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Economic Thoughts through History

A brief overview

Krisztina E. Lengyel Almos

on 18 April 2012

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Transcript of Economic Thoughts through History

Economic Thoughts
in History

Adam Smith
David Ricardo

Jeremy Bentham
John Stuart Mill
William Jevons
Carl Menger
Leon Walras
Alfred Marshall
Classical Economics
value theory
distribution theory
state: "Invisible hand"

"Laissez Faire" capitalism:
let the market forces decide
XVIII & XIX centuries
utility of goods and services
XIX century
marginal utility, cost, profit, production
Late XIX century
Neoclassical School of Economics
(mainstream economics)
supply & demand
people have rational preferences
marginalist theory in microeconomics:
maximize utility and profit
in macroeconomics: often Keynesian
XX century
Friedrich von Hayek
John Maynard Keynes
macroeconomic policy
with government intervention
government intervention
classical liberalism
Chicago School of Economics
Austrian School of Economics
Milton Friedman
Gary Becker
Frank Knight
Ronald Coase
Robert Fogel

struggle of classes: workers vs. owners
no private ownership, instead: state ownership
prices are fixed
no free competition
capitalism is doomed, crisis is inevitable
heterodox school of economics
individualism & marginalism
laissez faire economy
Ludwig von Mises,
Friedrich v. Hayek,
Carl Menger
Joseph Schumpeter: "creative distruction"
Late XIX and XX century
neoliberalism & monetarism
Irving Fisher
Paul Samuelson
Francois Quesnay
J.B. Colbert-
J. B. Say - Say´s Law - market law
"A businessman will never hoard money,
he´ll always invest it
because money will lose its value faster. Thus, boom and bust are inevitable."
John Kenneth Galbraith: "Affluent Society"
"Competition follows up immediately on the entrepreneur", J. Schumpeter
prices should not be fixed
free entrepreneurship
free market capitalism
government intervention should be limited to
monetary policy
XX century, after the Great Depression
" The General Theory of Employment, Interest and Money ", 1936
After the 1950s
"The Road to Serfdom", 1943 - it was "a war cry against central planning" (Walter Block)
father of modern macroeconomics (observed the relationships among aggregate demand & aggregate supply, unemployment, inflation, money)
aggregate demand
determined the overall level of economic activity & employment
advocated the use of
fiscal and monetary
policies to mitigate to
negative effects of economic recessions
government intervention with monetary policy
a natural rate of unemployment exists
stagflation can occur
FED can boost the economy by a small increase of money supply
among its contemporary followers: Ben Bernarke
Karl Marx, Das Kapital, 1867
Lenin, The Imperialism, The Highest Stage of Capitalism, 1916
Reaganomics (or: "Trickle-down Economics)
1. Sound money (no price fixing, thus inflation goes down)
2. Deregulation (industries should regulate themselves)
3. Modest tax rates
(huge tax cuts, favoring the rich: from 70%->28% on top earners)
4. Limited government spending (less public programs)
(supply-side economics)
Results: radical tax cuts led to huge debts, unleashed market forces, made the wealthy richer and the poor, poorer
social cost: a more polarized a society
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