Mercantilism- is the first great school of economic thought. Mercantile thought is concerned with

enrichment of nation and increasing national wealth. Wealth is associated with money and money is

Identified with gold. The major source of enrichment is seen in commerce or merchandising. To sell

more and buy less, or to export more than import, or to achieve a favorable trade balance and a

ccumulate money- that is the principle of mercantilism. To promote a favorable trade balance, the

mercantilists advocated government regulation of trade. (Tomas Mun (1571-1641, G.B.),

Antoin de Montchretien(1575-1621, France), Antonio Serra (Italy),

Afhanasy L. Ordin-Naschokin(1605-1680)

Protectionism – a kind of policy when tariffs, quotas, and other commercial policies are proposed

to minimize imports in order to protect a nation’s trade position. (Used by mercantilists)

Classical political economy: The 18 century was the age of the classical economic thought represented

by two major schools: physiocracy in France and the English classical political economy.

Physiocracy: The physiocratic school criticized the system of restraint and detailed government

regulation of production and trade, the system of high taxes on domestic producers. The name of

the school is of the Greek origin and means “the power of nature” as economists considered land to

be the only productive resource. The physiocrats introduced the idea of natural order to economic

thinking. The physiocrats pursued the principle of “laissez-faire”, “laissez-passer”. (Actually it means:

“let people do as they please without government interference”) The physiocrats made the emphasis

on agriculture. Physiocrats thought that since only agriculture produced a surplus, which the landowner

received in the form of rent, only the landowner should be taxed. All taxes imposed on others would be

passed on the landowner anyway. (Francois Quesnay and A.R. Turgot)

The English classical political economy: (William Petty, Adam Smith, David Ricardo)

As well as the physiocrats,

English economists emphasized the role of production as the major source of wealth and supported the principle

of laissez-faire. Contrary to the physiocrats, the accent was made on industry, not agriculture.

The major scientific achievements of the classics are:

1) focus on industrial production as the major economic sphere where the national wealth is created;

2) the development of the labour theory of value;

3) the analysis of the market mechanism of self-regulation (the invisible hand of the market);

4) the analysis of the factors of production;

5) the analysis of factor incomes.

In Russia the ideas similar to the classical school were formulated by Ivan Pososhkov, Mikhail Lomonosov,

Nikolay Mordvinov, Mikhail Speransky.

Utopian socialism ( the end of the 19- the beginning of the 19 centuries) (Clode Saint-Simon, Charle

Fourier, Robert Owen)

Saint-Simon named it – industrialism, Fourier – a harmony, Owen – communism.

The new fair system had no private property, no exploitation, it based on labour, on just distribution,

on self-management and cooperation: there would be no contradiction between city and village, between

physical and intellectual labour.

Marxism (19 century):

the major ideas and achievements of marxist political economy:

1) further development of the labour theory of value;

2) the surplus value theory was created on the labour theory of value (the theory proves that

surplus value results from the exploitation of labour by capital owners);

3) a principally new analysis of the factors of production and factor incomes was made;

4) immanent contradictions of the capitalist economic system were analysed;

5) the conclusion is made that as production becomes more and more associated while

appropriation retains its private capitalist form, capitalism will inevitabl give way to another economic

system. In Russia : Georgy Plekhanov, Vladimir Ulianov-Lenin.

Neoclassicism: suggests that the economic science can be firmly grounded on the basic individual act

of subjectively choosing among alternatives.

Neoclassicism began with marginal revolution.

It included the following three subschools:

1) the marginal utility theory; (Austrian school: Karl Menger, von Wieser)

2) the marginal productivity theory; (American school: John Clark)

3) the mathematical school. (L. Walras, V. Pareto, W. Jevons)

Keynesian revolution- more fair income distribution, for effective deflationary policy, for restriction of market

competition.  Keynes insisted on the necessity of the broad and intensive government interference in the economic life. He argued that only the government could prevent recessions, ensure economic stability, growth, and full employment.

Institutionalism (19-20 centuries) (T.Veblen, V. Mitchell)

Institutionalists criticize neoclassicism for the apologetics of the capitalist market economy.

Economic theory should take into consideration other social sciences, such as sociology, politilogy, law.

Neoconservative counter-revolution stated that the former destroyed the motivation to invest

while the latter destroyed the motivation to work. Monetarism pays major attention to money. (Milton Friedman)

Neoliberalism. (Friedrich von Hayek and Ludwig von mises) – a planned socialist economy would lack incentives for people to take risks. They blamed the government interference for all the economic disturbances and for people’s liberties.

Neoclassical synthesis: Keynesian concepts did not prove to be a panacea. The neoconservative ideas are very

disputable, and the success of their implementation in practice is doubtful. That is why there appeared

the intention to find a compromise between the Keynesian and  the neoclassical approaches.  The basic principle is that of mixed economy. That demands both market self-regulation and government interference. (Paul Samuelson)

2

Economics is the social science that analyzes the production, distribution, and consumption of goods and services. (Subject of economics - the social science that studies the production, distribution, and consumption of goods and services.)

The three basic economic questions – what to produce, how to produce, who will get what is produced. ( who’ll produce) Instinct, Command, Customs, Market.

Microeconomics – the branch of economics that studies individual units: households, firms and industries. It studies the interrelationships between these units in determining the pattern of production and distribution of goods and services. (компании; trees)

Macroeconomics - the branch of economics that studies economic aggregates (grand totals): the overall level of prices, output and unemployment in the company. (общий уровень цен; forest)

Two key words in economics – scarcity (дефицит) and choice.

Positive economics - the branch of economics that concerns the description and explanation of economic phenomena. It focuses on facts and cause-and-effect relationships and includes the development and testing of economics theories. (каков фактический уровень инфляции и как он влияет на урвоень занятости)

1) Descriptive economics - the complilation of data that describe phenomena and facts. Such data appear in the Statistical Abstract (or Statistical Yearbook) of a nation. (собрание данных описывающих явления и факты)

2) Economic theory attempts to generalize about data and interpret them. ( попытки обобщения о данных и их интерпретации.)

Normative economics – the branch of economics that incorporates value judgments (that is, normative judgements) about what the economy ought to be like or what particular policy actions ought to be recommended to achieve a desirable goal. Normative economics looks at the desirability of certain aspects of the economy. It underlies expressions of support for particular economic policies. (насколько плох или хорош ежегодный объем затрат на вообружение)

Analysis – the process of breaking a complex topic or substance into smaller parts to gain a better understanding of it. (процесс разбиения сложной теме или вещества на более мелкие части, чтобы получить более глубокое ее понимание)

Synthesis – is used in many fields, usually to mean a process which combines together two or more pre-existing elements resulting in the formation of something new. (используется во многих областях, как правило, для обозначения процесса, который объединяет вместе две)