what is profit? where do profits come from?
ECOP1001 Economics as a Social Science Essay
The essay should compare Two different schools of economic thoughts
Question 4. What is profit? Where do profits come from?
Economic theories simplify the relations among key economic concepts and enable us to understand different economic concepts. Throughout history, different economists in different time periods have formed diverse thoughts on how markets work by building and improving on the work of those who came before them. Therefore in order to gain a wider understanding of a particular economic term, it is helpful for us to investigate more than one economic theory. This essay will explore classical and Marxist and compare their portrayal of the concept of profit and where is it from. While classical economists believe profit has a large role to play in land and rent, Marxist economists put more emphasis on surplus value gained through the exploitation of workers’ labour.
Classical economic thoughts originated in the 1770s by its leading economists: Adam Smith and David Ricardo. David Ricardo divided the participants in the economy into three classes with profit being the income received by one of the classes (i.e. the capitalists), with the other two classes being landowners and workers who receive rent and wages, respectively. Profit is then differentiated from the other two incomes as a bonus for entrepreneurs – it is a surplus of the total income in the economy after wages and rent have been paid. Adam Smith (1776) espouses the view that the employer “shares” in the value added to the materials from which produce is made through the labour of workers and that “in this share consists his profit”.
In classical economics, profits of capitals have a close connection with the rise and fall of the rent and wages (Stilwell, 2011). The rent of a particular piece of land is defined as the difference between its productivity and the productivity of a piece of land which produces just enough to sustain
The essay should compare Two different schools of economic thoughts
Question 4. What is profit? Where do profits come from?
Economic theories simplify the relations among key economic concepts and enable us to understand different economic concepts. Throughout history, different economists in different time periods have formed diverse thoughts on how markets work by building and improving on the work of those who came before them. Therefore in order to gain a wider understanding of a particular economic term, it is helpful for us to investigate more than one economic theory. This essay will explore classical and Marxist and compare their portrayal of the concept of profit and where is it from. While classical economists believe profit has a large role to play in land and rent, Marxist economists put more emphasis on surplus value gained through the exploitation of workers’ labour.
Classical economic thoughts originated in the 1770s by its leading economists: Adam Smith and David Ricardo. David Ricardo divided the participants in the economy into three classes with profit being the income received by one of the classes (i.e. the capitalists), with the other two classes being landowners and workers who receive rent and wages, respectively. Profit is then differentiated from the other two incomes as a bonus for entrepreneurs – it is a surplus of the total income in the economy after wages and rent have been paid. Adam Smith (1776) espouses the view that the employer “shares” in the value added to the materials from which produce is made through the labour of workers and that “in this share consists his profit”.
In classical economics, profits of capitals have a close connection with the rise and fall of the rent and wages (Stilwell, 2011). The rent of a particular piece of land is defined as the difference between its productivity and the productivity of a piece of land which produces just enough to sustain