History of our attempt to put humankind in the saddle.

1. History of Economic Thought
Famous Economists and
Their Idea Chronology

2. Outline
• Adam Smith and The Wealth of Nations
• Classical political economy
• Capitalism and Marx
• Neoclassical thought
• Depression and Reconstruction
• The "American Way"
• Monetarism and the Chicago school
• Global times
• Contemporary economic thought

3. Adam Smith
• British Philosopher
• Scottish Enlightenment
• Father of Modern
Economics
• Wealth of Nations 1776
• Industrial Revolution
• Division of Labor
• Invisible Hand:
Individual effort is the
producer of social good.

4. Classical Political Economists
• Jeremy Bentham
• Rev. Thomas Malthus
• David Ricardo
• John Stuart Mill
• They examined ways
the landed, capitalist
and laboring classes
produced and
distributed national
output and modeled
the effects of
population and
international trade.

5. Jeremy Bentham
• The greatest good for the
greatest number
• The Auto-icon has a wax
head, as Bentham's head
was badly damaged in the
preservation process. The
real head was displayed
in the same case for
many years but became
the target of repeated
student pranks. It is now
locked away securely.

6. Rev. Thomas Malthus
• An Essay on the Principle
of Population published
from 1798 to 1826,
observed that sooner or
later population gets
checked by famine and
disease. He wrote in
opposition to the popular
view in 18th-century
Europe that saw society
as improving and in
principle as perfectible.
• Malthus thought that the
dangers of population
growth would preclude
endless progress towards
a utopian society: "The
power of population is
indefinitely greater than
the power in the earth to
produce subsistence for
man".

7. David Ricardo
• Member of Parliament
• Businessman
• Financier
• and speculator, who
amassed a considerable
personal fortune.
• Most important
contribution was the
law of comparative
advantage, a
fundamental argument
in favor of free trade
among countries and of
specialization among
individuals

8. John Stuart Mill
• British philosopher
• Economist
• Civil servant
• Member of Parliament
• Proponent of
utilitarianism, an ethical
theory developed by
Jeremy Bentham

9. Capitalism and Marx
• pre-eminent socialist
economist
• Communist Manifesto
• Das Kapital 1867
• History of class
struggles
• Hegalian Dialectic

10. Neoclassical Thought
• Marginal Utility
– application and
development of Jeremy
Bentham's utilitarianism
• Mathematical Analysis
• Austrian School
• Irving Fisher
• Alfred Marshall
• Joseph Schumpeter
• determination of prices,
outputs, and income
distributions in markets
through supply and
demand

11. Marginal Utility
• At the margin, the satisfaction of more goods
and services decreases.
• An example of the theory of diminishing
returns is that for every orange one eats, the
less pleasure one gets from the last orange
(until one stops eating).

12. Alfred Marshall
• Attempt to put
economics on a more
mathematical footing
• Marshall's graphical
representation is the
famous supply and
demand graph
• (1) Use mathematics as
shorthand language,
rather than as an engine
of inquiry. (2) Keep to
them till you have done.
(3) Translate into English.
(4) Then illustrate by
examples that are
important in real life. (5)
Burn the mathematics.
(6) If you can't succeed in
4, burn 3. This I do often

13. Joseph Schumpeter
• Advocate the use of
deductive logic instead of
mathematics
• Works on business cycles
and innovation
• He insisted on the role of
the entrepreneurs in an
economy
• Creative Destruction
• Capitalism goes through
long-term cycles, because it
is entirely based upon
scientific inventions and
innovations. A phase of
expansion is made possible
by innovations, because
they bring productivity
gains and encourage
entrepreneurs to invest.
When investors have no
more opportunities to
invest, the economy goes
into recession

14. Thorstein Veblen
• Thorstein Veblen in 1900, in his Preconceptions of
Economic Science, contrasted neoclassical
marginalists in the tradition of Alfred Marshall
from the philosophies of the Austrian school.
• The Theory of the Leisure Class: Distinction
between the productiveness of "industry," run by
engineers, which manufactures goods, and the
parasitism of "business," which exists only to
make profits for a leisure class. The chief activity
of the leisure class was "conspicuous
consumption", and their economic contribution is
"waste," activity that contributes nothing to
productivity.

15. Depression and Reconstruction
• Friedrich von Hayek
• John Maynard Keynes
• Wall Street Crash of
1929
• FDR
• World War II
• Bretton Woods

16. John Maynard Keynes
• 1930s: conditions
necessitated public sector
action
• General Theory provided
conceptual reinforcement
for New Deal policies of
FDR already being
pursued to quell the
Great Depression.
• ...this long run is a
misleading guide to
current affairs. In the long
run we are all dead.
Economists set
themselves too easy, too
useless a task if in
tempestuous seasons
they can only tell us that
when the storm is long
past the ocean is flat
again.

17. The “American Way”
• Institutionalism
• John Kenneth Galbraith
• Paul Samuelson
• Kenneth Arrow
• After World War II, the
United States had
become the pre-
eminent global
economic power.
Europe, Japan, and the
Soviet Union lay in ruins
and the British Empire
was at its end.

18. Modern Corporate Governance
• Harvard University
lawyer, named Adolf
Berle
• Gardiner C. Means, The
Modern Corporation
and Private Property
(1932),
• Those who controlled
big firms should be
better held to account. Adolf Augustus Berle, Jr. with Gardiner
Means was a foundational figure of
modern corporate governance.

19. Monetarism and the Chicago school
• Ronald Coase
• Milton Friedman
• The Fed
• Paul Volker
• Alan Greenspan
• The interventionist
monetary and fiscal policies
that the orthodox post-war
economics recommended
came under attack in
particular by a group of
theorists working at the
University of Chicago, which
came to be known as the
Chicago School.

20. Small Is Beautiful: Economics As If
People Mattered
is a collection of essays
by British economist E.
F. Schumacher. The
phrase "Small Is
Beautiful" is often used
to champion small,
appropriat technologies
that are believed to
empower people more,
in contrast with phrases
such as "bigger is
better".

21. Small Is Beautiful
• Wisdom demands a new orientation of
science and technology towards the organic,
the gentle, the non-violent, the elegant and
beautiful.
• The way in which we experience and interpret
the world obviously depends very much
indeed on the kind of ideas that fill our minds.
If they are mainly small, weak, superficial, and
incoherent, life will appear insipid,
uninteresting, petty, and chaotic.

22. Global times
• IMF
• Amartya Sen
• Joseph E. Stiglitz
• Paul Krugman
• World Bank
• WTO
• Jeffery Sachs
• Bono
• Amartya Sen (born
1933) is a leading
development and
welfare economist and
has expressed
considerable skepticism
on the validity of neo-
classical assumptions.
He has devoted his
work to development
and human rights.

23. Contemporary economic thought
• Macroeconomics since the Bretton Woods era
• From the 1970s onwards Friedman's
monetarist critique of Keynesian
macroeconomics formed the starting point for
a number of trends in macroeconomic theory
opposed to the idea that government
intervention can or should stabilize the
economy.

24. Thomas Pikkety
French economist who works on
wealth and income inequality. He is
the author of the best selling book
Capital in the Twenty-First Century
(2013) which emphasizes the
themes of his work on wealth
concentrations and distribution
over the past 250 years. The book
argues that the rate of capital
return in developed countries is
persistently greater than the rate of
economic growth, and that this will
cause wealth inequality to increase
in the future. To address this
problem, he proposes
redistribution through a global tax
on wealth

25. Join the Dialogue
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