Economics: Smith, Ricardo, Malthus and Marx

This week’s lecture was based on economics, which claims to be a science because the field only deals with “facts”.
The 1^st ever economist was Adam Smith. He wrote “The Wealth of Nations” which explored and answered the question “why is one country richer than the other?”  He came to the conclusion that wealthy countries are characterised by free individuals and free trade.  He especially went into analysing why China was so poor when it had a wealth of gold and oil and said it was due to too much government intervention.His philosophical work mirrored Hume’s ideas and therefore (surprise, surprise) was fairly cynical. In this view he stated that there was in fact no altruistic deed as they are done purely for an ego buzz, etc. People are constantly calculating what gives them the most pleasure whilst minimising pain. “The Law of unintended circumstances” in fact ensures that any conscious act which is carried out to benefit someone else will only end in disaster by harming them and yourself.  You must allow people to be economically free.

David Ricardo held the opposite view. Whereas Smith fixated on the idea that value comes from trade, Ricardo held a more metaphysical ideology. He said that there is a spirit of value. Coal itself has no value; it only arises when human beings apply conscious effort to it. This takes us to the Labour theory of Value.

Explored last year, Malthus crops up again this year. His philosophy is rather miserable and perhaps makes even Schopenhauer look happy in comparison.His “Iron Law of Population” follows that the human species will inevitably starve to death. He describes humans to be like bacteria who will consume everything they encounter, and eventually will eat all their resources.  This theory is backed by the fact that about 70,000 years ago the human species was very close to extinction with only 5-6000 humans left on the face of the planet.  Even now, the UK is exactly 4 days away from mass starvation, because we constantly rely on others for our food source. The public usually goes mental and rushes to the supermarkets to stock up on any product that is rumoured to be in short supply for a while. Imagine then that if there was a shortage of petrol. No goods could be delivered as everything depends on transportation; even the machines in factories making the products would be in trouble as they are also run on petrol. We’re practically eating the stuff.

So Malthus went onto say that marriage and a lack of sexual contact (contraception wasn’t really around in those days) are the only things that will prevent starvation. Marriage seems like an odd one but in those days a man would not get married until he owned his own farm (unless he managed to do it illegally). This way he would be able to definitely provide for himself and his Mrs During these times women were too busy giving birth to work so thank God for feminism and contraception. They had a massive hand in stopping overpopulation.Modernist laugh at Malthus as he doesn’t take into account that every mouth to feed is also an extra pair of hands to work. However, Malthus is coming back into fashion due to climate change. The cost of decent food is extremely high and low level malnutrition is becoming a huge problem.

Marx’ economical ideologies are a mixture of Ricardo and Malthus'. Labour adds value to objects but wages will always decrease due to population increase. The fatal flaw with a market obsessed with profit is that people who grow food won’t be able to buy it.I will attempt to explain this through “the widget theory”, hang in with me, this may get slightly confusing. Imagine that all value comes from a widget. A labourer goes into a widget factory to make widgets. Workers make $10 per widget and the owner takes 50% profit. The worker therefore gets paid $5. The value of a widget however is $10 so the worker is in fact unable to afford one.  As nobody is buying widgets because they can’t afford to there is a widget crunch and the widget is lowered to $5. However, the labourer’s wages are therefore also cut in half to $2.50. He still cannot afford the widget.  This leads to widget crunch 2 and so forth until workers begin a strike and start burning down shops and factories.

Eventually workers were sacked and replaced by machines and the company is more profitable. Although about 1 out of 10 workers would get a job managing and fixing this machinery, the rest were made redundant. Capitalism completely revolutionises everything as everything must be constantly innovated or the company will risk success.  The iron law of wages states that a company must find an increasing number of employees for minimum wages.

In 1848, there was a big political crisis. Millions of people were in uproar at the factory system.

In 1849, Gold was discovered to exist in huge quantities in California and Australia and people began to leave for work. These refugees were the brains behind the likes of Budweiser and Hamburgers.

In 1844, the bank of England came about. There was now officially a machine for printing money.

The currency worked in such a way that if one was to borrow £10, you would give an imaginary IOU. This IOU would be used by the bank to get another £10. Suddenly there is twice as much cash. The whole idea is based on a confidence trick. The bank would only accept your IOU if you were deemed trustworthy.

In 1844, IOUs were based on Gold. The amount of money in England now became based on Gold. The widget crisis was now essentially over because the worker can now borrow the other $5. Ironically, the value of gold is based on Greek mythology and it is in fact intrinsically invaluable.

Adam Smith believed that money has no effect on human behaviour but was just a mechanism of keeping score. The modernist theory is that money has an actual effect on behaviour.

In the 1930s, all the wealth made from the Industrial revolution was threatened, and there was mass unemployment. The 2^nd world war solved this depression and everyone stopped the gold superstition.

The 50s, 60s, and 70s, were based on the Keynesian system. Here, unemployment was dealt with by giving the employee money to employ certain people.  The system is based on the idea that Government intervention in the marketplace is the best method of ensuring economic growth. A massive example of this is the NHS.  This idea is in fact the complete opposite to Adam Smith’s notion that all poverty is the result of too much government intervention. This is perhaps one of the reasons contributing to why Britain is currently in so much debt. 

Wittgenstein

Wittgenstein was born into a rich Austrian family of Jewish descent in 1889.
His father was a millionaire who had 9 children and raised them all as catholics.
Wittgenstein himself lost his faith in school, this is perhaps due to Schopenhauer's influence.
He studied engineering in Berlin and then at the University of Manchester, in which he (impressively) designed a jet reaction engine.

He became acquainted with the works of Frege whom he visited in 1911, and on his advice, went to Cambridge and studied under Russell for the next 5 years.
In 1913, Wittgenstein went to Norway to live solitarily in a hut he had built himself, in which he began developing his philosophical ideas. One of which was the idea that philosophy cannot confirm or confute scientific investigations.

In 1914 War broke out and Wittgenstein went to volunteer in the Austrian artillery. Unfortunately he was captured by Italian soldiers in 1918 and sent to prison camp. It was here that he turned his philosophical diary into "Tractatus Logico Philosophicus" which he sent to Russell and it was published in 1921.

 The work is described as "short, beautiful and cryptic". The first chapter is the sentence "the world is all that is the case", and the last is "whereof one cannot speak, thereof one must remain silent". In essence he comes to the conclusion that if one is not familiar with the facts surrounding a matter, one should remain silent. This is not unsimiliar to Socrates' famous quote: "And in knowing that you know nothing, that makes you the smartest of all."

Wittgenstein's picture theory of propositions states that  propositions can represent reality by making a logical picture of the facts they represent.  A picture must have something in common with what it depicts.According to Wittgenstein, this is a common logical form. Therefore, a  proposition has the same logical form as the fact it represents.  Words in a proposition do not resemble facts in the actual world, but we can recognise one as the picture of another through the common logical form.

The text also  deals with Logical Atonism, which is inspired by Russell. It is the idea that the world can be repeatedly be analysed into simple, incorrigible facts. For example, fact A can be simplified multiple times until it can no longer be reduced. It can no longer be reduced when it reaches the terminus of objects, which Wittgenstein describes as "logical forms without content".

Philosophy according to him is not a theory but rather an activity. This activity is to clarify non-philosophical propositions.This idea formed the basis of the Vienna Circle's ideologies. 

According to him,  neither science, nor philosophy can reveal  the meaning of life to us, but what philosophy can do for us, according to Wittgenstein, has been fulfilled by Tractatus. H believed this so much so, that after it was published, Wittgenstein gave up philosophy and supported himself by doing various odd jobs. in 1926, his teaching career came to a halt when he was accused of sadistic punishment by a student.

Wittgenstein states that if the reader has got a full understanding of  the Tractatus, he will regard it as nonsense. He compares it to a ladder which we have climbed and now can throw away. Essentially, he is asking us reconsider everything that we have read,  because we have understood his main message which is "the world is NOT  all that is the case".  This idea somewhat contradicts his message that the Tractatus gives us all that philosophy has to offer. Although perhaps he is stating that the book tells us that the world is not totally of facts, and that is as close to the truth as we can get.

The Vienna Circle

The Vienna circle was a group of philosophers who would gather around the University of Vienna in 1922. They were an association of anti-metaphysical philosophers who stated that philosophy ought not to be used to find answers but rather to clarify statements that are non-philosophical.They argued that knowledge could only come through experience and that propositions that cannot be verified are meaningless. This notion is known as the verificiation principle.

Therefore, general laws of science come under threat under this principle, as they are incapable of if conclusive verification. For example, it is generally accepted that the sun will rise tomorrow, but we cannot be sure of it as it cannot be verified. The Vienna Circle would therefore argue against the existence of posteriori truths.

Karl Popper however (who was also a member of the circle) went onto state that the verification principle itself cannot be verified so therefore it cannot be accepted as a truth.Popper was born in Austria, and although he travelled to various places during the course of his life, his most famous work was done in Vienna.

He was inspired by Einstein who took prior knowledge set by Newton and managed to disprove it. It is no surprise then that Popper argued that science ought not to prove propositions but rather disprove them. This is because we have no way of knowing if something is or will remain true (or in fact the truth actually exists), but we can always disprove something. He included this idea in his "Logic of Scientific Discovery", in which he attempted to counter the ideas set by empiricists and logical positivists.

Similarly, in his other works he opposed ideas found in Plato's Republic, and said that men who are considered experts in their fields are in fact not because the truth about any matter cannot be known. They therefore should not be granted any powers or be placed as figures of authorities. Governments soul in fact attempt to minimise suffering. This links in with his thoughts on the Paradox of Democracy. Hitler's rise to power is used as a prime example in this theory, in which he states that democracy can bring about the end of democracy through the voting system, and there is no way of getting out of it.

Although he was surrounded by the Vienna Circle, he was never considered a logical positivist, this is mainly down to his thoughts on falsification, and his "problem of induction", in which he once again states that all theories are just that, and science should be used accurately to falsify them.
This is increasingly important in journalism as we are constantly presented with ideas that are "truths" but we should not take them at face value , and instead take them with a pinch of salt and recognise that matters can be falsified but not necessarily verified.

John Henry Newman

Unusual for religious men at the time, John Henry Newman backed the ideas of Darwin.  He said that acknowledging the existence of fossil baring rocks is necessary if you believe in the separate creation of individual species.

He became the Vicar of St Mary’s in 1828 in the Trinity college’s church.

It is therefore no surprise that he wrote that a belief in God and an acceptance of a specific religion is a rational activity, defying the idea that it is always wrong to agree with a proposition without adequate evidence.  Unlike Locke, who stated that there ought to be no proposition without justification, Newman argued that there are plenty of solid beliefs that we have no real stance for believing in. For example, we believe that Britain is an island because a select number of people have told us so, but not everyone has collected evidence to support the idea. However, if we refused to accept ideas such as these because we want individual proof, the world would stop, and science would be halted massively. Although, I must add that there IS recorded proof for Britain being an island which everyone can access, God on the other hand is an entire different story. He also states that you can prove the true nature of Christianity by looking at the history of Judaism. However, he does recognize that in order to believe you must be willing to accept, ie) through revelation. Your conscious should be a trigger for why you believe in an existence of a higher deity. Newman here is suggesting that the idea of God is innate and inbuilt within our conscious.