38 terms

Schools of Economic Thought

Mercantilist School
The Mercantilist School was about...
-East Indian Trade Company 1600
-Increase a nation's wealth by imposing government regulation concerning all of the nation's commercial interests
-Accumulate wealth in gold
-Nationalism, protectionism, & colonization
Mercantilists (6)
Child, Colbert, Law, Mandeville, Mun, Petty
Physiocratic School
Physiocrats (4)
Condorcet, Condillac, Quesnay, Turgot
The Physiocratic School was about..
-Rule of Nature
-Theory of Wealth
-methodological approach
-Aimed to reduce gov't influence to shift wealth towards production
The Classical School
(1776-1871) Based on understanding: Smith, Ricardo & Mill
Classical economists (5)
-Cantillon, Hume, Locke, Malthus
-Say's Law of Markets
The Classical School was about...
-Followed the view of Rousseau & Kant that the sole task of the state is the protection of the members of the community from violence & fraud
-the invisible hand
-focused on minimal gov't involvement and the economy is self-correcting
-markets function best with minimal government interference
-The "invisible hand" of the free markets is all we need to achieve equilibrium.
The Classical School important texts
Smith's Theory of Moral Sentiments & Wealth of Nation
The Classical School loves (4)
-Say's Law
-concept of the "invisible hand"
-laissez fairre ideas
-free markets.
The Classical School hates (2)
-Outside intervention in markets
Marxian Socialism
(1800s) Karl Marx
Marxian Socialism was about...
-Capitalism is not just flawed, but likely to screw most of us all if left to its own devices.
-Mode of production where the sole criterion for production is use-value and therefore the law of value no longer directs economic activity
-Intervene preemptively to make sure the capitalists don't wreck it.
Marxian Socialism loves
Labor class
Marxian Socialism hates
Capitalist class
Austrian School
Austrian economists (4)
Bohm-Bawerk, Menger, Wickseed, Wieser
Austrian economics was about...
-methodological individualism
-social phenomena result from the motivations and actions of individuals
-A "heterodox" school that advocates the purposeful economic decisions of the individual
-Criticized Smith and said utility doesn't determine exchange value
-We can fix the economy by reducing government and central bank involvement in free market forces.
Austrian economics loves
-Austrian Business Cycle Theory
-free markets
-individual freedoms
-unfettered capitalism
Austrian economics hates
-Paul Krugman
-Federal Reserve -"Keynesians"
-anyone who advocates for government intervention in markets
Historical School
(Germany in Late 19th-century)
Historical School subgroups (2)
-German (older, younger, youngest)
Older German historical economists (2)
Roscher & Schmoller
Younger German historical economists
Richard Jones
German historical school
-justifies protectionist economic policy
-support social reform
-cannot challenge growing practical demands of modern civilization
English historical school
-empirical & inductive methods based on Bacon
-Not based on Ricardo & Smith
The Historical School was about...
-Alternative from neo-classical based on Darwin's evolution, empirical & supported a more interventionist economy
-Approach relied on empirical observation & inductive reasoning, rather than deduction from theoretical propositions.
-Roots = Hegelian philosophy.
-Economics result from careful empirical/historical analysis instead of from logic and mathematics.
-Rejected universal validity of economic theorems.
-Economic laws are not universally valid because it depends on the circumstances of the economy (British vs. German economies)
-Recognized the State as not merely an institution for the maintenance of law & order, to take care for all citizens' needs/problems.
Neoclassical School
Neoclassical economists
Fisher & Marshall
The Neoclassical School was about...
-laissez faire approach to policy.
-microeconomics, relates supply and demand to an individual's rationality and his or her ability to maximize utility or profit
-Rational agents are always making optimal decisions and firms are always maximizing profits, but the economy is often shocked by "real" effects like unanticipated policy changes, changes in technology or changes in raw materials.
The Neoclassical School loves (4)
-The Lucas Critique
-Ricardian Equivalence
-rational expectations
The Neoclassical School hates (2)
-The concept of "involuntary unemployment"
-policy stabilization
The Marginal School
(1890s) Was popularized by Marshall
The Marginal School was about...
-Marginalism's value in establishing market prices and S&D patterns
-Analyzed rational decision making on both sides of the market
-Economic decisions typically made at the margin
-Firms aim to maximize profits & individuals aim to maximize utility
Marginal economists (5)
Clark, Jevons, Menger, Walras, Wicksell
Keynesian economics
(1930s) J.M. Keynes released book on the Great Depression
Keynesian economics was about...
-In the short run, and especially during recessions, economic output is strongly influenced by aggregate demand-total spending in the economy