Ever thought about how you could really impress your HSC Economics markers?

Try referencing some economists and working their economic theories into your response!

Although you won’t get any extra marks directly from mentioning these economists, you must use them and their ideas to help ensure you receive a top band in terms of economic explanation and reasoning.

In fact, many parts of the HSC Economics syllabus are directly built from their pioneering work!

So, who are these key economists?

Adam Smith

Karl Marx

John Maynard Keynes

Thomas Piketty

4 Key Economists

1. Adam Smith

Bio: Who was he?

Out of all of the economists I’m about to mention, Adam Smith is arguably the most famous in the field of economics.

Adam Smith was a very hardworking student (like you if you’re reading this!) who was born in Kirkcaldy, Scotland in 1723.

He was briefly kidnapped by gypsies, but we won’t go into that. He loved logic and aesthetics, yet his desk was often very messy.

Adam Smith wanted to understand economics and the money system because his underlying ambition was to make nations rich and people happier.

Smith trained as an academic philosopher and wrote a major book about the importance of sympathy.

Yet he insisted that philosophers should really only worry about one thing; the economy – namely how money is earned, spent and who gets how much for doing what task.

Work: What was his main idea?

Adam Smith was a busy man and produced many great ideas. I’ll cover a few of them:

Specialisation

Smith argued that it’s far better to split everything up into smaller, more specialised tasks.

A nation where people made their own bread for breakfast, had a go building their own house during the day and tried catching their own fish for dinner were doomed to live in perpetual poverty.

The fact that we sometimes don’t understand what someone’s job is from its title, e.g. logistics supply manager, highlight the economic logic of Smith’s insight.

Consumer capitalism

Smith defended capitalism and argued that the desire for luxury goods generated immense wealth increased trade and employment.

He furthered that this allowed the state to take care of it’s weakest members, such as children and the elderly, through hospitals and poor relief.

The rich are not greedy

Hear him out on this one! Smith believed that the rich accumulate money not because they are materially greedy, but because they are emotionally needy.

The rich don’t care about money, they care about the honour and respect that comes with it.

He argued that governments should give the rich plenty of honour and status, is return for doing all of the good things that these narcissists wouldn’t normally do, e.g. funding schools or providing amazing conditions for workers.

Educate consumers

Adam Smith suggested that it’s not evil companies that primarily degrade the world, but it is the consumer’s appetites, which firms merely serve.

Smith said that capitalism needs to be saved by elevating the quality of consumer demand.

Consumers should want better-quality things and pay a proper price for them that affords the protection of the environment, and negates exploitation.

How to apply them in an essay

Adam Smith also coined the term ‘invisible hand’ to describe the unobservable market force that helps supply and demand reach an equilibrium.

If you have an essay based on market equilibrium and you’ve drawn a supply/demand graph, then you can mention Smith’s invisible hand as the mechanism that guides supply and demand to meet in equilibrium.

Relevant syllabus dot points:

  • Use supply and demand diagrams to explain how the value of a currency is determined under different exchange rate systems
  • Effects of changes in supply and/or demand on equilibrium market price and quantity through the use of diagrams

2. Karl Marx (1818 – 1883)

Image from the Week

Bio: Who was he?

Karl Marx was born in 1818 in Germany. He got into a duel as a teenager, and racked up huge debts. His father moved him to the University of Berlin, where Marx eventually joined a group of philosophers called the Young Hegelians, who strongly disliked modern economics.

Soon after, Marx became involved with the Communist Party. He became secretly engaged to a wealthy young woman, Jenny von Westphalen but due to his political activity, they had to flee Germany and ended up settling in London.

It is here that Marx wrote an enormous number of books.

Work: What was his main idea?

Modern work feels ‘alientating’. Marx argued that work can be one of the sources of our greatest joys.

He said that in order to be fulfilled at work, workers need to “see themselves in the objects they have created”, which is very hard to do in work that becomes increasingly specialised.

In Marx’s eyes, all of us are intrinsically generalists. It’s the economy that forces or pushes us to make personal sacrifices to become very good at one thing and one thing only.

He argued that although specialisation may be an economic imperative in a modern economy, it is true human betrayal.

Marx also believed that capitalism makes the human being utterly expendable. Modern work is largely insecure. He offers communism, which emotionally understood, is a promise that we always have a place in the world’s heart. We will never be cast out. This is deeply poignant.

How to apply them in an essay

I use the ideas of Marx to bring up important discussions as his ideas help us to see the other side of an agreement. As one of economics greatest critics, Marx’s work helps us avoid taking economics theories as completely black-and-white.

For example, when discussing unemployment, the business cycle or inequality you can mention Marx.

He pointed out that we have crisis in capitalism not because of shortages, but because of surreal abundance. We have too much stuff.

Our factories are too efficient. The job of 100 people can now be fulfilled by one machine. Yet instead of seeing this as a positive, we continue to see the unemployment it creates as a curse or failure.

Marx argues that perhaps logically, the goal of economics should be to make more and more of us unemployed, and celebrate this fact as progress, rather than failure.

Relevant syllabus dot points:

  • Investigate the economic and social problems created by unemployment

3. John Maynard Keynes (1883 – 1946)

Image from the Foundation for Economic Education

Bio: Who was he?

Keynes was a British economist born in 1883 who fundamentally changed the theory and practice of macroeconomics. He believed that free markets were not perfect and sometimes the economy would need government interference to restore full employment.

Work: What was his main idea?

In his book The General Theory of Employment, Interest and Money, Keynes helped to formulate the equation AD = C + G + I + (X – M).

This is a macroeconomic formula you must know. It says that Aggregate Demand (AD – Also known as Output or Total Income (Y)) is equal to Consumption (C) + Government Spending + Investment + Net Exports (Exports – Imports).

How to apply them in an essay

You’ll need to use this formula often in the HSC in the multiple choice section, short answer and extended response. I think it’s nice being able to throw in Keynes’ name and have some knowledge as to how it was formulated.

Relevant syllabus dot points:

  • Economic growth
  • Aggregate demand and its components: Y = C+I+G+X–M

4. Thomas Piketty (1971 – Present)

Image from Fortune

Bio: Who is he?

I’ve been fortunate to actually see Thomas Piketty speak live at the Sydney Opera House. Piketty is a French economist who works on wealth and income inequality.

His book, Capital in the Twenty-First Century (2013) has been a very large success.

Work: What is his main idea?

Piketty’s main idea is that, in developed countries, the rate of capital return (i.e. interest) is persistently greater than the rate of a nation’s economic growth (i.e. Gross Domestic Product – GDP).

Essentially, he argues that wealth inequality will continue to increase in the future as long as this is the case.

For example, if people can receive a 5% rate of return on their money, yet the economy is only growing at 2% then over time, wealth will accumulate in the hands of the wealthy elite. This is because average incomes only increase at a rate around the GDP growth rate.

How to apply them in an essay

Piketty’s ideas are great to bring up when discussing income and wealth inequality. Piketty advocates for higher wealth distribution through higher taxation.

He is a supporter of inheritance taxes (Australia’s inheritance tax is currently 0%) and wants to see a fairer society.

His ideas and the solutions he suggests can and should be included in your HSC economics essays on inequality.

Relevant syllabus dot points:

  • Investigate recent trends in the distribution of income in Australia and identify the impact of specific economic policies on this distribution
  • Analyse the economic and social costs of inequality in the distribution of income

Adam Smith, Karl Marx, John Maynard Keynes, and Thomas Piketty each have valuable ideas to add to our own economic understanding.

Incorporating these economists’ and ideas into our responses can simultaneously improve our grades, whilst also expanding upon our economic insight of the world we live in.

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Thomas Woolley loves Economics and Business Studies. He completed his HSC in 2013 and has been working at Art of Smart since 2014. He enjoys helping out his students whilst studying B Commerce / B Education at UNSW to become an actual economics/business studies teacher in 2018. Since high school Thomas has also learned to scuba dive, salsa dance, and he can fly a quadcopter like a pro. However, he still cannot skateboard.

 

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