Foundational Texts: David Ricardo and Adam Smith
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Foundational Texts: David Ricardo and Adam Smith

Dates
January 23, 2024
Type
Lecture
Reading
Facilitation Reading
Question

How did the early theories of English political economists like Adam Smith and David Ricardo lay the groundwork for later economic thinkers, and how do they influence our understanding of the digital economy today?

Section
Introductions to Pol Econ

Lecture

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Today’s question to ponder:

How did the early theories of English political economists like Adam Smith and David Ricardo lay the groundwork for later economic thinkers, and how do they influence our understanding of the digital economy today?

To Read

Adam Smith

  • Reading: "The Wealth of Nations, Book I" (Read Chapters 4 - 5)
  • Link: Adam Smith - The Wealth of Nations
  • Summary: In Book I of "The Wealth of Nations," Adam Smith lays the foundation for classical economic theory, introducing the concept of the division of labor which leads to increased productivity and efficiency. Smith discusses how the accumulation of wealth operates in growing market economies and the role of self-interest in driving economic prosperity. This foundational work is essential for understanding the basic principles of market economics and their evolution into the digital era.
  • Key Vocabulary:
    • Division of Labor: The assignment of different parts of a manufacturing process or task to different people to improve efficiency.
    • Invisible Hand: A metaphor used by Smith to describe the unintended social benefits of individual self-interested actions.
    • Mercantilism: An economic theory that trade generates wealth and is stimulated by the accumulation of profitable balances.
    • Market Economy: An economic system in which production and prices are determined by unrestricted competition between privately owned businesses.
    • Laissez-Faire: A policy of letting things take their own course, without interfering in the free market.

Supplemental Reading

David Ricardo "Principles of Political Economy and Taxation" (Chapter 7: "On Foreign Trade")

Summary and Vocabulary
  • Summary: In this chapter, David Ricardo introduces the theory of comparative advantage, which is fundamental to understanding international trade. He argues that countries engage in trade based on their relative advantages in producing certain goods, even if one country can produce all goods more efficiently. This theory explains the economic dynamics of globalization and is crucial for understanding the global digital economy, where nations specialize in different segments of the digital media industry.
  • Key Vocabulary:
    • Comparative Advantage: The ability of a country to produce a particular good or service at a lower opportunity cost than others.
    • Free Trade: International trade left to its natural course without tariffs, quotas, or other restrictions.
    • Protectionism: The theory or practice of shielding a country's domestic industries from foreign competition by taxing imports.
    • International Trade: The exchange of goods and services across international borders or territories.
    • Opportunity Cost: The loss of potential gain from other alternatives when one alternative is chosen.

To Watch

To Do In Class

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