Schools of economic thought
Currently, the great majority of economists follow an approach referred to as mainstream economics (sometimes called 'orthodox economics'). Within the mainstream in the United States, distinctions can be made between the Saltwater school (associated with Berkeley, Harvard, MIT, Pennsylvania, Princeton, and Yale), and the more laissez-faire ideas of the Freshwater school (represented by the Chicago school of economics, Carnegie Mellon University, the University of Rochester and the University of Minnesota). Both of these schools of thought are associated with the neoclassical synthesis.
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 a developing as independent schools.
- 1 Ancient economic thought
- 2 Islamic economics
- 3 Scholasticism
- 4 Mercantilism
- 5 Physiocrats
- 6 Classical political economy
- 7 American (National) School
- 8 French liberal school
- 9 German historical school
- 10 English historical school
- 11 French historical school
- 12 Utopian economics
- 13 Georgist economics
- 14 Marxian economics
- 15 Neo-Marxian economics
- 16 State socialism
- 17 Ricardian socialism
- 18 Anarchist economics
- 19 Distributism
- 20 Institutional economics
- 21 New institutional economics
- 22 Neoclassical economics
- 23 Lausanne school
- 24 Austrian school
- 25 Stockholm school
- 26 Keynesian economics
- 27 Chicago school
- 28 Carnegie school
- 29 Neo-Ricardianism
- 30 Peace economics
- 31 Modern schools (late 19th and 20th century)
- 32 Heterodox schools (20th and 21st century)
- 33 20th century schools
- 34 Economic viewpoints
- 35 See also
- 36 Notes
- 37 References
- 38 External links
Ancient economic thought
Islamic economicsIslamic law. The origins can be traced back to the Caliphate, where an early market economy and some of the earliest forms of merchant capitalism took root between the 8th–12th centuries, which some refer to as "Islamic capitalism".
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. Its pronouncement on use of paper currency also stands out. Though promissory notes are recognized, they must be fully backed by reserves. Fractional-reserve banking is disallowed as a form of breach of trust.
It saw innovations such as trading companies, big businesses, contracts, bills of exchange, long-distance international trade, the first forms of partnership (mufawada) such as limited partnerships (mudaraba), and the earliest forms of credit, debt, profit, loss, capital (al-mal), capital accumulation (nama al-mal), circulating capital, capital expenditure, revenue, cheques, promissory notes, trusts (see Waqf), startup companies, savings accounts, transactional accounts, pawning, loaning, exchange rates, bankers, money changers, ledgers, deposits, assignments, the double-entry bookkeeping system, lawsuits, and agency institution.
This school has seen a revived interest in development and understanding since the later part of the 20th century.
Classical political economy
- Francis Hutcheson
- Bernard de Mandeville
- David Hume
- Adam Smith
- Thomas Malthus
- James Mill
- Francis Place
- David Ricardo
- Henry Thornton
- John Ramsay McCulloch
- James Maitland, 8th Earl of Lauderdale
- Jeremy Bentham
- Jean Charles Léonard de Sismondi
- Johann Heinrich von Thünen
- John Stuart Mill
- Karl Marx
- Henry George
- Nassau William Senior
- Edward Gibbon Wakefield
- John Rae
- Thomas Tooke
- Robert Torrens
American (National) School
French liberal school
German historical school
Predecessors included Friedrich List. The Historical school largely controlled appointments to Chairs of Economics in German universities, as many of the advisors of Friedrich Althoff, head of the university department in the Prussian Ministry of Education 1882-1907, had studied under members of the School. 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. The Historical school was involved in the Methodenstreit ("strife over method") with the Austrian School, whose orientation was more theoretical and a prioristic. In English speaking countries, the Historical school is perhaps the least known and least understood approach to the study of economics, because it differs radically from the now-dominant Anglo-American analytical point of view. Yet the Historical school forms the basis—both in theory and in practice—of the social market economy, for many decades the dominant economic paradigm in most countries of continental Europe. The Historical school is also a source of Joseph Schumpeter's dynamic, change-oriented, and innovation-based economics. Although his writings could be critical of the School, Schumpeter's work on the role of innovation and entrepreneurship can be seen as a continuation of ideas originated by the Historical School, especially the work of von Schmoller and Sombart.
English historical school
French historical school
New institutional economics
Peace economicsPeace economics is the study of economic means of promoting peace. Key figures include:
Modern schools (late 19th and 20th century)Mainstream economics is a term used to distinguish economics in general from heterodox approaches and schools within economics. It begins with the premise that resources are scarce and that it is necessary to choose between competing alternatives. That is, economics deals with tradeoffs. With scarcity, choosing one alternative implies forgoing another alternative—the opportunity cost. The opportunity cost expresses an implicit relationship between competing alternatives. Such costs, considered as prices in a market economy, are used for analysis of economic efficiency or for predicting responses to disturbances in a market. In a planned economy comparable shadow price relations must be satisfied for the efficient use of resources, as first demonstrated by the Italian economist Enrico Barone. Economists represent incentives and costs as playing a pervasive role in shaping decision making. An immediate example of this is the consumer theory of individual demand, which isolates how prices (as costs) and income affect quantity demanded. Modern mainstream economics builds primarily on neoclassical economics, which began to develop in the late 19th century. Mainstream economics also acknowledges the existence of market failure and insights from Keynesian economics. It uses models of economic growth for analyzing long-run variables affecting national income. It employs game theory for modeling market or non-market behavior. Some important insights on collective behavior (for example, emergence of organizations) have been incorporated through the new institutional economics. A definition that captures much of modern economics is that of Lionel Robbins in a 1932 essay: "the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses." Scarcity means that available resources are insufficient to satisfy all wants and needs. Absent scarcity and alternative uses of available resources, there is no economic problem. The subject thus defined involves the study of choice, as affected by incentives and resources. Economics generally is the study of how people allocate scarce resources among alternative uses.
Heterodox economics: Some schools of thought at variance with the microeconomic formalism of neoclassical economics are listed here, and include: institutional economics, Marxian economics, feminist economics, socialist economics, binary economics, ecological economics, bioeconomics and thermoeconomics.
Heterodox schools (20th and 21st century)In the late 19th century, a number of heterodox schools contended with the neoclassical school that arose following the marginal revolution. Most survive to the present day as self-consciously dissident schools, but with greatly diminished size and influence relative to mainstream economics. The most significant are Institutional economics, Marxian economics and the Austrian School.
The development of Keynesian economics was a substantial challenge to the dominant neoclassical school of economics. Keynesian views eventually entered the mainstream as a result of the Keynesian-neoclassical synthesis developed by John Hicks. The rise of Keynesianism, and its incorporation into mainstream economics, reduced the appeal of heterodox schools. However, advocates of a more fundamental critique of orthodox economics formed a school of Post-Keynesian economics.
More recent heterodox developments include evolutionary economics (though this term is also used to describe institutional economics), feminist, Green economics, Post-autistic economics, and Thermoeconomics
Heterodox approaches often embody criticisms of the "mainstream" approaches. For instance:
- Feminist economics criticizes the valuation of labor and argues female labor is systemically undervalued
- Green economics criticizes externalized and intangible status of ecosystems and argues to bring them within the tangible measured capital asset model as natural capital
- Post-autistic economics criticizes the focus on formal models at the expense of observation and values, arguing for a return to the moral philosophy in which Adam Smith originally founded this human science.
Georgescu-Roegen reintroduced into economics, the concept of entropy from thermodynamics (as distinguished from what, in his view, is the mechanistic foundation of neoclassical economics drawn from Newtonian physics) and did foundational work which later developed into evolutionary economics. His work contributed significantly to thermoeconomics and to ecological economics.
20th century schools
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- Austrian School
- Biological economics
- Chicago School
- Constitutional economics
- Ecological economics
- Evolutionary economics
- Freiburg School
- Institutional economics
- Keynesian economics
- Marxian (Marxist) and neo-Marxian economics
- New classical macroeconomics
- New Keynesian economics
- Peace economics
- Post-Keynesian economics
- Public Choice school
- School of Lausanne
- Stockholm school
The study of risk was influential, in viewing variations in price over time as more important than actual price. This applied particularly to financial economics, where risk/return tradeoffs were the crucial decisions to be made.
An important area of growth was the study of information and decision. Examples of this school included the work of Joseph Stiglitz. Problems of asymmetric information and moral hazard, both based around information economics, profoundly affected modern economic dilemmas like executive stock options, insurance markets, and Third-World debt relief.
Finally, there were a series of economic ideas rooted in the conception of economics as a branch of biology, including the idea that energy relationships, rather than price relationships, determine economic structure. The use of fractal geometry to create economic models (see Energy Economics). In its infancy the application of non-linear dynamics to economic theory, as well as the application of evolutionary psychology. The most visible work was in the area of applying fractals to market analysis, particularly arbitrage (see Complexity economics). Another infant branch of economics was neuroeconomics. The latter combines neuroscience, economics, and psychology to study how we make choices.
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Within mainstreamMainstream economics encompasses a wide (but not unbounded) range of views. Politically, most mainstream economists hold views ranging from laissez-faire to modern liberalism. There are also divergent views on particular issues within economics, such as the effectiveness and desirability of Keynesian macroeconomic policy. Although, historically, few mainstream economists have regarded themselves as members of a "school", many would identify with one or more of neoclassical economics, monetarism, Keynesian economics, new classical economics, or behavioral economics.
Controversies within mainstream economics tend to be stated in terms of:
- the definitions of capital assets including natural capital (ecosystems) or social capital ("goodwill" or "brand value") or talent, and generally what constitute intangibles versus what can be measured
- investment and malinvestment and how the business cycle eradicates the latter leaving the former
- liability and who bears it, for instance the questions of network externalities
- wealth and value and how these affect price, especially of labour and of ecosystems
Outside the mainstreamOther viewpoints on economic issues from outside mainstrain economics include dependency theory and world systems theory in the study of international relations
Proposed radical reforms of the economic system originating outside mainstream economics include the participatory economics movement and binary economics.
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- Subhi Y. Labib (1969), "Capitalism in Medieval Islam", The Journal of Economic History 29 (1), pp. 79–96 [81, 83, 85, 90, 93, 96].
- Jairus Banaji (2007), "Islam, the Mediterranean and the rise of capitalism", Historical Materialism 15 (1), pp. 47–74, Brill Publishers.
- Robert Sabatino Lopez, Irving Woodworth Raymond, Olivia Remie Constable (2001), Medieval Trade in the Mediterranean World: Illustrative Documents, Columbia University Press, ISBN 0-231-12357-4.
- Timur Kuran (2005), "The Absence of the Corporation in Islamic Law: Origins and Persistence", American Journal of Comparative Law 53, pp. 785–834 [798–9].
- Subhi Y. Labib (1969), "Capitalism in Medieval Islam", The Journal of Economic History 29 (1): 79–96 [92–3]
- Ray Spier (2002), "The history of the peer-review process", Trends in Biotechnology 20 (8), p. 357-358 .
- Said Amir Arjomand (1999), "The Law, Agency, and Policy in Medieval Islamic Society: Development of the Institutions of Learning from the Tenth to the Fifteenth Century", Comparative Studies in Society and History 41, pp. 263–93. Cambridge University Press.
- Samir Amin (1978), "The Arab Nation: Some Conclusions and Problems", MERIP Reports 68, pp. 3–14 [8, 13].
- Roemer, J.E. (1987). "Marxian Value Analysis". The New Palgrave: A Dictionary of Economics. London and New York: Macmillan and Stockton. pp. v. 3, 383. ISBN 0-333-37235-2.
- Mandel, Ernest (1987). "Marx, Karl Heinrich". The New Palgrave: A Dictionary of Economics. London and New York: Macmillan and Stockton. pp. v. 3, 372, 376. ISBN 0-333-37235-2.
- Raico, Ralph (2011). "Austrian Economics and Classical Liberalism". mises.org. Mises Institute. Retrieved 27 July 2011.
despite the particular policy views of its founders ..., Austrianism was perceived as the economics of the free market
- Cleveland, C. and Ruth, M. 1997. When, where, and by how much do biophysical limits constrain the economic process? A survey of Georgescu-Roegen's contribution to ecological economics. Ecological Economics 22: 203-223.
- Daly, H. 1995. On Nicholas Georgescu-Roegen’s contributions to economics: An obituary essay. Ecological Economics 13: 149-54.
- Mayumi, K. 1995. Nicholas Georgescu-Roegen (1906-1994): an admirable epistemologist. Structural Change and Economic Dynamics 6: 115-120.
- Mayumi,K. and Gowdy, J. M. (eds.) 1999. Bioeconomics and Sustainability: Essays in Honor of Nicholas Georgescu-Roegen. Cheltenham: Edward Elgar.
- Mayumi, K. 2001. The Origins of Ecological Economics: The Bioeconomics of Georgescu-Roegen. London: Routledge.
- Galbács, Peter (2015). The Theory of New Classical Macroeconomics. A Positive Critique. Heidelberg/New York/Dordrecht/London: Springer. ISBN 978-3-319-17578-2.
- Spiegel, Henry William. 1991. The Growth of Economic Thought. Durham & London: Duke University Press. ISBN 0-8223-0973-4
- The History of Economic Thought Website at the New School
- John Eatwell, Murray Milgate, and Peter Newman, ed. (1987). The New Palgrave: A Dictionary of Economics, v. 4, Appendix IV, History of Economic Thought and Doctrine, "Schools of Thought," p. 980 (list of 23 schools)