History of Economics Essay Example for Free

History of Economics Essay Economics is the constituent of social sciences which studies the economy and its elements. The main elements of economics are production, distribution, and the consumption of certain goods and services. And its main objective is to allocate the scarce resources effectively and efficiently. Scarcity refers to the economic concept that reflects that the resources are insufficient to full fill the wants and needs of all the people. In this paper the concepts of surplus and its effects on the economy would be discussed. Surplus is the situation in which an excess of something is achieved. For example the value or the amount provided after the requirement for something is satisfied or the remainder of particular thing after the purpose is met (Danielson, 1994). The industrial take off in the 18th century was considered due to the need which was developed to produce in excess. The industrial revolution which was brought forward was the result of an influence made by the capitalists regarding the generation of sufficient surplus as the source. This idea developed the concept of producing more than one requires. Europe is considered as the leader for the revolution as it had the sufficient supply of resources to cope up with the increasing demand for the growing industries. The main purpose of developing industries was to produce and cope of with the demands of product by the people. Previously there was no concept of producing more than one required to satisfy the need for one self only. But as the people started to become more and more liberal the concept of producing more than required was built. Industries with there extensive research and resources started developing goods and services to gain more profits and to satisfy the needs and wants of the prospects. This reflects the role of surplus in the development of industries in the late 18th and the 19th century, which came out to be the main cause for the change in the methodology used previously for production. (Danielson, 1994) Francois Quesnay is another great scholar known to have made contributions in the economic studies in the era before the eighteenth century. He published the Economic Table which aided in explaining the working of the economy, and which is considered as one of the first attempts made to the economic thought. In the table he described three classes, landowners, farmers, and the sterile class which he assumed consumed everything the farmers produced with no left over surplus. Quesnay assumed that it was only the farmers that could produce a surplus, and which could be used in the next year to produce more and aid in growth, and he emphasized more on the agricultural sector than the manufacturing sector which has not yet developed. This point of view of Quesnay differed from that of Smith in regards to a surplus in the economy (Kurz Salvadori, 1997). Proceeding to the history of economics, the person who is known as the father of modern economics was Adam Smith. The concept of the well being of the society and the economy by the description made upon rational self-interests. Smith addressed upon bringing nation’s prosperity through the means of improvement in the methods of production in his book. He claimed that the surplus in production could be in general and not only in the agricultural sector. And to conceive higher profits it is required by the industries to gain surplus as profit is to be considered as the second component of it. For which achieving surplus would result in recovering cost effectively (Kurz Salvadori, 1997). Jean-Baptiste Say was a French business man and an economist in the early eighteenth century. He was the originator of the Say’s Law which describes that the supply creates its own demand, and the supply is not influenced by demand and supported the free trade and competition, and the lifting of restraints levied on the businesses. Say emphasized upon the concept that the supply creates its own demand, because he believed that the person’s ability to demand products is dependent on his disposable income which he generates from his own attributes in production. His point of view regarding surplus was similar to of Adam Smith in context that he accepted the concept that the surplus could be achieved in any product. Insufficient demand could be due to a misdirected production and result in an excess of a product in the market known as surplus. This perception of Say made his views different from that of Smith and Quesnay. Wood Kates, 2000) Proceeding to the conclusion to the different view presented by the three scholars Francois Quesnay, Adam Smith and Jean-Baptiste Say, it can be deduced that all had different perspectives according to their era with reference to surplus. Quesnay had a different set of mind and assumed his theories based upon the industries present at his time. Smith and Say were present in the similar time but had different aspects surrounding them. For which their theories differed from each other, but had similarities, because of being situated in identical time period.