Ch 2:
Economics is a relatively new field, because capitalism is a very recent innovation for organizing society. Before the 16th-18th centuries Feudalism was prevalent in Europe, where land was not sold, people did not work for wages, and the ideas of markets and commerce were limited at best. Capital, as something that is invested to be put to work and increased, was not really a thing. "Unjust gain" was stigmatized or outlawed by societies, innovation was feared, and people generally did whatever their fathers before them did. As the societal structure that later became known as capitalism took shape, it was vehemently opposed by all sides. In England wool became very expensive, causing noble landowners to fence off land from the peasants to put newly bought sheep in. In other countries those in power outlawed technological innovations or any changes in the way things were done. Even in cities, where commerce was more of a thing, workers did not negotiate for wages, rather they were set by the industry leaders. Protestantism preached more a work ethic, saying it was pious to fully utilize what God gave you, in contrast to medieval Catholicism which forbid Christians from being merchants or loaning at interest.
Ch 3:
Adam Smith's Wealth of Nations in 1776 really kickstarted economics. Before it, early theories were laughably incomplete. This book had a huge impact on society.
Smith had an incredible respect for the market mechanism, which he said would regulate all supply of goods (and even supply of people) if just left alone. He was against the collusion of industry leaders to artificially raise prices, which he said lowers the overall welfare by preventing the market from the producing the greatest amount of goods at the lowest possible prices.
He appreciated the increase in productivity the specialization of labor created, but he didn't see how it would be self-reinforcing in the long run. He thought that the increase in profits from increasing productivity, which led to increasing wages, would eventually lead to an increase in population that would drive wages back down to subsistence level, with no long term improvement in affairs.
Ch 4:
Thomas Robert Malthus wrote an influential treatise hampering the optimism of the times arguing that the reproductive urge will ensure that the population always increases as goods increase until people are barely able to subsist again.
David Ricardo was an opposing figure to Malthus, much more well liked, and they argued endlessly in publications back and forth, but they were great friends. Ricardo saw the landowner as opposed to both the capitalist and working classes of society. Market forces acted to correct capitalists' profits and workers' wages, but there is only so much land, so as population rises the amounted required & thus price of grain rises, benefiting the landowner at everyone else's expense. This was a big difference from the earlier Adam Smith, who saw a nation as one and did not perceive any shortage of good soil. The author states that Ricardo's analysis of land rents is accurate, but that we have been spared from its consequences today because of how much more food we can get from an acre of farmland and successes in checking population growth.
Ch 5:
Robert Owen was an 18th century liberal who made a very profitable factory with great labor conditions, in contrast to the horrors seen elsewhere. He also believed in getting rid of money and living in communes. He started one, but it quickly fell apart.
Utopian socialists are distinct from communists in that while communists appealed solely to the working masses & urged violence, the utopian socialists appealed to their fellow intelligentsia, members of the upper classes, trying to convince them the change would be to their benefit as well.
J. S. Mill made a huge insight in that economic laws deal with production, how to generate wealth. But once wealth is generated, "society" has the power to distribute it as it wills. There is nothing stopping it from taking the wealth from the one who would get it in a "natural" state of affairs. Critics rightly pointed out that one cannot so cleanly separate production from distribution as Mill implied. 100% tax rates would certainly impact what is produced, for example. He also thought that the working people could be taught to constraint their base impulses and voluntary keep population in check, keeping their wages up. He brought back optimism to economics after the glum pessimism of Ricardo and Malthus.
Ch 6:
Karl Marx published The Communist Manifesto in 1848.
The author had high regard for Marx as an economist, claiming he was very prophetic in his understanding of the inherent instabilities within capitalism. His theory was that capitalism would inevitably collapse into communism. That it had to, because of its nature. He claimed that the price of everything, wages & products ultimately is how much "labor" went into that thing, and that capitalists make profit by requiring employees to work "extra" "unpaid" hours, that the only hours they were paid for were the ones required to produce enough value to continue to subsist. He was prescient in predicting that capitalism would have a tendency to produce big businesses at the expensive of small, at a time when large corporations were the exception rather than the norm, saying at each bust in the business cycle many businesses would fail and allow the biggest ones to buy them cheaply. He was wrong in predicting that the misery of the proletariat would increase, as over the decades their wages went up and they went from being always in danger of starvation to much more prosperous.
Ch 9: Keynes
The author is effusive in flattery for Keynes. He was brilliant and knowledgable about many different fields. He became rich from a very small starting capital by spending 30 minutes each morning playing the commodity & currency markets.
His groundbreaking book: The General Theory of Employment, Interest and Money.
The author states that prosperity is not in a nation's physical assets (buildings, mines, factories, and forests), prosperity is measured by the incomes we earn. And income is not static, national income consists in the flow of incomes from one person to another. Every dollar of one's income was someone else's income at some point. The alleged issue arises with savings. Savings is capital that can be invested to improve production. But savings that is not invested in enterprise is income that does not get spent and thus does not become someone else's income. This alleged mismatch of savings and investment is what Keynes said caused depressions. You would think that if savings outstripped investment, interest rates would go down to incentivize businessmen to invest. But at the bottom of the great depression, savings dried up. The author doesn't explain how a glut of savings caused the depression but then there was no available savings funds for businesses at the bottom. From this idea Keynes concluded that Egypt was lucky in that it could always create work in making pyramids, a thing where more is always better so more savings can always be used, and that this is could even have caused its wealth! This is absurd, since creating pyramids did not actually create value for anyone, it didn't generate food or commodities that enable a society to be more prosperous. It just consumed them. Again, he claimed the government could bury bank notes in abandoned coal mines and let private enterprise employee people to dig them up, and thereby make society more prosperous.
Keynes was by no means a marxist. He had an appreciation for the cultivated life of the intelligentsia or bourgeoisie, and was generally trying to "save" capitalism, not replace it.
Ch 10: Joseph Schumpter
Schumpter had a new explanation for the existence of profits. Rather than coming from a deduction of the value of labor as Marx said, or from earnings of the capital itself, it is a result of innovation, growth, and is transient. Any profit will eventually be eliminated once competitors adopt the same technique. This guy was the closest thing to an "Austrian" discussed in the book. But he was very sociological, and saw the long term demise of capitalism resulting from sociological, not economic factors, as bureaucracy took over and squashed out entrepreneurism.
The author mentions at the end of the last chapter that he is a democratic socialist. There is a list of lots of economics related books he recommends reading at the end of the book that lists many that would be interesting.
