History of economic thought Wikipedia

Indian economist Amartya Sen (1933–) expressed considerable skepticism about the validity of neoclassical assumptions, and was highly critical of rational expectations theory, devoting his work to Development Economics and human rights. In 1951 English economist James Meade (1907–1995) published The Balance of Payments, volume 1 of “The Theory of International Economic Policy”, which proposed the theory of domestic divergence (internal and external balance), and promoted policy tools for governments. In 1955 he published volume 2 Trade and Welfare, which proposed the theory of the “second-best”, and promoted protectionism.

Mercantilism and international trade (16th to 18th century)

1. Some influential approaches of the past, such as the historical school of economics and institutional economics, have become defunct or have declined in influence, and are now considered heterodox approaches.
2. Adam Smith (1723–1790) is popularly seen as the father of modern political economy.
3. As societies grew wealthier and trade grew more complex, economic theory turned to the mathematics, statistics, and computational modeling that economists use to help guide policymakers.
4. However, the assumptions that guide the study of economics have changed dramatically throughout history.
5. Hume held that any surplus of exports would be paid for by imports of gold and silver.
6. Moreover, Prussia was the intellectual powerhouse of Germany and so dominated academia, not only in central Europe, but also in the United States until about 1900, because the American economics profession was led by holders of German Ph.Ds.

It uses neoclassical economic theory to reinterpret historical data, spreading throughout academia, causing economic historians untrained in economics to disappear from history departments. American cliometric economists Douglass Cecil North (1920–2015) and Robert William Fogel (1926–2013) were awarded the 1993 Nobel Economics Prize. Similarly disenchanted with regulation on trade inspired by mercantilism, the Frenchman Vincent de Gournay (1712–1759) reputedly asked why it was so hard to laissez faire (“let it be”), laissez history of economic thought passer (“let it pass”), advocating free enterprise and free trade. He was one of the early physiocrats, who regarded agriculture as the source of wealth.

Classical (18th and 19th century)

Saint Antoninus of Florence (1389–1459), O.P., was an Italian Dominican friar, who became Archbishop of Florence. Antoninus’ writings address social and economic development and argued that the state has a duty to intervene in mercantile affairs for the common good, and an obligation to help the poor and needy. In his primary work, “summa theologica” he was mainly concerned about price, justice and capital theory.

Economics in the Ancient World

He was considered an advocate of the concept that government incomes policy should prevent inflationary wage and price settlements in connection to the customary fiscal and monetary means of regulating the economy. The theories developed by Walras, Marshall, and their successors would develop in the 20th century into the neoclassical school of economics—defined by mathematical modeling and assumptions of rational actors and efficient markets. Later, statistical methods were applied to economic data in the form of econometrics, allowing economists to propose and test hypotheses empirically and in a methodologically rigorous manner. The development of Keynesian economics was a substantial challenge to the dominant neoclassical school of economics. Keynesian views entered the mainstream as a result of the neoclassical synthesis developed by John Hicks. The rise of Keynesianism, and its incorporation into mainstream economics, reduced the appeal of heterodox schools.

Pre-Classical (17th and 18th century)

In contrast to Galbraith’s linguistic style, the post-war economics profession began to synthesize much of Keynes’ work with mathematical representations. Introductory university economics courses began to present economic theory as a unified whole in what is referred to as the neoclassical synthesis. “Positive economics” became the term created to describe certain trends and “laws” of economics that could be objectively observed and described in a value-free way, separate from “normative economic” evaluations and judgments. On top of the supply of money, Keynes identified the propensity to consume, inducement to invest, marginal efficiency of capital, liquidity preference, and multiplier effect as variables which determine the level of the economy’s output, employment, and price levels. Much of this esoteric terminology was invented by Keynes especially for his General Theory. Keynes argued that if savings were being withheld from investment in financial markets, total spending falls, leading to reduced incomes and unemployment, which reduces savings again.

Following John Locke, Smith thought true value of things derived from the amount of labour invested in them. English economist Thomas Mun (1571–1641) describes early mercantilist policy in his book England’s Treasure by Foreign Trade, which was not published until 1664, although it was widely circulated in manuscript form during his lifetime. A member of the East India Company, he wrote about his experiences in A Discourse of Trade from England unto the East Indies (1621). In 1568 Jean Bodin (1530–1596) of France published Reply to Malestroit, containing the first known analysis of inflation, which he claimed was caused by importation of gold and silver from South America, backing the quantity theory of money.

This concern ties Sen’s thinking back to the writing of the earliest economic thinkers, who saw the over-accumulation of wealth by individuals or groups as ultimately harmful to society. In recent decades, this has led to new theories, such as behavioral economics, and to renewed interest in heterodox theories, such as Austrian-school economics, which were previously relegated to the economic backwaters. He was proved wrong, however, because he didn’t foresee technological innovations that would allow production to keep pace with a growing population. Nonetheless, his work shifted the focus of economics to the scarcity of goods rather than the demand for them.

The economic theories and methods of today are the product of many centuries of historical development. Courses in the history of economic thought courses allow students to explore various aspects of this history, from the ideas of people such as Adam Smith, Karl Marx, John Maynard Keynes, and Friedrich Hayek to forces behind the modern mathematical and quantitative turn in the subject and its growing influence in the policy realm. John Maynard Keynes developed a new branch of economics known as Keynesian economics or macroeconomics. Keynes styled the economists who had come before him as “classical” economists. He believed that while their theories might apply to individual choices and goods markets, they did not adequately describe the operation of the economy as a whole.

Falling EROEI due to the depletion of non-renewable resources also poses a difficult challenge for industrial economies. Sustainability becomes an issue as survival is threatened due to climate change. Hume held that any surplus of exports would be paid for by imports of gold and silver. That in turn would cause a decline in exports until the balance with imports is restored. Georgism or geoism is an economic philosophy proposing that both individual and national economic outcomes would be improved by the utilization of economic rent resulting from control over land and natural resources through levies such as a land value tax. The American School owes its origin to the writings and economic policies of Alexander Hamilton, the first Treasury Secretary of the United States.

1. The Cambridge School was founded with the 1871 publication of Jevons’ Theory of Political Economy, developing theories of partial equilibrium and focusing on market failures.
2. Thomas Malthus and Karl Marx had decidedly poor reactions to Smith’s treatise.
3. Mainstream economics is distinguished in general economics from heterodox approaches and schools within economics.
4. Antoninus’ writings address social and economic development and argued that the state has a duty to intervene in mercantile affairs for the common good, and an obligation to help the poor and needy.
5. In the 17th century Britain went through troubling times, enduring not only political and religious division in the English Civil War, King Charles I’s execution, and the Cromwellian dictatorship, but also the Great Plague of London and Great Fire of London.
6. The development of Keynesian economics was a substantial challenge to the dominant neoclassical school of economics.
7. To inspect the country’s soil with the greatest care, and not to leave the agricultural possibilities of a single corner or clod of earth unconsidered…

Islamic economics seeks to enforce Islamic regulations not only on personal issues, but to implement broader economic goals and policies of an Islamic society, based on uplifting the deprived masses. It was founded on free and unhindered circulation of wealth so as to handsomely reach even the lowest echelons of society. One distinguishing feature is the tax on wealth (in the form of both Zakat and Jizya), and bans levying taxes on all kinds of trade and transactions (Income/Sales/Excise/Import/Export duties etc.).Another distinguishing feature is prohibition of interest in the form of excess charged while trading in money. Though promissory notes are recognized, they must be fully backed by reserves. Most prominent is monetarism and the Chicago School, developed by Milton Friedman, which retains neoclassical microeconomics and the Keynesian macroeconomic framework but shifts the emphasis of macroeconomics from fiscal policy (favored by Keynes) to monetary policy. In 1979 American economist Paul Krugman (1953–) published a paper founding New trade theory, which attempts to explain the role of increasing returns to scale and network effects in international trade.