Seo Hee (Janet) Hong Professor Kinnaman ECON 103, Fall, 2009 9/9/09 Homework #1

1] “The profit motive is is as old as man himself.” Please use course materials (your text book) to comment on the accuracy of this statement.

Unlike our common belief held in today, the notion of profit motive is modern and not as universal as we suppose it is. We are taught that man is born acquisitive to behave like any typical businessman, yet it turns out to be wrong as the history shows that a large population of the world not only was unfamiliar with the profit motive, but did not even attempt to improve their quality of living. Indeed, the unindustrialized peoples around the world still live a life that is hardly tied with the profit motive. The Church in the Middle Ages even banned Christians from becoming a merchant because it viewed the act of gaining as a sin.
2] Imagine the king of England has passed a new law preventing all exportations of gold from England to other countries. Thus, all English merchants may not purchase goods or supplies from other countries using gold as payment. a) What school of economic philosophy supports this initiative? Explain the logic behind this philosophy (see your text for answer).

Mercantilism supports this idea since its philosophy was centered on the perspective that national power was strengthened from the property of a nation, gold. The mercantilists thus strongly believed in accumulation of gold to keep their nation wealthy and powerful. They did not want to lose the royal treasury in exchange for foreign goods or supplies.
b) How would Adam Smith respond to such a law? Explain.

Adam Smith would be against it. He deems the market economy should be run independently by each person’s freedom and self-interests. This law, however, disrupts the merchant’s business with other foreign countries.
3] Adam Smith wrote extensively about the proper role for government in a market economy. a) According to Smith, what specific government activities are not desirable in a market economy (see text)?

According to Adam Smith, the meddling of government with market economy is not desirable in a market economy. Government is not supposed to try dealing with the working mechanism of the market economy, such as restraints on imports and bounties on exports, laws that discourage competition in industry, and its spending for unproductive ends.

what specific government activities are warranted in a market economy (see text)? Smith argues government should protect a society from the violence from other societies. More labors and higher wages were therefore demanded that time. these laws would force people to purchase expensive food only from Britain. allow citizens to have rights to justice. After observing these two. The population grew rapidly due to the increase of wages from the development of financial assets. David Ricardo opposed to Britain’s Corn Laws. it was discovered that this company actually offers a better quality of training and disciplining guards with enough funds. which trains certain guards who get paid. 5] Britain's Corn Laws discouraged the importation of cheap food from other countries. Therefore. Red Cross and a private company. In “Greed with John Stossel. and maintain public works and institutions which bring benefits to society. The supervisor even spies on his life guards and evaluates their job. Pick an example and explain how this person’s actions helped not only themselves but also others. other individuals are served in a safer environment where the life guards pay more attention to them. their wages depend on how they perform their jobs. 4] In the film "Greed with John Stossel." several examples are given of individuals whose selfish actions benefited other individuals. and capitalists would have to pay workers even higher wages as a result. According to David Ricardo. . The film presents two different groups. This company makes more profits as they provide better service. Also.b) Also according to Smith.” life guard is shown as a case where his selfish actions benefited others. a non-profit organization. they would not be able to gain any profits. Was David Ricardo for or against these laws? Explain his logic (see text). Eventually.

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