Explain the difficulty of forecasting economic events
The quote, “the difficulty is that forecasting requires more than foreseeing the possibility of an event; in the first place, it requires that a timetable be attached to the probability. This distinction is well enough known to have led to the long-standing comment about economic forecasters that they have forecast ten of the last two recessions’ is saying that, it cannot be forecasted to exactly what is going to happen only what may happen and what could happen when something may happen. It is saying that with the number of possibilities economists have forecasted a lot of things with not many of them happening. The quote is also saying there is more to the job that guessing what could happen and that a timetable to all of this is needed.
Adam Smith (1723-1790)
Adam smith was born in Scotland in 1723; he showed promise as a young student and entered university on a scholarship.
He taught at universities and because a professor at the age of 28, until 1763.
Between 1764 and 1766 Adam Smith became a private tutor to a duke, this made him financially secure for life.
Adam smith then wrote the book, which was considered very influential: The wealth of nations.
In 1778 he became the commissioner for customs in Scotland, .
Smith never married and lived with his mother until she died. Adam fitted the profile of an eccentric professor often getting very deep into thought and loosing touch with what he was doing.
Adam smith died on 17th of July 1790.
Adams main theories were,
Human nature economic growth, Adam quoted “The uniform, constant and uninterrupted effort of every man to better his condition, the principle from which public and national, as well as private opulence is originally derived, is frequently powerful enough to maintain the natural progress of things toward improvement, in spite both of the extravagance of government, and of the greatest errors of administration. Like the unknown principle of animal life, it frequently restores health and vigor to the constitution, in spite, not only of the disease, but of the absurd prescriptions of the doctor.”
Although Adam Smith never distinctly faces the problem of the supreme end of life, nor asks himself whether virtue and morality are merely means to the attainment of happiness, or whether they are ends in themselves irrespective of happiness, he leaves little doubt that happiness really occupies in his system very much the same place that it does in the systems of professed Utilitarians. But he distinguishes between happiness as the natural result of virtue and happiness as the end or purpose of virtue; and, by satisfying himself that it is the natural result, he saves himself from considering whether, if’ it were not, virtue would remain in and for itself desirable as an end.
John Maynard Keynes (1883- 1946)
John Maynard Keynes was born in England; he was academically brilliant and had an engaging personality.
Keynes went to Eton and then went on to King’s College Cambridge to study Classics and Math. He worked for a short time in the Civil Service but didn’t like it much, and so left and went back to Cambridge as a Fellow
He used his talents to gain money from international currency speculation.
Keynes’ introduction to the public was with his first book: The economic consequences of the peace.
Even though so intelligent he was conscious of it around other people. He was also fun.
Keynes’ is perhaps the only economist to have a whole branch of economics named after him. He also wrote a further two books after the first.
John Maynard Keynes died in 1946.
In the General Theory Keynes comprehensively challenged the Classical orthodoxy. He argued that a slump was not a long-run phenomenon that we should all get depressed about and leave the markets to sort out. A slump was simply a short-run problem stemming from a lack of demand. If the private sector was not prepared to spend to boost demand, the government should instead. It could do this by running a budget deficit. When times were good again and the private sector was spending again, the government could trim its spending and pay off the debts they accumulated in the slump. One of his best known quotes summarises this focus on short-run policies:’In the long-run we are all dead’So his theory was that the government should actively intervene in the economy to manage the level of demand. These policies are often known as demand management policies, aptly named since the idea of them is to manage the level of aggregate demand. you could even call these policies counter-cyclical demand management policies. They are termed this because the government should be doing the exact opposite to the trade cycle. The government should spend more, and when the economy is booming the government should spend less.
Joan Robinson (1903-1983)
Born Joan Violet Maurice in Surrey,
She studied economics at Girton
Married the young economist
In 1926, the Robinsons went
to India, during which she got
involved in research committee
on Anglo-Indian economic relations.
They returned to Cambridge in 1929.
During the 1930s, Joan Robinson,
published three books and
numerous articles, and still found
time to give birth to two daughters.
She became a full lecturer in 1937.
In 1956, Robinson published
The Accumulation of Capital,
which extended Keynes’s theory
to account for long-run issues of
growth and capital accumulation.
This was followed up by a exposition of growth theory (1962), the concept of a variety of “golden age” growth paths were laid out.
Robinson was also interested in problems in underdeveloped and developing countries – a natural outgrowth of her work on growth – and made substantial contributions in that direction. However, in later years, Robinson embarrassed many enemies and friends with her far-too-laudatory comments of the Chinese Cultural Revolution.
John Kenneth Galbraith (1908-)
John Kenneth Galbraith was born in Ontario and went to school at the Universities of Toronto, California and Cambridge In 1939 he was teaching at Princeton and by 1949 was teaching at Harvard.
Galbraith’s first big seller was his Affluent Society. It most likely contributed to the “war on poverty,” being a government spending policy first brought on by Kennedy and Johnson. This policy not only brought on debt but split the country in to those who have the jobs and those who do not. “The war on poverty of which so much has been made since then has been able to make excellent careers and many thousands of civil servants of academic people who have been able to do study after study on poverty
Galbraith’s book, The New Industrial State, was published in 1967. Milton Friedman thinks that this work is one were Galbraith attempts to update certain of the theories espoused by Veblen.
Milton Friedman (1912-)
He was born in New York City in 1912, and his father died when he was only 15. Nonetheless, Friedman got a Bachelor of Arts degree from Rutgers University in 1932 and an AM from Chicago one year later. He started out working as a research assistant at Chicago with demand analysis. Another long association begun around that time was with his wife, Rose Director. He had two children. In 1946, Friedman received his PhD from Columbia, the same year in which he became a professor of economics at Chicago.
In 1953, Friedman wrote an essay called Methodology of Positive Economics in which he argued that theories should be proven only by the correspondence of the predictions and facts, not between the correspondence between empirical correlates and assumptions.. What many regard as Friedman’s greatest work, A Theory of the Consumption Function, was published in 1957, and in this he pointed out regression fallacy and other flaws in Keynes’s General Theory of the regularity and predictability of the consumption function. He suggested that people rather tend to adjust their consumption on the basis of variations in their long-term expected income.
Freedman’s work the next thirty years focused on studies of money, such as showing the inferiority of excise taxes compared to income taxes, the uses and abuses of the theory of price, the theory of human capital, etc.
Yet in spite of increasing attention to the balance of payments and the money supply process, the prime focus of Friedman’s work was the examination of the effects of monetary variations on nominal income, prices and output. In essence, Friedman found that variations in the rate of growth of the money supply had short run effects, but in the long run the only substantial effect was on prices.