Question

What is the most important economic law according to you? One that reflects our capitalist market. Explain b- What is the main difference between the “net product” of the physiocrats and the concept of value in Smith and Ricardo? c- How does an individualist (selfish) conception of human nature affect an economic system of thought?

Answer 1

1)Coase theorem-When property rights occur then,  2 parties are involved, and in the end, the parties involved come with the outcome regardless of which party is rewarded with property right unit there is any transaction cost between the parties. For example, due to manufacturing the factory produces toxic chemicals and pours it in the river near the residential area. Here the citizens raise the voice but they don't consume anything from the factory. Here water pollution in an externality caused by economic activity.

2)Net product is defined as a surplus of wealth produced over and above the requirement. The physiocrats believed that real wealth comes from production and agriculture and this concept was founded in 18th century.

Theory of value was introduced in early times and it explained why goods are exchanged in certain prices on the market.The value of product can be measured by the average labour involved in the production of that goods.And labor theory was that the number of labor goes for work for production of an economic product is the source of values of goods.

3)Selfish human nature can be seen and it also affects the economy because scarcity of product in an economy. Nobel laureate Herbert Simon has explained,that whatever decision a human takes in present and in future has range of alternative choices and they also understand the consequences of their choices.Humans basically go wth their profit.