January 20, 2016

Alternative Economic Systems - Review Notes

The system described in detail by Samuelson is Mixed Capitalist Economy.

This is the economic system of advanced democracies of world today. It accounts for 60 percent of world income.

Marxism and socialism are important alternative economic systems.

Development or Evolution of Economic Thought

Aristotle wrote on economic issues also.

First systematic thinkers were mercantilists of the 17th and 18th centuries. They advocated the accumulation of gold and silver to improve the military and economic power of a state.

David Hume (1711-1776) showed how gold inflow would eventually end up raising prices rather than output. Physiocrats put forward arguments against mercantile thought excesses and argued that agriculture is the only source of economic surplus.

Modern economic claims its roots to 'The Wealth of Nations' by Adam Smith published in 1776.

T.R. Malthus (1766-1834) enuniciate the iron law of wages.

David Ricardo (1772-1823) believed that there were basic errors in Smith's analysis and attempted to provide alternative ideas. He wrote Principles of Political Economy and Taxation in 1817.

One of his major achievements was to analyze the laws of income distribution in a capitalist economy.

John Stuart Mill wrote his classic 'Principles of Political Economy'.

Economics developed a branch with the writings of Marx, Capital (1867, 1885, 1894). But the tradition of Adam Smith and David Ricardo was continued by W.Stanley Jevons, Carl Menger, and John Maynard Keynes.

The Keynesian Revolution

The great depression made Keynes to come out with General theory of Employment, Interest, and Money (Macmillan,1936). Economists were inspired to understand why wages and prices tend to be sticky, why nominal variables like money have real impacts, and how government fiscal and monetary policies affect the macroeconomy.

Criticism of Capitalistic System by Some Economists  (Characterised as Dissent from Left by Samuelson)

John Kenneth Galbraith: Wrote American Capitalismm, The Affluent Society, and the New Industrial State.

Todays economies are directed by large bureaucracies and perfectly competitive markets do not exist.
Consumers are not masters of their own minds. Advertising shapes preferences.
Public sector is starving and private sector is flourishing. Parks, roads, and bridges etc. are not built adequately and maintained properly.

MIT's Lester Thurow, Harvard's Robert Reich, and others argued for redesigning the work place on cooperative rather than competitive lines.

One important suggestion of this group of economists is introduction of profit sharing in place of fixed wages. MIT's Martin Weitzman has analyzed this type of system According to him profit sharing system,will result in lower marginal cost of labor.


Marx's advocated labor theory of value. what gives value to a product is the amount of direct labor and indirect labor embodied in it. In the capitalist system, profit is earned by paying only part of the labor value to the workers. As capital goes on accumulating, profits fall and capitalist pay less and less to workers and make them live a subsistence life.


Socialists believed that the role of private property should be reduced and key industries should be run by government.


Paul Samuelson and William D. Nordhaus, Economics, 13th Edition, McGraw-Hill, 1989

Originally posted in

Updated 20 January 2016, 11 Dec 2011


In view of the birth centenary year of Pt. Deendayal Upadhyaya, (Propounder of Ekatma Manav-vad), Deendayal Prerana Kendra and Ekatma Prabodh Mandal have organized a seminar on Ekatma Manav Darshan as per details below:



Time: WEDNESDAY, 10TH FEBRUARY 2016, 4.30 TO 7.45 PM

Session 1: Ekatma Manav Darshan & Capitalism by Dr. KVSS Narayana Rao
Session 2: Ekatma Manav Darshan & Globalization by Dr. Varadraj Bapat
Session 3: Ekatma Manav Darshan – In Practice by Dilip Kelkar
Session 4: Samarop: DR. SATISH MODH,  Director, Vivekanand Institute of Mgt, Chembur

DEENDAYAL PRERANA KENDRA 2/27 Kalpana Sahaniwas, Sahyog Mandir Path, Naupada, Thane (W)

EKATMA PRABODH MANDAL (Activity of Ekatma Vikas Samiti, Public Trust) B105 Vatsalyadeep, Krantiveer Phadke Marg, Mulund East, Mumbai 400081 Tel: 25639654, Email: ekatmaprabodh at the rate gmail.com

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