The first modern economists
Lead-in
1. Can you name any well-known economists? What were they famous for?
2. Who got the epithet «the father of economics»?
Key Vocabulary
1. Study the following list of vocabulary.
| 1. merchant n | купец, торговец; лицо, занимающееся торговлей |
| 2. compete v | конкурировать, состязаться, соревноваться |
| 3. wealth n | богатство, состояние |
| 4. object v | возражать, протестовать; выдвигать возражения |
| 5. outperform v | превосходить; выполнять лучше (кого-л.) |
| 6. invisible hand | «невидимая рука» (рыночный механизм, автоматически осуществляющий регулирование хозяйства в условиях свободной конкуренции) |
| 7. benefit the society | помогать, приносить пользу обществу |
2. Mind the following common nouns.
1. mercantilist n - меркантилист (сторонник меркантилизма, системы взглядов на вопросы экономической политики, господствовавшей в 16 – 18 вв.)
2. physiocrat n - физиократ (представитель французской школы политической экономики в 18 веке)
Pre-Reading Activities
1. Use a dictionary and match the synonyms. Mind the use of the prepositions.
| i) to outperform somebody | a) to oppose something |
| ii) to object to something | b) a seller |
| iii) to compete with somebody | c) to surpass somebody |
| iv) a merchant | d) to rival somebody |
Reading
Read the text and assimilate its information.
Between the 16th and 18th centuries the major countries of Europe believed in the economic theory of mercantilism. Mercantilists claimed that nations should behave as if they were merchants competing with one another for profit and like merchants, nations should protect business and industry.
But for a group of 18th-centuary French philosophers and economists, the suggestion that nations should protect their own business and industry made no sense at all. Those were the physiocrats. They claimed that the products of agriculture and other natural resources were the true source of wealth. In other words, since real wealth came from the land, it followed that the best thing the government could do would be to keep its hands off business and let nature take its course. This idea was expressed in the slogan «laissez faire», (let people do as they choose).
The year of 1776 became very significant for the development of the world economic thought, as one of the most influential scientific works, The Wealth of Nations, written by Adam Smith, the father of economics, was published. The author objected to the principal economic beliefs of his day. He disagreed both with the physiocrats and mercantilists. In Smith’s view, the nation’s wealth depended on production, not agriculture alone.
The heart of Smith’s economic philosophy was his belief that the economy would work best without any government regulation. In this case, self-interest would lead companies to produce only those products that consumers wanted, and to produce them at the lowest possible cost. They would do this to outperform their competitors and gain the greatest profit. He believed that self- interest would benefit the society as a whole by providing it with more and better goods and services at the lowest prices. To explain why the society benefits when the economy is free of regulation, Adam Smith used the term «invisible hand», meaning the economic forces that today are called supply and demand.
In his work «The Wealth of Nations» Adam Smith sounds realistic and practical, respectful of the classical past but at the same time dedicated to the great discovery of his epoch – progress. Although he was writing for his generation, his thoughts and ideas have always attracted the attention of all economists, that is why Adam Smith has remained a significant figure in the history of economic thought for more than 2 centuries.
Comprehension Check
1. Complete the following sentences.
1. The economic theory of mercantilism … .
2. Some French philosophers and economists claimed that … .
3. … in 1776.
4. A. Smith objected to … .
5. According to Smith, … .
6. Adam Smith used the term «invisible hand» to … .
2. Answer the questions.
1. What was the difference between mercantilists’ and physiocrats’ views?
2. What idea was expressed in the slogan «laissez faire»?
3. Why did the year of 1776 become very significant for the development of the world economic thought?
4. Who is considered to be the father of economics?
5. What theories formed the core of Smith’s philosophy?
6. Why has Adam Smith remained a significant figure in the history of economic thought?
3. Read the text once more and explain the meaning of the phrases below.
| “balance of trade” | “laissez faire” | “invisible hand” |
Vocabulary Focus
1. Provide appropriate English equivalents of the following collocations.
- бороться (конкурировать) за прибыль
- поддерживать промышленность
- природные ресурсы
- источник состояния
- правительственное регулирование
- производить те товары, которые нужны потребителям
- превзойти конкурентов
- предоставлять товары и услуги по самым низким ценам
- история экономических учений.
2. Fill in the prepositions, if necessary. Translate the sentences into Russian.
1. Free market system allows businesses to compete … profit with a minimum of government interference.
A) for b) with c) on
2. There are several reasons why I object … joining you.
A) with b) to c) -
3. The production of this equipment depends … demand.
A) in b) on c) at
4. Our company can provide goods or services … a low cost.
A) at b) on c) of
5. You will gain … no profit by resistance.
A) by b) in c) -
3. Use the vocabulary of the text to complete these sentences.
1. An individual who buys products or services for personal use and not for manufacture or resale is …
a) a consumer
b) a merchant
c) an exporter
2. In economics, … is the amount of goods and services by a firm, industry, or country.
a) trade
b) output
c) profit
3. A fundamental economic concept that describes the total amount of a specific good or service that is available to consumers is …
a) demand
b) supply
c) a law
4. Adam Smith saw the creation of … as the combination of materials, labor, land, and technology in such a way as to gain profit.
a) costs
b) society
c) wealth
5. The Peugeot engine has … its competitors this season.
a) competed
b) benefited
c) outperformed
6. I didn’t want to … him or his company.
a) rival
b) compete
c) produce
Talking Points
1. Economic thought may be roughly divided into three phases:
· Premodern (Greek, Roman, Arab);
· Early modern (mercantilists, physiocrats);
· Modern (since Adam Smith in the late 18th century).
What new facts have you learnt about it from the text? Can you add anything else?
2. Comment on the quotation.
“Labor was the first price, the original purchase - money that was paid for all things. It was not by gold or by silver, but by labor, that all wealth of the world was originally purchased.” Adam Smith.
Summary Points
1. What is the basic topic of the text about first economists?
2. Draw up an outline of the text and give a one-sentence summary of each point.
3. Add some important information and make a conclusion: What have you learned from the text? Have you found it informative/ helpful/ interesting?
SUPPLEMENTARY READING
Unit 1
Economics as a Science
The Business Cycle
The business cycle or trade cycle is a permanent feature of market economies: gross domestic product (GDP) fluctuates as booms and recessions succeed each other.
During a boom, an economy (or at least part of it) expands to the point where it’s working at full capacity, so that production, employment, prices, profits, investment and interest rates tend to rise.
During a recession, the demand for goods and services declines and the economy begins to work at below its potential. Investment, output, employment, profits, commodity, share prices and interest rates generally fall. A serious, long-lasting recession is called a depression or a slump.
The highest point on the business cycle is called a peak, which is followed by a downturn or a period of contraction. Economists sometimes describe contraction as “negative growth”.
The lowest point on the business cycle is called a trough, which is followed by a recovery or an upturn or a period of expansion.
There are various theories as to the cause of business cycle. Internal (or endogenous) theories consider it to be regular and indefinitely repeating. When economic times are good and people feel good about the future, they spend their money. If people are worried about the possibility of losing their jobs in the near future they tend to save more.
External (or exogenous) theories, on the contrary, look for causes outside economic activity: scientific advances, natural disasters, elections or political shocks, demographic changes, and so on.
Notes:
gross domestic product (GDP) – валовой внутренний продукт (ВВП)
fluctuate – колебаться, быть неустойчивым
recession – спад, снижение
downturn – экономический спад, понижение
upturn – подъём, рост
trough – самый низкий уровень экономической активности, низшая точка (цикла)
endogenous theory – эндогенная (внутренняя) теория
exogenous theory – экзогенная (внешняя) теория
Unit 2