those whom he addresses, not to the theoristwho has considered only one, though among the most important,of those causes. The business of a Political Economist is neither to recommend nor to dissuade, but to state general principle.



Senior¶s Four Propositions

1. Principle of income or utility maximization.People wish to maximize wealth with the lowest sacrifice.

2. Principle of population

The population is limited only by moral or physical evil , or by

fear of a deficiency of wealth which needed by each class of inhabitants.

3. Principle of capital accumulation

The power of Labour and of the other instruments which produce

wealth , may be indefinitely increased by using their Products as

means of further production.

4. Principle of diminishing returns

Every increase of the labour bestowed, the aggregate return is

increased, the increase of the return is not in proportion to the

increase of the labour.



A bstinence

µAbstinence¶ was a new term developed by Senior to thelexicon of political economy.

It implied a value judgement about the sacrifices undertaken

by the capitalist in postponing the consumption of wealth.

Abstinence Theory

o Cost is subjective.

o The cost of production are the labor of the workers and the

abstinence of the capitalists.o This makes saving a function of interest.



Productive Labor

Senior disagreed with Smith, who thought that the

producers of services are all unproductive.

Producers of services like lawyers , doctors and

teachers are productive because they promote theincrease of wealth.

The proper distinction was not between productive and

unproductive labor but rather between productive and

unproductive consumption .



Policy PositionsPoor Laws

o Senior served on the Poor Law Commission appointed in 1832.

o Favored the Poor Law Amendment of 1834 which sought to discourage

able-bodied workers from applying for welfare.

o The act established the principle that living conditions of those receiving

welfare should be worse than those of the poorest-paid workers.o These poor laws were in force for 70 years.

Trade Unions

o Senior opposed to trade union movement because they interfered with the

market process and the mobility of labor.

Factory Acts

o In 1837 , Senior published a pamphlet opposing the English Factory Act,

which at the time limited the working day to 12 hours in factories where

children were employed .

o Senior opposed laws limiting the hours of adults.



JOHN STUART MILL

1806 - 1873



Mill was the last great Classical economist whose

magnificent in 1848 restatement of Ricardo¶s theory

Made contributions to economics, philosophy, logic, political science

Broad concerns:

- Mankind¶s position in the cosmos

- Each person¶s relationship to society

- The rules that govern though

- The natural laws of human action

- Not as interested in the growth o production or efficiency as he was interested in the quality of life and

the full development of the individual

- More social philosopher than technical economist



Law of International Value

Solved a problem left open by Ricardo. Ricardo had used

only production costs. Mill used demand as well.

The stronger is a country¶s demand for its imported good,the closer the free trade price would be to the country¶s pre-

trade price and, therefore, the smaller would be the

country¶s gains from trade.



Utilitarianism

-Generally supported Bentham¶s calculus of pain and

pleasured

-Modifications - Quality of life is also important

- Recognized that pleasured may be

subjective

Theory of value

- ³there is nothing in the laws of value which remainsfor the present or any future writer to clear up; the

theory of the subject is complete.´



Mill¶s On Liberty is one of the founding texts of classical

liberalism and one of the most important treatises ever written

on concept of liberty.

The book explores the nature and limits of the power that can

be legitimately exercised by society over the individual. One

argument that Mill develops further than any previous philosopher is the harm principle.

The harm principle holds that each individual has the right to

act as he wants, so long as these actions do not harm others.



Jeremy Bentham ± Utilitarianism

Bentham¶s ideas promoted progress, reform, wider democracy and

the amelioration of undesirable social conditions.

Designed an elaborate plan for a model prison that would reformcriminals rather than punish them.

Bentham¶s concept of human nature - although not his

utilitarianism - became the foundation for the economic systems of

Ricardo, John Stuart Mill, and the early margin lists, especially

William Stanley Jevons.

SUMMARY



Jean-Baptiste Say ± Say¶s Law of Markets

Contribute modern theory of the costs o f monopoly by pointing

out that monopolists not only create what today we call µeff iciency

losse s¶ , but also use scarce resources in their competition to obtain

and protect their monopoly positions.

Emphasizing E nt re preneur ship as a µfourth factor¶ of productionalong with the more traditional ones of Land, Labor , and C a pit al .



John Stuart Mill ± The Law of International Value

Endorsed Ricardo¶s advocacy of free international trade

based on the law of comparative costs.

Shows that the actual barter terms of trade not only on

domestic costs but also on the pattern of demand. More

specifically, the terms of international exchange depend on the

strength and elasticity of demand for each product in the foreign

country.



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