Critical orientation

As such, economic thought begins to present a critical view on the process of creating national wealth, seeking criteria for assessing economic growth and development at a scale of values and actions that go beyond the mere enhancement product. In his work New Principles of Political Economy or Wealth in its Relation to Population (1818), Simonde de Sismondi (1778-1842) speaks in terms of new science governance principles need to be aimed at human happiness in relation to wealth creation. Political economy, as the science of government - he argues - must aim is "meeting people's happiness in society. It examines the means to afford the highest happiness to be compatible with nature, it investigates also how to participate in this happiness the largest number of people possible. Country where no one suffers, but neither feels at ease to enjoy the values of civilization, is only half-civilized."[1]

Sismondi defined political economy subject saying "man's physical welfare, to the extent that it may be the work of his government, is the subject of political economy."[2] Like Sismondi, other representatives of utopian socialism treated the economic growth and development through a series of general social indicators, linking them to welfare: "Without this newly wealth created by machines* would not have led wars for the overthrow of Napoleon and to maintain aristocratic society. But this new force was created by the working class."[3] Marx (1828-1883) placed at the origin of change mechanism, the new technologies, the progress in the productive forces that determine the transition to new relations of production and, thereby, to a new social order, etc. Marxist theory emphasizes the qualitative changes of transition to a new social order. The concept of economic development becomes subordinated to the social development by removing capitalism and moving to a "socialist society." The whole scheme of analysis is aimed at demonstrating a basic political thesis the "socialist revolution." Development results from the need to solve their own crisis of capitalism (Table 2).

Neoclassical School

A paradigm shift is achieved by marginalist "neoclassical" theories formulated by: Jeons Stanley (1835-1882), Carl Menger (1840-1921), Leon Walras (1834-1910), Alfred Marshall (1842-1924) etc.

Table 2 Crisis of capitalism in Marx[4]

Crisis of capitalism in Marx

"Neoclassical school marks a break in the evolution of economic theory, contrary to neo* prefix implying. If economics was, until then, the science of wealth accumulation, it is the science of scarcity and allocation of resources, in the sense that Lionel Robbins (1923) has defined. It rests upon a new conception of value and microeconomic approach in terms of market equilibrium."[5] Neoclassical theories are based on individual methodology. The value of property is no longer given by its production work needed but for the usefulness that is has for the consumer, i.e. the last unit of a good consumed. The growth now takes another meaning and another area of analysis: consensus. Neoclassics differ, in their theories, three correlated markets: the goods and services, labor and capital. Correction can be made in one market or everyone (having to do with a partial or general equilibrium). If demand for goods and services of a consumer is a decreasing function of price then for each product the offer is an increasing function. The aggregation of the two functions marks a balance when they intersect (Figure 3).

Partial equilibrium

Fig. 3 Partial equilibrium[6]

Neoclassical theories consider growth to be "neutral" in relation to distribution and therefore can be analyzed independently of it. "The possibility of a macroeconomic production functions with constant efficiency and it is the base of neoclassical analysis on the distribution and provides such a simple scheme the distribution of equilibrium."[7] In the neoclassical view, global production is explained by two factors function with the same general form as microeconomic function: At a macroeconomic scale global production depends on the quantity of the total factors capital (K) and labor (L) from the economy at a time [Q = F (K, L)]. For businesses (as a whole) is easy to find an optimal combination of factors, because their growth rates correlate quantitatively the relationship to meet their marginal productivity remuneration factors.

For example, if the marginal productivity of labor is higher to the real wage rate, entrepreneurs are looking to use more workers and workers overuse decrease the ratio of wages (W) and productivity (p) until it equals with the marginal productivity [F = (KL )] that depends only on the initial endowment (KL). The global production of equilibrium is therefore assumed to satisfy conditions FK (KL) = C/p and FL (KL) = w/p. These conditions are present due to the law of supply and demand.

Neoclassical theory supports the idea of natural distributions unrelated to the relationship between social classes. "Therefore, the theory used an artifice. On the one hand, it allows growth to be 'balanced' and states that balanced growth is 'the rule' and, therefore, without any effect on the distribution. On the other hand, in the case of growth through technical progress, it neutralizes, through the assumptions adopted, the effects of technical progress on the distribution." From the neoclassical perspective the balanced growth is defined by "the condition of equality between saving S, consisting of households a certain period and AK increase of the capital stock of the same period. S = AK."[8] In neoclassical universes, in which the profit and money are absent (i.e. saving of enterprises), the growth is necessarily balanced. In the absence of saving businesses, net fixed capital investment can only come from saving household, where: S >= AK. But, because of possible liquid investments in this economy without money, the only possible investment in the economy is in fixed capital investment, where: S < AK. From these two inequalities results provided previously presented (S = AK).

Before going on with our presentation, it should - as a central element of how we want to do this book - to formulate a problem. What brings new and important the method of analysis offered by marginalist theories? This question can find different answers, each of us has to try and find solutions that are acceptable. What we are going to present (as a possible answer) must be analyzed and discussed to see its degree of rationality.

  • [1] Sismondi, Simonde de (apud. Ivanciu Nicolae-Valeanu, op. cit., 101).
  • [2] Ibid., 101.
  • [3] Owen Robert (1771-1858), (see Ivanciu Nicolae-Valeanu, op. cit., 107, *-is about the productive forces created by machines).
  • [4] Longatte J., P. Vanhove, op. cit., 17.
  • [5] Ibid., 18 (*-emphasis in text).
  • [6] Ibid., 19.
  • [7] Poulon, Frédéric, op. cit., 297. m Ibid, 301.
  • [8] Ibid., 301 (the followings are based on the same work).
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