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History of Economic Thought


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History of our attempt to put humankind in the saddle.

Published in: Economy & Finance, Technology
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History of Economic Thought

  1. 1. History of Economic Thought Famous Economists and Their Idea Chronology
  2. 2. Outline • Adam Smith and The Wealth of Nations • Classical political economy • Capitalism and Marx • Neoclassical thought • Depression and Reconstruction • The "American Way" • Monetarism and the Chicago school • Global times • Contemporary economic thought
  3. 3. Adam Smith • British Philosopher • Scottish Enlightenment • Father of Modern Economics • Wealth of Nations 1776 • Industrial Revolution • Division of Labor • Invisible Hand: Individual effort is the producer of social good.
  4. 4. Classical Political Economists • Jeremy Bentham • Rev. Thomas Malthus • David Ricardo • John Stuart Mill • They examined ways the landed, capitalist and laboring classes produced and distributed national output and modeled the effects of population and international trade.
  5. 5. Jeremy Bentham • The greatest good for the greatest number • The Auto-icon has a wax head, as Bentham's head was badly damaged in the preservation process. The real head was displayed in the same case for many years but became the target of repeated student pranks. It is now locked away securely.
  6. 6. Rev. Thomas Malthus • An Essay on the Principle of Population published from 1798 to 1826, observed that sooner or later population gets checked by famine and disease. He wrote in opposition to the popular view in 18th-century Europe that saw society as improving and in principle as perfectible. • Malthus thought that the dangers of population growth would preclude endless progress towards a utopian society: "The power of population is indefinitely greater than the power in the earth to produce subsistence for man".
  7. 7. David Ricardo • Member of Parliament • Businessman • Financier • and speculator, who amassed a considerable personal fortune. • Most important contribution was the law of comparative advantage, a fundamental argument in favor of free trade among countries and of specialization among individuals
  8. 8. John Stuart Mill • British philosopher • Economist • Civil servant • Member of Parliament • Proponent of utilitarianism, an ethical theory developed by Jeremy Bentham
  9. 9. Capitalism and Marx • pre-eminent socialist economist • Communist Manifesto • Das Kapital 1867 • History of class struggles • Hegalian Dialectic
  10. 10. Neoclassical Thought • Marginal Utility – application and development of Jeremy Bentham's utilitarianism • Mathematical Analysis • Austrian School • Irving Fisher • Alfred Marshall • Joseph Schumpeter • determination of prices, outputs, and income distributions in markets through supply and demand
  11. 11. Marginal Utility • At the margin, the satisfaction of more goods and services decreases. • An example of the theory of diminishing returns is that for every orange one eats, the less pleasure one gets from the last orange (until one stops eating).
  12. 12. Alfred Marshall • Attempt to put economics on a more mathematical footing • Marshall's graphical representation is the famous supply and demand graph • (1) Use mathematics as shorthand language, rather than as an engine of inquiry. (2) Keep to them till you have done. (3) Translate into English. (4) Then illustrate by examples that are important in real life. (5) Burn the mathematics. (6) If you can't succeed in 4, burn 3. This I do often
  13. 13. Joseph Schumpeter • Advocate the use of deductive logic instead of mathematics • Works on business cycles and innovation • He insisted on the role of the entrepreneurs in an economy • Creative Destruction • Capitalism goes through long-term cycles, because it is entirely based upon scientific inventions and innovations. A phase of expansion is made possible by innovations, because they bring productivity gains and encourage entrepreneurs to invest. When investors have no more opportunities to invest, the economy goes into recession
  14. 14. Thorstein Veblen • Thorstein Veblen in 1900, in his Preconceptions of Economic Science, contrasted neoclassical marginalists in the tradition of Alfred Marshall from the philosophies of the Austrian school. • The Theory of the Leisure Class: Distinction between the productiveness of "industry," run by engineers, which manufactures goods, and the parasitism of "business," which exists only to make profits for a leisure class. The chief activity of the leisure class was "conspicuous consumption", and their economic contribution is "waste," activity that contributes nothing to productivity.
  15. 15. Depression and Reconstruction • Friedrich von Hayek • John Maynard Keynes • Wall Street Crash of 1929 • FDR • World War II • Bretton Woods
  16. 16. John Maynard Keynes • 1930s: conditions necessitated public sector action • General Theory provided conceptual reinforcement for New Deal policies of FDR already being pursued to quell the Great Depression. • ...this long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again.
  17. 17. The “American Way” • Institutionalism • John Kenneth Galbraith • Paul Samuelson • Kenneth Arrow • After World War II, the United States had become the pre- eminent global economic power. Europe, Japan, and the Soviet Union lay in ruins and the British Empire was at its end.
  18. 18. Modern Corporate Governance • Harvard University lawyer, named Adolf Berle • Gardiner C. Means, The Modern Corporation and Private Property (1932), • Those who controlled big firms should be better held to account. Adolf Augustus Berle, Jr. with Gardiner Means was a foundational figure of modern corporate governance.
  19. 19. Monetarism and the Chicago school • Ronald Coase • Milton Friedman • The Fed • Paul Volker • Alan Greenspan • The interventionist monetary and fiscal policies that the orthodox post-war economics recommended came under attack in particular by a group of theorists working at the University of Chicago, which came to be known as the Chicago School.
  20. 20. Small Is Beautiful: Economics As If People Mattered is a collection of essays by British economist E. F. Schumacher. The phrase "Small Is Beautiful" is often used to champion small, appropriat technologies that are believed to empower people more, in contrast with phrases such as "bigger is better".
  21. 21. Small Is Beautiful • Wisdom demands a new orientation of science and technology towards the organic, the gentle, the non-violent, the elegant and beautiful. • The way in which we experience and interpret the world obviously depends very much indeed on the kind of ideas that fill our minds. If they are mainly small, weak, superficial, and incoherent, life will appear insipid, uninteresting, petty, and chaotic.
  22. 22. Global times • IMF • Amartya Sen • Joseph E. Stiglitz • Paul Krugman • World Bank • WTO • Jeffery Sachs • Bono • Amartya Sen (born 1933) is a leading development and welfare economist and has expressed considerable skepticism on the validity of neo- classical assumptions. He has devoted his work to development and human rights.
  23. 23. Contemporary economic thought • Macroeconomics since the Bretton Woods era • From the 1970s onwards Friedman's monetarist critique of Keynesian macroeconomics formed the starting point for a number of trends in macroeconomic theory opposed to the idea that government intervention can or should stabilize the economy.
  24. 24. Thomas Pikkety French economist who works on wealth and income inequality. He is the author of the best selling book Capital in the Twenty-First Century (2013) which emphasizes the themes of his work on wealth concentrations and distribution over the past 250 years. The book argues that the rate of capital return in developed countries is persistently greater than the rate of economic growth, and that this will cause wealth inequality to increase in the future. To address this problem, he proposes redistribution through a global tax on wealth
  25. 25. Join the Dialogue Engage History