H = HAMILTON
Alexander Hamilton was born in either 1755 or 1757 on the Caribbean island of Nevis.
His father, the Scottish trader James Hamilton, and mother, Rachel Faucette Lavien, weren’t married. Rachel was still married to another man at the time of Hamilton’s birth, but had left her husband after he spent much of her family fortune and had her imprisoned for adultery.
Hamilton’s father abandoned the family in 1766 and his mother died two years later. Hired as a clerk in a trading company on St. Croix when he was just 11,
Hamilton gained wider attention after he published an eloquent letter describing a hurricane that had hit the island in 1772. Locals helped raise money to send him to America to study, and he arrived in New York in late 1772, just as the colonies were gearing up for a war for independence from Great Britain.
Hamilton offered a remarkably modern economic vision based on investment, industry, and expanded commerce. Most strikingly, it was an economic vision that had no place for slavery
A major problem facing the first federal government was how to deal with the financial chaos created by the American Revolution. States had huge war debts. There was runaway inflation. Almost all areas of the economy looked dismal throughout the 1780s.
ECONOMIC HARD TIMES WERE a MAJOR FACTOR CREATING the SENSE of CRISIS THAT PRODUCED the STRONGER CENTRAL GOVERNMENT UNDER the NEW CONSTITUTION.
George Washington chose the talented ALEXANDER HAMILTON, who had servedwith him throughout the Revolutionary War, to take on the challenge of directing federal economic policy as the treasury secretary.
Hamilton is a fascinating characterwhose AMBITION FUELED TREMENDOUS SUCCESS as a SELF-MADE MAN.
BORN in the BRITISH WEST INDIES to a single mother who was a shopkeeper, he learned his first economic principles from her and went on to APPRENTICE FOR a LARGE MERCANTILE FIRM.
His mother died of yellow fever. After an astonishing series of life difficulties, Hamilton was taken in by the family of a young friend (who may have been Hamilton’s half-brother) and went to work for a local merchant house of New York-based traders.
Hamilton learned bookkeeping, inventory control, short-term finance, and exchange-rate mechanics.He dealt with traders from ports throughout Western Europe. He emigrated to New York when he was fifteen.
From these modest origins, Hamilton would become the FOREMOST ADVOCATE FOR A MODERN CAPITALIST ECONOMY in the early United States.
At least until recently, Hamilton was best known as the AUTHOR of MANY of THE FEDERALIST PAPERS, a leader of the movement for THE CONSTITUTION. AS GEORGE WASHINGTON’S TREASURY SECRETARY, he was also ARCHITECT of the UNITED STATES FINANCIAL SYSTEM.
As a VORACIOUS READERof history while serving as a young officer in the Continental Army, for four years as WASHINGTON’S CHIEF STAFF AIDE,Hamilton understood how INSTITUTIONS OF PUBLIC AND PRIVATE CREDIT.
These institutions had enabled the Dutch Republic to win its independencefrom Spain, and go on to became the richest nation in Europe; how Britain after 1688 had copied and improvedupon the Dutch system.
The GOVERNMENT BANK, NATIONAL CURRENCY, PRIVATE BANKS and SECURITIES MARKETS THE BRITISH CREATED FUELED RAPID ECONOMIC GROWTH and FINANCE.
In 1791, Congress passed a bill creating a NATIONAL BANKfor a term of 20 years, leaving the question of the bank’s constitutionality up to President Washington, who reluctantly signed the measure as he believed a bank was necessary for the nation’s financial well-being.
HamiltonHOPED TO BREAK BRITAIN’S MANUFACTURING HOLD ON AMERICAthrough high tariffs designed to protect American industry from foreign competition, government subsidies, and government-financed transportation improvements,
Alexander Hamilton offered a modern economic vision based on investment, industry, and expanded commerce.
The first issuethat Hamilton tackled as Washington’s SECRETARY OF THE TREASURY concerned the problem of PUBLIC CREDIT.
The most pressing problems facing the new government were economic. Due to the Revolution, the federal government had a $54 MILLION DEBT. Foreign creditwas unavailable.
As Treasury Secretary, Alexander Hamilton designed a financial system thatmade the United States the BEST CREDIT RISK in the western world.
Governments at all levels had taken on so much debt during the Revolution. The commitment to pay them back was not taken very seriously.
By the late 1780s, the value of such public securities had plunged to a small fraction of their face value. In other words, state IOU’s – the MONEY BORROWED TO FINANCE THE REVOLUTION – were viewed as nearly worthless.
Hamilton issued a bold proposal. The federal government should pay off ALL CONFEDERATION (state) DEBTSat full value. Such action would enhance the legitimacy of the new central government.
To raise money to pay off the debts, Hamilton would issue new SECURITIES bonds. Investors who had purchased these public securities came to pay off these new debts.
Hamilton’s vision for reshaping the American economy included a FEDERAL CHARTER FOR A NATIONAL FINANCIAL INSTITUTION.
Modeled along the lines of the Bank of England, a central bank would help make the new nation’s economy dynamic through a more stable paper CURRENCY.
Hamilton possessed a MODERN ECONOMIC VISION. His support forMANUFACTURING, BANKS, AND STRONG PUBLIC CREDITall became central aspects of the MODERN CAPITALIST ECONOMYthat would develop in the United States.
His policies were CONTROVERSIAL.
Hamilton favored an even stronger central governmentthan the Constitution had created and often linked democratic impulseswith potential anarchy.
Hamilton’s economic philosophies became touchstones of the MODERN AMERICAN CAPITALIST ECONOMY.
That is why he’s on the $10 bill.
M = MARSHALL
Alfred Marshall was the dominant figure in British economics(itself dominant in world economics) from about 1890until his death in 1924.
HIS BOOK, PRINCIPLES OF ECONOMICS, WAS THE DOMINANT ECONOMIC TEXTBOOK IN ENGLAND FOR MANY YEARS.
It brought the ideas of supply and demand, marginal utility, and costs of production into a coherent whole.
Marshall was born into a middle-class family in London and raised to enter the clergy. He instead became an academic in mathematics and economics.
His specialtywas microeconomics– the study of individual markets and industries, as opposed to the study of the whole economy.
The two curves are like scissor blades that intersect at equilibrium. Modern economists trying to understand why the price of a good changes still start by looking for factors that may have shifted demand or supply, an approach they owe to Marshall.
To Marshall also goes credit for the concept of price elasticity of demand, which quantifies buyers’ sensitivity to price.
The concept of consumer surplus is another of Marshall’s contributions. He noted that the price is typically the same for each unit of a commodity that a consumer buys, but the value to the consumer of each additional unit declines. A consumer will buy units up to the point where the marginal value equals the price.
To MAKE ECONOMICS DYNAMIC RATHER THAN STATIC, Marshall used the tools of classical mechanics, including the concept of optimization.
With these tools he, like took as givens technology, market institutions, and people’s preferences. But Marshall was not satisfiedwith his approach. He once wrote that “the Mecca of the economist lies in economic biologyrather than in economic dynamics.”
Marshall was argued that the economy is an evolutionary process in which technology, market institutions, and people’s preferences evolve along with people’s behavior.
Marshall rarely attempted a statement or took a position without expressing COUNTLESS QUALIFICATIONS, EXCEPTIONS, AND FOOTNOTES.
He showed himself to be an ASTUTE MATHEMATICIAN– he studied math at St. John’s College, Cambridge– but limited his quantitative expressions so that he MIGHT APPEAL TO THE LAYMAN.
“All wealth consists of desirable things; that is, things which satisfy human wants directly or indirectly: but not all desirable things are reckoned as wealth.
Civilized countries generally adopt gold or silver or both as money.
All labour is directed towards producing some effect.
S = SMITH
Adam SmithFRSA was a SCOTTISH ECONOMIST, PHILOSOPHER AS WELL as a MORAL PHILOSOPHER, a PIONEER of POLITICAL ECONOMY,
A key figure during the Scottish Enlightenment, also known as ”The Father of Economics” or ”The Father of Capitalism”.
Indeed, the sheer catholicity of his interests, embracing not only ECONOMICS, ETHICS, POLITICAL PHILOSOPHY and JURISPRUDENCE, but also LITERATURE (ancient and modern), LINGUISTICS, PSYCHOLOGY, and the HISTORY of SCIENCE,must seem STAGGERING to the modern specialist, but no less STAGGERING is the analytical depth which he applied in all his studies.
Adam Smith was BORN in 1723 in Kirkcaldy, SCOTLAND, the posthumous son (by a second marriage) of Adam Smith, comptroller of customs, and Margaret Douglas.
The exact date of his birth is unknown,but he was baptized on June 5, 1723, and this date is often mistakenly taken as his birth-date.
LITTLE is KNOWN about IS CHILDHOOD, except that at the age of 4 he was kidnapped by a band of Gypsies, though prompt action by his uncle soon effected his rescue. “He would have made, I fear, a poor Gypsy,” commented John Rae, his main biographer.
Two centuries after his death in 1790, Adam Smith is STILL JUSTLY REGARDED as the SINGLE MOST TOWERING FIGURE in the HISTORY of MODERN ECONOMICS.
HIS CELEBRATED WORK ON THE WEALTH OF NATIONS CAPTURED the SPIRIT of INDUSTRIAL CAPITALISM,and presented its theoretical rationale in a form which dominated the thinking of the most influential political economists of the 19th century and which CONTINUES TO INSPIRE FREE MARKET ADVOCATES TO THIS DAY.
it is also important to realize that he was NOT MERELY (OR EVEN PRIMARILY) AN ECONOMIST– the field had not yet developed into an independent discipline in his time – and he himself regarded his Wealth as only a partial exposition of a much larger work on “the general principles of LAWand GOVERNMENT, and of the different revolutions they have undergone in the different ages and periods of society,” which he hoped to write but never completed in his lifetime.
Moreover, even in The Wealth of Nations it is evident that Smith’s conception of economic science encompassed MUCH MORE than today’s “core” fields of PRICE THEORY, PRODUCTION AND DISTRIBUTION, MONEY AND BANKING, PUBLIC FINANCE, INTERNATIONAL TRADE and ECONOMIC GROWTH, Each of which is regarded todayas a specialty in itself.These topics are of course discussed at length in Smith’s book, but it also includes DETAILED EXCURSIONS INTO FIELDS AS DIVERSE as ECCLESIASTICAL HISTORY, DEMOGRAPHICS, EDUCATIONAL POLICY, MILITARY SCIENCE, AGRICULTURE and COLONIAL AFFAIRS.
Apart from this kidnapping incident, Smith’s life was singularly QUIET and UNEVENTFUL, and his story is essentially that of his STUDIES and his BOOKS.
In1737, at the age of 14,having finished his term at the Kirkcaldy Grammar School, Smith entered the University of Glasgow,whereupon he came under the strong influence of “the never to be forgotten” Francis Hutcheson, the famous professor of moral philosophy.
Upon his graduation in 1740,Smith won an important scholarship to OXFORD, studying for six years in Balliol College. However, the intellectual atmosphere at Oxfordat the time was LAX and DISAPPOINTING(“. . . the greater part of the public professors [at Oxford] have . . . given up altogether even the pretence of teaching,” and “. . . it will be his own fault if anyone should endanger his health at Oxford by excessive study . . . .”).
These years were devoted largely to a program of SELF-EDUCATIONin which he read widely in both CLASSICAL and MODERN LITERATURE and PHILOSOPHY.
Returning to his mother’s home in 1746, Smith cast about for suitable employment, and meanwhile continued his studies. In 1748 he went to EDINBUGH, where, under the sponsorship of Lord Henry Kames, he gave for three years a series of public lectures on rhetoric and belles lettres.
In 1751, on the basis of this performance, he was called to his own UNIVERSITY of GLASGOW, first as professor of LOGIC, and shortly after as professor of MORAL PHILOSOPHY. The latter position he held for 12 years, a time which he later described as “by far the most useful, and therefore by far the happiest and most honorable period of my life.”
His course was divided into four parts: NATURAL THEOLOGY, ETHICS, JURISPRUDENCE, AND POLITICAL ECONOMY.
In 1759he published his first book, The Theory of Moral Sentiments,
In 1763 Charles Townshend offered Smith a lifetime pension in return for acting as tutor to his stepson, the Duke of Buccleuch, on a three-year tour of France. Smith thus gave up his professorship and embarked on his only trip abroad
For the next five years he lived in LONDON, and his close friends included Edward Gibbon and Edmund Burke.
In March 1776 The WEALTH of NATIONs was published and was an immediate and lasting success:
The first edition was exhausted in six months, and in Smith’s lifetime the book went through five editions (1776, 1778, 1784, 1786, and 1789).
Also, within three decades it had been translated into at least six foreign languages.
WELCOME to “H.M.S. ECONOMICS” !!!