Question

How would the economists( jean baptiste say, adam smith, David ricardo) react to these issues in COVID-19 :
1- labor force inequalities
2- unemployment
3- fiscal and monetary policies
4- increased demand for certain goods.
5- recession

Answer 1

Jean-Baptiste Say

Pandemics like Covid-19 can occur unexpectedly and affect the Human Beings badly. Therefore, financial and medical protection should be enhanced for groups vulnerable to disease and economic measures are also required for the protection of their livelihoods in the labor market to prevent unemployment stemming from inequality.

Jean-Baptiste Say was a French economist who argued strongly in favor of competition, free trade, and lifting restraints on business. But he advocated a simple, unencumbered constitutional order for France, in which laws would be few in number and mostly limited to the protection, and not the violation, of individual rights. The main focus of most of his writings was to emphasize the importance of sound economic principles for understanding why the market should be freed from government control. He strongly believed that freeing the market was the best avenue for reducing poverty, eliminating the artificial inequalities in income created by state regulation, and bringing about a much better world for all through increased productivity and competition. A combination of monetary as well as fiscal policy measures are called for to salvage the economy from the collateral damage from the fallout of the spread of coronavirus disease-COVID-19.
Jean-Baptiste Say stated that Law “supply creates its own demand.”. Negative supply shock can trigger a demand shortage that leads to a contraction in output and employment larger than the supply shock A simple perspective on the effects of COVID-19, casts the issue as one of aggregate supply versus aggregate demand, whether the shock to one side is greater than the other. Analysis uncovers features of the economy that matter and the mechanisms by which forces acting on the supply side end up affecting the demand side as well. when workers lose their income, due to the shock, they reduce their spending, causing a contraction in demand. However, the question is whether this mechanism is strong enough to cause an overall shortfall in demand.

The law states that the production of goods ensures that workers and suppliers of these goods are paid enough to be able to buy all the other goods that are being produced.

ADAM SMITH

Adam Smith, the purported founding father of laissez-faire capitalism, who advocated greed and selfishness in the name of allowing the invisible hand of the market to work its magic. Smith argued that by giving everyone freedom to produce and exchange goods as they pleased (free trade) and opening the markets up to domestic and foreign competition, people's natural self-interest would promote greater prosperity than with stringent government regulations. It is also indisputable that the alleviation of poverty was one of Smith’s central concerns, the common caricature notwithstanding. Even a cursory reading of The Wealth of Nations should make this point abundantly clear. Smith states, explicitly and repeatedly, that the true measure of a nation’s wealth is not the size of its king’s treasury or the holdings of an affluent few but rather the wages of “the laboring poor

Adam Smith, in his book, An Inquiry into the Nature and Causes of the Wealth of Nations, explained about the productivity and prosperity that arise from the division of labor and warned against the alienating potential of work when forced to do repetitive tasks with little variety. According to Adam Smith, human beings are by nature social creatures. In The Theory of Moral Sentiments, he wrote: Nature, when she formed man for society, endowed him with an original desire to please, and an original aversion to offend his brethren. She taught him to feel pleasure in their favourable, and pain in their unfavourable regard. Adam Smith, who first argued that self-interested market actors promote the prosperity of all, also thought a lot about the nature of self-interest. His Theory of Moral Sentiments offers a much richer view of self-interest than purely individualistic utilitarianism, one that includes other-regarding or virtuous forms of self-interest, such as caring for other members of society without compensation.

David Ricardo

David Ricardo , the famous economist in 19th Century advanced a labor theory of value and his most famous work is his Principles of Political Economy and Taxation. The value of a commodity, or the quantity of any other commodity for which it will exchange, depends on the relative quantity of labour which is necessary for its production, and not on the greater or less compensation which is paid for that labour. He advocated that the difference between the produce obtained by the employment of two equal quantities of capital and labor." Ricardo believed landlords tended to squander their wealth on luxuries, rather than invest.

David Ricardo outlined in the early 19th century, and it dictates that items are produced in the countries where they can be made at the lowest cost. Ricardo identified that institutional separation of the power to create money from the power to spend it; a ban on the monetary funding of the State budget; and the central bank’s obligation to give an account of its monetary policy. As with most manufactured goods in the world these days, this meant in China. But since the COVID-19 crisis hit, people now care plenty when there are suddenly not enough ventilators and masks to go around.

It is already clear that the pandemic could cause a negative supply shock if the amount of available labor were to decline rapidly because working-age people have fallen ill (or died) from the disease. With factories being shut down around the world, production is bound to take a hit. No factory produces everything itself; it has suppliers. Once production at a big factory shuts down, the impact is felt down the value chain. While economists and academics make convincing arguments that there is a certain natural level of unemployment that cannot be erased, elevated unemployment imposes significant costs on the individual, the society, and the country.