1)Capitalism industrial revolution and the division of labor

1)Capitalism is an economic system that supports individual ownership of property and the production of goods and services for private gain.This system is often guided by the forces of demand and supply which implies minimal government intervention.Capitalist mode of production, according to Marx is the “product of the industrial revolution and the division of labor coming from it”.In Marx’s capitalism division of labor is necessary for production.This division affects the working class in such way, according to Marx that they become “crippled beings”.It is through this process of becoming “crippled” that they experience what is called “acute alienation”.Alienation in a capitalist society is when the workers divide from their humanity because the worker can only express themselves through labour.Each worker becomes an instrument,a thing, and not a person in the eyes of capitalism.Under Marx’s capitalist reality, the division of labor is a “necessary condition for commodity production”.This division attacks the working class at the root of their life.In fact, according to Marx the alienation mentioned earlier has several dimensions.The first being the worker becoming estranged and not only from the products of his or her labor, but also from the production of his or her labor.Second being the workers activities belonging to the capitalist and the translation of this into the loss of the workers self.Which essentially means he or she enstraging his or herself from themselves through the act of production.And lastly the alienation of oneself takes on a new form of “estrangement of on man to another man”.Translating into the division of labour creating a hierarchy of sorts among the workers.This causes workers to work beyond what they are paid for.All profit in the capitalist system according to Marx is due to the “surplus value” created from these workers as a result of the system.Marx defined the rate of profit as the ratio of profit to investment.Under Marx investment was “divided in production” into two categories. The first being raw materials,machines and other goods used to produce commodities which have values that do not change easily.The second investment is in labour.The only cost in a capitalist system that a employer can influence is labour because workers have to sell their labour to survive, which leads to what is known as “wage slavery”.Capitalists according to Marx can increase output as well as a profit by investing in more of the”same variable and constant capital”.Essentially by employing more workers with more of the same machines that are currently being used.There is, however a flaw in this system as profit can only come from human labour and as a result when more and more people invest an average labour times to produce goods and services will begin to fall and this is what makes the rate of profit fall as the ratio of surplus value to investment falls along with it. 4)Keynesian economics is considered among one of the most influential approaches to economic thought.It was developed by John Maynard Keynes.In an attempt to explain the great depression, Keynes published The General Theory of Employment Interest and Money .Within it Keynes focused on proving wrong the classical ideas that employment is determined by the price of labor.He proposed that employment was not in fact determined by this, but by the spending and aggregate demand.He argued that under “Full Employment” an equilibrium exists.He also argued that “investment is a function of the expected rate of return as well as the interest rate”. So, according to Keynes “investment does not need equal savings”.Meaning that one does not need to first save to invest.Yes,if there is an increase in savings that  could possibly lower the interest rate and create a reason  for investment to increase.However, this increase in investment is not guaranteed.”When the expected rate of return is low investment will not likely rise in proportion to saving so the level of aggregate demand will fall and the insufficient demand will cause an equilibrium with less than full employment”.This is where Keynes’ “propensity to consume” or marginal propensity to consume(MPC) becomes important.Given the MPC and the level of employment, according to Keynes an equilibrium exists where aggregate supply is equal to aggregate demand.He argued that “consumption will always be less than income, but never be negative.” 2)According to Ricardo the correct economic theory of value was that of the “labor-embodied” theory of value.This theory argues that the relative “natural” prices of goods and services are determined by the time of labour expended in their production.Under Ricardo’s point of view the value of commodities was independent of distribution and thus only this theory made sense to him.Ricardo noticed some “internal logical contradiction” within capitalist systems.According to him as different industries apply different amounts of capital per laborer and then as a result the rate at which these industries profit will differ as well.He understood that if he then assumed that the rates of profit are also equal among industries as a free competition, market would imply then relative prices would now vary with wages.He realized that the labor theory of value he knows to be correct is only correct to a certain degree.If the level of capital-intensity across all sectors was the same it would work but otherwise it would not.Ricardo suggested two ways to solve this dilemma of capital intensity.The first was the argument that firms should  apply capital in a proportionate  to the amount of labor invested.In this example the prices when profits are equal would not be any different the labor theory of value.The other solution being finding a commodity which has an “average capital per worker” so that the price of that commodity would reflect the labor-embodied value.This would mean that the the prices do not change along with changes in distribution.Ricardo called this second solution the “invariable standard of value”.Ricardo argued that if the one “standard” commodity can be found then the rest of the analysis is simple.5)Heterodox economics  refers to the methodologies or schools of economics that are considered outside of  mainstream economic thought..Post-Keynesian economics for example was developed and formed by economists who believed keynesian economics was based on “disequilibrium and uncertainty”.These economists used ideas from Keynes and his concepts of effective demand.They believed in the role of financial markets and rejected the quantity theory of money which states that the general price level of goods and services is directly proportional to the amount of money in circulation or in supply.Post Keynesians essentially assumed that the human is not always rational and this irrationality leads to instability in the economy and financial systems.For example, the 2008 housing crisis happened as a result of the irrationality of investments.The classical Keynesian model however, formed as a result of the great depression in the early 1930s.Keynes observed that the economy was not in fact always at full employment  but rather the economy at any time can be above or below its peak(like a mountain goes up and then down on the other side)l. Meaning that there are dips in the level of employment and it almost never stays the same.During the great depression unemployment was very large and the economy according to Keynes was simply just operating below its median potential level.