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Can someone clear this up?

BobTurner
Posts: 114
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3/23/2014 7:33:34 PM
Posted: 2 years ago
Yeah, this isn't the "homework help" section, but I was hoping someone could elucidate this point for me. It speaks of free trade in reference to Adam Smith, and who gained and lost from his proposals:

"Also to be noted is that Smith's theory served the interest of factory owners (who were able to pay lower wages because of cheaper food imports) and harmed landowners in England (because food became less scarce due tot cheaper imports), and it shows the link between social pressures and the development of new economic theories to support them."

So, the interpretation from this is that free trade benefitted factory owners because they could pay lower wages to their workers (makes sense), hurt workers because their wages were cut (made sense), and hurt landowners in England. The last part is what confused me, in particular. What's this distinction between factory owners and landowners? Aren't factory owners, in effect, landowners? And wouldn't landowners be impacted by lower food prices, too?

At the same time, wouldn't factory owners be hurt as the imports lower the price of the goods he's producing as wages drop?

This could be the dumbest topic in this forum, but honestly, this doesn't make any sense to me. I would appreciate if someone could clear this up.
blaze8
Posts: 164
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3/23/2014 8:38:13 PM
Posted: 2 years ago
At 3/23/2014 7:33:34 PM, BobTurner wrote:
Yeah, this isn't the "homework help" section, but I was hoping someone could elucidate this point for me. It speaks of free trade in reference to Adam Smith, and who gained and lost from his proposals:

"Also to be noted is that Smith's theory served the interest of factory owners (who were able to pay lower wages because of cheaper food imports) and harmed landowners in England (because food became less scarce due tot cheaper imports), and it shows the link between social pressures and the development of new economic theories to support them."

So, the interpretation from this is that free trade benefitted factory owners because they could pay lower wages to their workers (makes sense), hurt workers because their wages were cut (made sense), and hurt landowners in England. The last part is what confused me, in particular. What's this distinction between factory owners and landowners? Aren't factory owners, in effect, landowners? And wouldn't landowners be impacted by lower food prices, too?

At the same time, wouldn't factory owners be hurt as the imports lower the price of the goods he's producing as wages drop?


This could be the dumbest topic in this forum, but honestly, this doesn't make any sense to me. I would appreciate if someone could clear this up.

See my most recent debate for a discussion of the three classes in the economy in Smith's narrative. Basically, for Adam Smith, there are three classes: landowners, earn their living by charging rents, laborers whose wages come from labor, and the capitalistic class which earns a living through profit. Thus thr distinction between the factory owner (designated the master manufacturer in smith's narrative), and the landowners, which are more appropriately described as landed gentry.

Now as to Smith and free trade, does your assignment give you a passage from Smith? If so, I'd be curious to see which book its from (wealth of nations is split into 5 "books").
"For I am a sinner in the hands of an angry God. Bloody Mary full of vodka, blessed are you among cocktails. Pray for me now and at the hour of my death, which I hope is soon. Amen."-Sterling Archer
blaze8
Posts: 164
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3/23/2014 8:42:08 PM
Posted: 2 years ago
Also in regards to your last question, im not sure why your assignment discusses Smith here, Ricardo is usually considered the father of comparative advantage and free trade notions. But if I remember correctly, John S. Mill's response to your question was if the British economy could not stay competitive due to lower prices in that specific industry, they should abandon all pursuits in that industry. I'd have to check the name, but im pretty sure it was Mill.
"For I am a sinner in the hands of an angry God. Bloody Mary full of vodka, blessed are you among cocktails. Pray for me now and at the hour of my death, which I hope is soon. Amen."-Sterling Archer