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Economic thought deals with different thinkers and theories in the subject that became political economy and economics, from the ancient world to the present day. It encompasses many disparate schools of economic thought. Ancient Greek writers such as the philosopher Aristotle examined ideas about the art of wealth acquisition and questioned whether the property is best left in private or public hands. In medieval times, scholasticists such as Thomas Aquinas argued that it was a moral obligation of businesses to sell goods at a just price.
In the Western world, economics was not a separate discipline, but part of philosophy until the 18th–19th century Industrial Revolution and the 19th-century Great Divergence, which accelerated economic growth. Long before that, from the Renaissance at least, economics as an intellectual discipline or science was dominated by Western thinkers and their academic institutions, schooling economists from outside the West, although there are isolated instances in other societies.
The Development Of Economic Thought
Many great economists have shown a profound interest in the history of their discipline, and have left behind a legacy of appraisals of the work of their fellow-economists. A number of such studies have been assembled in this volume, together with kindred essays by contemporary writers of distinction. The studies are arranged in chronological order, enabling the reader to obtain a first-hand view of the development of economics as seen through the eyes of the great economists themselves. This double perspective in which the various figures and phases of the history of economics are presented will bring to light many new facets of a subject which, in Paul Samuelson’s words, “is a game only worth playing if it is played very well indeed.” Nobody surely could play it better than the great men, from Aristotle down to the present, who are here acting out the story of which they themselves are the heroes, telling us what they think about each other.
The work is international in scope and representative of a multiplicity of points of view. The reader will find, displayed at the marketplace, as it were, the great ideas that have inspired economic thought throughout the ages. The very profusion of ideas, it is hoped, will prove a challenge to the critical mind, and a wholesome antidote against any narrow dogmatism of the Keynesian or other variety.
How did I go about the work of collection? It was my aim to assemble outstanding essays by great economists about other great economists. There were a few articles whose very fame seemed to make their inclusion mandatory. With a few other articles, I had to take what was available in order to round out the story. Most often, however, an article was selected as the result of a process of sifting, calling for discretion and judgment. It goes without saying that in this task I had no axe to grind; that I had what seemed to me sound reasons for inclusions and rejections; and that the opinions expressed by my authors are not necessarily my own. The justification of each selection would make a long story, too long and too tedious to be told here.
Contributions Of Economics Schools Of Thought
1. Classical School: The Classical school, which is regarded as the first school of economic thought, is associated with the 18th Century Scottish economist Adam Smith, and those British economists that followed, such as Robert Malthus and David Ricardo.
The main idea of the Classical school was that markets work best when they are left alone and that there is nothing but the smallest role for government. The approach is firmly one of laissez-faire and a strong belief in the efficiency of free markets to generate economic development. Markets should be left to work because the price mechanism acts as a powerful ‘invisible hand’ to allocate resources to where they are best employed.
In terms of explaining value, the focus of classical thinking was that it was determined mainly by scarcity and costs of production.
In terms of the macro-economy, the Classical economists assumed that the economy would always return to the full-employment level of real output through an automatic self-adjustment mechanism. It is widely recognised that the Classical period lasted until 1870.
2. Neo-classical: The neo-classical school of economic thought is a wide-ranging school of ideas from which modern economic theory evolved. The method is clearly scientific, with assumptions, and hypothesis and attempts to derive general rules or principles about the behaviour of firms and consumers.
For example, neo-classical economics assumes that economic agents are rational in their behaviour, and that consumers look to maximise utility and firms look to maximise profits. The contrasting objectives of maximising utility and profits form the basis of demand and supply theory. Another important contribution of neo-classical economics was a focus on marginal values, such as marginal cost and marginal utility. Neo-classical economics is associated with the work of William Jevons, Carl Menger, and Leon Walras.
3. New classical: New classical macro-economic dates from the 1970s, and is an attempt to explain macro-economic problems and issues using micro-economic concepts like rational behaviour, and rational expectations. New classical economics is associated with the work of Chicago economist, Robert Lucas.
4. Keynesian economists: Keynesian economists broadly follow the main macro-economic ideas of British economist John Maynard Keynes. Keynes is widely regarded as the most important economist of the 20th Century, despite falling out of favour during the 1970s and 1980s following the rise of new classical economics.
In essence, Keynesian economists are skeptical that, if left alone, free markets will inevitably move towards a full employment equilibrium.
In the history of economic thought, a school of economic thought is a group of economic thinkers who share or shared a common perspective on the way economies work. While economists do not always fit into particular schools, particularly in modern times, classifying economists into schools of thought is common. Economic thought may be roughly divided into three phases: pre-modern (Greco-Roman, Indian, Persian, Islamic, and Imperial Chinese), early modern (mercantilist, physiocrats) and modern (beginning with Adam Smith and classical economics in the late 18th century). Systematic economic theory has been developed mainly since the beginning of what is termed the modern era.
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. Other longstanding heterodox schools of economic thought include Austrian economics and Marxian economics. Some more recent developments in economic thought such as feminist economics and ecological economics adapt and critique mainstream approaches with an emphasis on particular issues rather than developing as independent schools.
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