Which of thefollowing statements are true/false?

1. Smith's version of the economic system was proved to be right for the advanced economies.

2. Keynes challenged both classical and neoclassical economic doctrines.

3.Lord John Maynard Keynes was not alone in his beliefs.

4. The reason why Smith's theory of self-organizing and self-adjusting “social mechanism” was criticized was the Great Depression of the 1930s.

5. According to the Keynes and his colleagues, continued government intervention is necessary to achieve required employment of labour and other positive results.

6. Keynes works were proved to be true and that was the reason why no one disputed them during the following 50 years.

7. Keynes himself wasn't really sure that economics is an accurate science.

8. Keynes thought that dentists are more competent economists than Adam Smith followers.

Questions for discussion.

1. Was the Great Depression the only reason for Keynes' criticism? Do we have to wait till the next crisis to come up with the new theory or it could be proved experimentally?

2. Why did it take 150 years for economists to realize that Smith's theory was not correct?

3. Do you agree with the author that the “great worry” is that there is a lack of professional competence to make valid diagnoses? Is it a problem of economics as a science?

СLASSICAL LIBERALISM

In the seventeenth century, liberalism emerged as the radical philosophy that attacked authoritarianismand paternalism in the political sphere by defending the rights of the individual against the commands of monarchs and other rulers. The seventeenth-century philosopher John Locke questioned claims to political authority based on birth, social status, privilege, and divine right. Political authority either derived from the consent of the governed or else was illegitimate.

Later in the eighteenth century, liberals added the notion of the “rule of law”, the idea that the government in its legislative capacity had to enact generalrulesthat apply to all citizens equally. The substitution of the rule of people for the rule of law created a capricious, uncertain, and sometimes cruel community life. This early variety of liberalism — often termed “classical liberalism” — stimulated the development of the social sciences by insisting that what holds society together and promotes an orderly commercial economy is the mutual interplay of the passions and interests of ordinary citizens in the market.

The basic principle of liberal thought is that individuals are the best and most accurate judges of their own interests and can berelied uponto pursue those interests with great dedication and creativity. The mighty arm of the state with its web of regulations and bureaucratic agents often does more harm than good when trying to substitute administrative methods of organization for impersonal market processes that spring out of self-interested individual action.

The philosopher and American revolutionary, Thomas Paine, wrote that “society is created by our wants, government by our wickedness”.

Classical liberals are not anarchists and at the very least recommend a minimal state: a state that protects lives, defines property rights, and enforces private contracts. Many classical liberals (such as Adam Smith and the later classical school of economists) went somewhat further and requested that the state builds and maintains certain public works (bridges, canals, highways, harbors, recreational parks, and so on), maintainsstanding armies, provides basic education, promotesinvention and innovation, and intervenes in the market on a limited scale for specific humane purposes such as the enactment and enforcementof child labor laws.

Generally, the classical liberal believes in the general rule of laissez-faire and wants to preserve self-regulating market processes as much as possible. The classical liberal is confidentthat with the enactment of strict constitutional safeguards and the elimination of monopoly and the never-ending varieties of special-interest legislation, peace and material progress are within the reach of all societies and all social classes.

The leading works of classical liberalism include Adam Smith's Wealth of Nations (1776), Herbert Spencer's TheMan versus the State (1892), Friedrich A. Hayek's Constitution of Liberty (1960), Ludwig von Mises's Liberalism: A Socio-Economic Exposition (1962), and Milton Friedman's Capitalism and Freedom (1962).

Vocabulary

authoritarianism - авторитаризм

rulers - правители

privilege - привилегия

divineright- божественное право

derived- производное

illegitimate- не легитимный

enact - вводить

capricious – капризный, прихотливый

relyon (upon), v - полагаться на кого-либо (что-либо)

springout- происходить из

wickedness - злоба