Currently, the great majority of economists follow an approach referred to as
mainstream economics (sometimes called 'orthodox economics'). Within the mainstream, 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.
- 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.
It may be accordingly easier to describe these as variants of mainstream economic thought rather than as schools in themselves.
Ancient economic thought[edit]
Islamic economics[edit]
Islamic economics is the practice of economics in accordance with
Islamic law. The origins can be traced back to the
Caliphate,
[1] where an early
market economyand some of the earliest forms of
merchant capitalism took root between the 8th–12th centuries, which some refer to as "Islamic capitalism".
[2]
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),
[3]circulating capital,
capital expenditure,
revenue,
cheques,
promissory notes,
[4] trusts (see
Waqf),
startup companies,
[5] savings accounts,
transactional accounts,
pawning,
loaning,
exchange rates,
bankers,
money changers,
ledgers,
deposits,
assignments, the
double-entry bookkeeping system,
[6] lawsuits,
[7] and
agencyinstitution.
[8][9]
This school has seen a revived interest in development and understanding since the later part of 20th century.
Scholasticism[edit]
Main article:
Scholasticism
Mercantilism[edit]
Main article:
Mercantilism
Economic policy in Europe during the late Middle Ages and early
Renaissance treated economic activity as a good which was to be
taxed to raise revenues for the
nobility and the
church. Economic exchanges were regulated by
feudal rights, such as the right to collect a
toll or hold a
faire, as well as
guild restrictions and religious restrictions on
lending. Economic policy, such as it was, was designed to encourage trade through a particular area. Because of the importance of
social class,
sumptuary laws were enacted, regulating dress and housing, including allowable styles, materials and frequency of purchase for different classes.
Niccolò Machiavelli in his book
The Prince was one of the first authors to theorize economic policy in the form of advice. He did so by stating that princes and
republicsshould limit their expenditures, and prevent either the wealthy or the populace from despoiling the other. In this way a state would be seen as "generous" because it was not a heavy burden on its citizens.
Physiocrats[edit]
Main article:
Physiocrats
Classical political economy[edit]
Classical economics, also called classical
political economy, was the original form of mainstream economics of the 18th and 19th centuries. Classical economics focuses on the tendency of markets to move to equilibrium and on objective theories of value. Neo-classical economics differs from classical economics primarily in being
utilitarian in its value theory and using marginal theory as the basis of its models and equations. Marxian economics also descends from classical theory.
Anders Chydenius (1729–1803) was the leading
classical liberal of
Nordic history. A
Finnish priest and
member of parliament, he published a book called
The National Gain in 1765, in which he proposes ideas of freedom of trade and industry and explores the relationship between economy and society and lays out the principles of
liberalism, all of this eleven years before
Adam Smith published a similar and more comprehensive book,
The Wealth of Nations. According to Chydenius, democracy, equality and a respect for human rights were the only way towards progress and happiness for the whole of society.
American (National) School[edit]
French liberal school[edit]
German historical school[edit]
The
Historical school of economics was an approach to academic economics and to public administration that emerged in 19th century in Germany, and held sway there until well into the 20th century. The Historical school held that history was the key source of knowledge about human actions and economic matters, since economics was culture-specific, and hence not generalizable over space and time. The School rejected the universal validity of economic theorems. They saw economics as resulting from careful empirical and historical analysis instead of from logic and mathematics. The School preferred historical, political, and social studies to self-referential mathematical modelling. Most members of the school were also Kathedersozialisten, i.e. concerned with social reform and improved conditions for the common man during a period of heavy industrialization. The Historical School can be divided into three tendencies: the Older, led by
Wilhelm Roscher,
Karl Knies, and
Bruno Hildebrand; the Younger, led by
Gustav von Schmoller, and also including
Étienne Laspeyres,
Karl Bücher,
Adolph Wagner, and to some extent
Lujo Brentano; the Youngest, led by
Werner Sombart and including, to a very large extent,
Max Weber.
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[edit]
Although not nearly as famous as its German counterpart, there was also an English Historical School, whose figures included
William Whewell,
Richard Jones,
Thomas Edward Cliffe Leslie,
Walter Bagehot,
Thorold Rogers,
Arnold Toynbee,
William Cunningham, and
William Ashley. It was this school that heavily critiqued the deductive approach of the classical economists, especially the writings of
David Ricardo. This school revered the inductive process and called for the merging of historical fact with those of the present period.
French historical school[edit]
Utopian economics[edit]
Marxian economics[edit]
Marxian economics descended from the work of
Karl Marx and
Friedrich Engels. This school focuses on the
labor theory of value and what Marx considered to be the exploitation of labour by capital. Thus, in Marxian economics, the labour theory of value is a method for measuring the exploitation of labour in a capitalist society, rather than simply a theory of price.
[10][11]
State socialism[edit]
Ricardian socialism[edit]
Anarchist economics[edit]
Distributism[edit]
Main article:
Distributism
Distributism is an economic philosophy that was originally formulated in the late 19th century and early 20th century by Catholic thinkers to reflect the teachings of Pope Leo XIII's encyclical Rerum Novarum, and Pope Pius's XI encyclical Quadragesimo Anno. It seeks to pursue a third way between capitalism and socialism, desiring to order society according to Christian principles of justice while still preserving private property.
Institutional economics[edit]
New institutional economics[edit]
Neoclassical economics[edit]
Neoclassical economics is the dominant form of economics used today and has the highest amount of adherents among economists. It is often referred to by its critics as
Orthodox Economics. The more specific definition this approach implies was captured by
Lionel Robbins in a
1932 essay: "the science which studies human behavior as a relation between scarce means having alternative uses." The definition of scarcity is that available resources are insufficient to satisfy all wants and needs; if there is no scarcity and no alternative uses of available resources, then there is no
economic problem.
Lausanne school[edit]
Austrian school[edit]
Stockholm school[edit]
Keynesian economics[edit]
Keynesian economics has developed from the work of
John Maynard Keynes and focused on macroeconomics in the short-run, particularly the rigidities caused when prices are fixed. It has two successors.
Post-Keynesian economics is an alternative school—one of the successors to the Keynesian tradition with a focus on
macroeconomics. They concentrate on macroeconomic rigidities and adjustment processes, and research micro foundations for their models based on real-life practices rather than simple optimizing models. Generally associated with
Cambridge, England and the work of
Joan Robinson (see
Post-Keynesian economics).
New-Keynesian economics is the other school associated with developments in the Keynesian fashion. These researchers tend to share with other
Neoclassicaleconomists the emphasis on models based on micro foundations and optimizing behavior, but focus more narrowly on standard Keynesian themes such as price and wage rigidity. These are usually made to be endogenous features of these models, rather than simply assumed as in older style Keynesian ones (see
New-Keynesian economics).
Chicago school[edit]
Carnegie school[edit]
Neo-Ricardianism[edit]
Modern schools[edit]
- 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 aplanned 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 theoryof 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 fromKeynesian 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 ofchoice, as affected by incentives and resources. Economics generally is the study of how people allocate scarce resources among alternative uses.
Current heterodox schools[edit]
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.
Most heterodox views are critical of
capitalism. The most notable exception is Austrian economics.
Other 20th century schools[edit]
Notable schools or trends of thought referring to a particular style of economics advocated by and disseminated from well-defined groups of academicians that have become known worldwide, may be generally summarized as follows:
In the late 20th century, three of the areas of study which are producing change in economic thinking are: risk-based, rather than price-based models; imperfect economic actors; and treating economics as a
biological science, based on
evolutionary norms rather than abstract exchange.
The study of
risk has been influential, in viewing variations in price over time as more important than actual price. This applies particularly to financial economics, where risk/return tradeoffs are the crucial decisions to be made.
The most important area of growth has been in the study of information and decision. Examples of this school include the work of
Joseph Stiglitz. Problems of asymmetric information and
moral hazard, both based around information economics, profoundly affect modern economic dilemmas like executive
stock options,
insurance markets, and
Third-World debt relief.
Finally, there are 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, and the use of
fractal geometry to create economic models. (See
Energy Economics.) In its infancy is the application of
non-linear dynamics to economic theory, as well as the application of
evolutionary psychology. So far, the most visible work has been in the area of applying fractals to market analysis, particularly
arbitrage. (See
Complexity economics.) Another infant branch of economics is
neuroeconomics. The latter combines
neuroscience, economics, and
psychology to study how we make choices.
Viewpoints within mainstream economics[edit]
Mainstream 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,
Austrian School, or
behavioral economics.
Controversies within mainstream economics tend to be stated in terms of:
An example of a "mainstream" economic approach is the
Triple Bottom Line accounting methods for cities developed by
ICLEI and advocated by the
C40organization of the world's 40 largest cities. As this example suggests, a "mainstream" approach is defined by the degree to which it is adopted and advocated, not necessarily its technical rigor.
Viewpoints outside economics[edit]
Other viewpoints on economic issues from outside economics include
dependency theory and
world systems theory. An example of another
economic system which has recently been advocated is the
participatory economics model. This uses neither market methods nor centralised methods for allocation, but incorporates many local positive and negative feedback loops in order to respond to the most positive human values. One example of this school of thought is the
Post-autistic economics movement.
See also[edit]
- Jump up^ The Cambridge economic history of Europe, p. 437. Cambridge University Press, ISBN 0-521-08709-0.
- Jump up^ Subhi Y. Labib (1969), "Capitalism in Medieval Islam", The Journal of Economic History 29 (1), pp. 79–96 [81, 83, 85, 90, 93, 96].
- Jump up^ Jairus Banaji (2007), "Islam, the Mediterranean and the rise of capitalism",Historical Materialism 15 (1), pp. 47–74, Brill Publishers.
- Jump up^ 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.
- Jump up^ 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].
- Jump up^ Subhi Y. Labib (1969), "Capitalism in Medieval Islam", The Journal of Economic History 29 (1): 79–96 [92–3]
- Jump up^ Ray Spier (2002), "The history of the peer-review process", Trends in Biotechnology 20 (8), p. 357-358 [357].
- Jump up^ 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.
- Jump up^ Samir Amin (1978), "The Arab Nation: Some Conclusions and Problems",MERIP Reports 68, pp. 3–14 [8, 13].
- Jump up^ 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.
- Jump up^ 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.
- Jump up^ http://www.econlib.org/library/Enc/AustrianSchoolofEconomics.html
- Jump up^ 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"
- Jump up^ 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.
- Jump up^ Daly, H. 1995. On Nicholas Georgescu-Roegen’s contributions to economics: An obituary essay. Ecological Economics 13: 149-54.
- Jump up^ Mayumi, K. 1995. Nicholas Georgescu-Roegen (1906-1994): an admirable epistemologist. Structural Change and Economic Dynamics 6: 115-120.
- Jump up^ Mayumi,K. and Gowdy, J. M. (eds.) 1999. Bioeconomics and Sustainability: Essays in Honor of Nicholas Georgescu-Roegen. Cheltenham: Edward Elgar.
- Jump up^ Mayumi, K. 2001. The Origins of Ecological Economics: The Bioeconomics of Georgescu-Roegen. London: Routledge.
References[edit]
External links[edit]
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