The period —75 is a timeframe of significant debate. Karl Marx originally coined the term "classical economics" to refer to Ricardian economics — the economics of David Ricardo and James Mill and their predecessors — but usage was subsequently extended to include the followers of Ricardo. Sraffians , who emphasize the discontinuity thesis , see classical economics as extending from Petty's work in the 17th century to the break-up of the Ricardian system around The period between and the s would then be dominated by "vulgar political economy", as Karl Marx characterized it.
Sraffians argue that: the wages fund theory; Senior's abstinence theory of interest , which puts the return to capital on the same level as returns to land and labour; the explanation of equilibrium prices by well-behaved supply and demand functions; and Say's law , are not necessary or essential elements of the classical theory of value and distribution. Perhaps Schumpeter's view that John Stuart Mill put forth a half-way house between classical and neoclassical economics is consistent with this view.
Georgists and other modern classical economists and historians such as Michael Hudson argue that a major division between classical and neo-classical economics is the treatment or recognition of economic rent. Georgists and others argue that economic rent remains roughly a third of economic output. Sraffians generally see Marx as having rediscovered and restated the logic of classical economics, albeit for his own purposes. Others, such as Schumpeter, think of Marx as a follower of Ricardo. Even Samuel Hollander  has recently explained that there is a textual basis in the classical economists for Marx's reading, although he does argue that it is an extremely narrow set of texts.
Another position is that neoclassical economics is essentially continuous with classical economics. To scholars promoting this view, there is no hard and fast line between classical and neoclassical economics. There may be shifts of emphasis, such as between the long run and the short run and between supply and demand , but the neoclassical concepts are to be found confused or in embryo in classical economics.
To these economists, there is only one theory of value and distribution. Alfred Marshall is a well-known promoter of this view. Samuel Hollander is probably its best current proponent. Still another position sees two threads simultaneously being developed in classical economics. In this view, neoclassical economics is a development of certain exoteric popular views in Adam Smith.
Ricardo was a sport, developing certain esoteric known by only the select views in Adam Smith. This view can be found in W. Stanley Jevons, who referred to Ricardo as something like "that able, but wrong-headed man" who put economics on the "wrong track". The above does not exhaust the possibilities. John Maynard Keynes thought of classical economics as starting with Ricardo and being ended by the publication of his own General Theory of Employment Interest and Money. The defining criterion of classical economics, on this view, is Say's law which is disputed by Keynesian economics.
Keynes was aware, though, that his usage of the term 'classical' was non-standard. One difficulty in these debates is that the participants are frequently arguing about whether there is a non-neoclassical theory that should be reconstructed and applied today to describe capitalist economies.
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There are some scholars who are known for a famous article they wrote, or a magisterial dissertation that changed the way experts understand their field and has since been read by every graduate student. Then there are finance experts who work in banking and Wall Street and get a big break with the government.
But Jeffery Sachs became one of the leading scholars on economic development, poverty, and globalism by spearheading a long list of important research initiatives. He is well known amongst numerous influential organizations that make the political world go round. Sachs was a co-recipient of the Blue Planet Prize. His fight for the environment has led Time Magazine to twice list him among the world's most influential leaders.
He was the head of the Earth Institute from to , and he became a professor at Columbia University in He is also the Special Advisor to the U. In the past he served as a U.
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Secretary advisor on Millennium Development Goals. Sustainable Development Solutions Network. Carl Menger was born and raised in Poland, where he eventually received a law degree from the University of Krakow in His love of economics developed while working for Vienna's Prime Minister. He eventually published Principles of Economics in He spent three years working as the tutor to the Crown Prince of Austria, and eventually became a professor at the University of Vienna from After that, he retired and spent the rest of his life researching and further building on the arguments he laid down in Principles of Economics , although he never completed another systematic treatment of the material.
Menger used the concept of utility to develop his theory of value and price, it should be noted that utility for Menger meant subjectively held preferences as opposed to pleasure attainment and pain avoidance. Menger also wrote extensively about the distinction and complimentary relationship between consumer, or lower order, and producer, or higher order, goods. He favored using pure theory over the more empirical and historical case study approach of his German counterparts.
His works on monetary theory provided the foundation for what would eventually be called the Austrian School of Economics, and had a particularly profound impact on Ludwig von Mises. Menger's work provides the cornerstone for much of the 20th century's free market thinking. He highly valued institutions that organically developed, as opposed to favoring those which came into existence via top-down central planning, as well as recognized how difficult it is to quantify the sum total of every individual's subjective preferences.
For many people economics seems like a dry subject that only those with a love of words surpassed by their love of numbers could ever enjoy. But some people are drawn to the field not so much because of ability or curiosity, but rather because of conviction. John R. Commons was such a man, the kind of person on a mission.
He was raised in a deeply pious home, and consequently spent a great deal of time trying to gel his Christian convictions with his studies in economics. This led him to a progressive perspective and the institutionalist school of thought, where he systemically defended social change that he thought would bring about a better world. Despite being shunned early in life as a radical, he eventually became a professor at the University of Wisconsin-Madison. Commons made substantial contributions to our understanding of the history of economics. He was the first historian and theoretician of the American labor movement.
His defense of the labor union as an institutional vehicle helped establish him as the leader of Wisconsin Institutionalism. He went on to develop an entire theory of institutional economics, which sought recognition of aggregate bodies like labor unions as protecting and bearing the same sorts of rights traditionally ascribed to individuals under classical economics.
Economics, like all sciences, originally began as a field of philosophy. It then developed into political economy, which was a combination of what we now call political science and economics. Today most scholars in either field see their work as intimately related, but still separate. James M. Buchanan, however, was chiefly a contemporary political economist who gelled two fields that by his day had separated. He made numerous important contributions, such as his distinction between politics the rules governing the social game , and policy the strategies employed within the social game.
He developed constitutional economics, which saw the rules governing politics as an essential foundation to all economic activity. He is known for his work on public choice theory, and especially his writings on how politicians' non-overtly economic decisions are still driven by economic concepts of self-interest. He discovered Austrian economics after independently coming to many of the same opinions held by Mises and realizing his affinity for the latter man's book Human Action.
Buchanan spent most of his career teaching at George Mason University and won the Nobel Prize in Thomas Sowell is a living testament to the fact that early failures do not bar later success. As a young man Sowell dropped out of high school. Nevertheless, he joined the United States Marines during the Korean War, and would later receive a magna cum laude bachelor's degree from Harvard, a master's degree from Columbia, and a PhD in Economics from the University of Chicago.
He is now one of the most influential libertarian thinkers in America. He is known for advocating supply-side economics and free market capitalism. Sowell is also a staunch critic of the Federal Reserve, often arguing that since its inception the dollar has suffered systematic inflation and thus the Fed has failed to maintain price stability. He also believes that the Fed has failed to prevent depressions.
Sowell's work as an economist, political philosopher, and social theorist has led to his writing of over 30 books. It has also granted him a position as a Senior Fellow at the Hoover Institution at Stanford University, a leading think tank with international reputation. He is both a popular syndicated columnist and an academic economist with a regular column distributed by Creators Syndicate.
He has won the National Humanities Medal. Some economists have tried to use mathematical models to understand their field, while others have built logical systems precept by precept. Still others see economics as an extension of history. And yet, there is still more room for future economic development. Ernst Fehr is one of the figures building an entirely new approach to the field, which he calls behavioral economics.
His research draws much more heavily from evolutionary anthropology than most other economists. He is especially interested in the evolution of altruism and other group dynamics. This research asks questions about the origins and perpetuation of social norms, and the proliferation of social preferences.
Fehr's research has earned him many accolades. He has held a professorship of Microeconomics and Experimental Economics at the University of Zurich, and is currently the director of the economics department. He won the Marcel Benoist Prize in He is widely regarded as one of the most influential economists in the German speaking world.
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But there is something far more important behind Fehr's work than a long list of titles. Fehr has given economists an entire new avenue by which they can approach their work. He is drawing from the intersection of biology and sociology in a way that unites the social and hard sciences.
Consequently, his research has the potential to dramatically impact the conceptual foundations of economics for generations to come in a way that few scholars ever will. Let's be honest. Most people think of a crusty old white guy living a pampered life in the Western ivy tower when they hear the word, "economist. Luckily for the free market of ideas, there are men like Hernando de Soto.
De Soto is an immensely talented man. By the time he turned 38, he had already left his native Peru and established a successful career in business in Europe. But instead of living a life of luxury after earning enough money to retire at such a young age, he instead returned to his people in order to seek economic reform and answer the fundamental question of economics, namely, why are some people poor and others rich. He created the Institute for Liberty and Democracy, a pro-entrepreneurial think tank which promoted free market reform throughout the nation.
His institute brought numerous economic reforms, including granting land titles to 1. Under de Soto's view, any nation looking to build a strong market economy must also have a working information structure that transitions financial transactions from under the table to cataloged, legal knowledge. Barbara Bergmann was in many ways the leading voice for feminist economics of her generation. As someone who grew up in the midst of the great depression, she developed a deeply convicted belief that the government has a moral obligation to help the downtrodden.
She carried these convictions with her through her schooling, and eventually graduated from Harvard in She became further interested in issues of social justice when she read Gunnar Myrdal's book who himself won the Nobel Prize with Friedrich Hayek and spent ample time championing social justice in Swedish politics , An American Dilemma , which spoke of racial inequality in the workplace.
She authored and coauthored several important books, including The Economic Emergence of Women. She served as a staff economist for the White House Council of Economic Advisers during the 60's, cofounded the International Association for Feminist Economics, and received the American Economic Association's Carolyn Shaw Bell Award in for improving women's position in economics.
In addition to her work arguing that discrimination is manifest throughout labor markets, Bergmann also challenged typical economic metrics which drew conclusions from overly simplistic assumptions. Bergman held that many bad things came from capitalism, but also believed these disadvantages could be controlled, and that the system also produced much good. Unfortunately, after a lifetime of academic success, Bergmann met with an unfortunate end when she committed suicide in He later taught at several prestigious schools such as Carnegie Mellon, Brown, and Berkeley, before settling at Washington University in St.
Minsky considered himself a Keynesian with a heterodox interpretation of the famous economic forefather, but many now consider Minsky to be post-Keynesian. He opposed the efficient market hypothesis and instead advanced the financial instability hypothesis. He articulated the notion that when investors have to sell their non-speculative positions in order to pay their debts, the economy unwinds under the weight of deflationary pressure.
This has come to be known as the "Minsky moment. This and other pieces represent his opposition to the neoclassical synthesis interpretation of Keynes. Schwartz's research spans numerous topics, but her greatest contributions have examined economic history. This project laid a prolonged attack on the Federal Reserve, and systematically made the case that the Fed's policies are both what created and what sustained the Great Depression.
The work garnered extensive acclaim, being called one of the most influential economic texts of the 20th century by the libertarian CATO Institute, and received high praise from more centrist figures like Fed Chairman Ben Bernanke and left-leaning Paul Krugman. Her and Friedman's work has set much of the monetary policy for contemporary central bank policy in the wake of the financial crises. After Keynesian policies proved ineffective in stabilizing the economy, monetarists used their research to justify the role of central banks in stabilizing the economy.
Kenneth Rogoff is one of the most brilliant high school drop outs you could ever hope to meet. Of course, when you leave school because you are a world class chess player who goes on to play the game professionally and eventually become a grand master, you have a credential which is worth more than most degrees. Given Rogoff's intensely abstract and mathematically-tuned mind, it is not surprising that he is now a Harvard economics professor, a member of the prestigious Group of 30, and someone who has worked for both the International Monetary Fund and the Federal Reserve.
He is best known for two major contributions. Rogoff showed computation errors in the text which challenged the author's thesis that excess debt undermines GDP growth. Reinhart in turn corrected the computation errors, but continues to defend her initial thesis. The second major policy Rogoff is known for is much more recent. In he published a book titled The Curse of Cash. This argument, although unthinkable a couple decades ago, has become increasingly popular. Recently the European Union, Australia, and especially India have made similar policy decisions.
Some people come to study economics because they are good at math and find the financial realm to be a useful place to apply their skill set. Others are born with a silver spoon in their mouth, and apply their time and effort at the university towards this particular brand of academics. And then there are others who are motivated by personal conviction, who see the world in an unbalanced state and wonder how it got to be that way. Amartya Sen is the latter sort of man. He witnessed a great famine while growing up in India, and went on to study the causes of famine from a combination of economic and philosophical perspectives.
Sen has combined his knowledge of welfare economics and wealth distribution with philosophy's study of choice and game theory. His work in this field has significantly impacted the United Nations' Human Development Report, as well as landed him numerous prestigious teaching positions at places like Oxford and Cambridge. He now teaches economics, philosophy, and law at Harvard. He won the Nobel Prize in economics in Sen is especially known for his development of "capabilities.
Instead, a society must equip people with everything they need in order to implement that right and make it a live concept. Sen has effectively raised the bar on what a society needs to provide in order to grant its citizens rights, and consequently has transformed the role of the state. Modern economic theory tends to be a battle between loose money economic policies from left-leaning Keynesianism and right-leaning free market views. In their most pure forms, this can often involve a pedagogical preference for mathematical modeling by the former school of thought, and system building from the latter.
But Joseph Schumpeter represented a third way. He is a prime example of the historical school's approach to economics. Under this view, it is difficult to build universal laws of economics because unlike physics, economics changes based on its relationship to the culture which produced its context. Schumpeter, who began his career in Austria but later left under the encroaching forces behind World War II, eventually came to America and finished his career teaching at Harvard. He saw an unfortunate pattern unfolding before him.
For Schumpeter, capitalism was a powerful force for good that inevitably had the seeds for its own destruction embedded within itself. In his book, Capitalism, Socialism, and Democracy , he saw capitalism as leading to increases in wealth, which would then expand the intellectual class and attack the very foundations for the wealth that made their academic positions possible in the first place. Schumpeter popularized phrases in economics, such as "creative destruction," and further developed our models of entrepreneurship. Wassily Leontief was an American economist known for demonstrating the interconnected nature of the economy.
He described how changes in one branch of the economy can have both unforeseen and unintended consequences in another area. Early in life his political views brought him into conflict with his native Russian government. After it became obvious his ideological perspectives would never be accepted under communism, he fled to Germany in where he eventually pursued his PhD, but he later immigrated to the United States.
He taught at both Harvard and New York University. His technical achievements include developing the linear activity model of general equilibrium with its input-output analysis, describing the Leontief paradox in international trade, and developing the composite commodity theorem. He won the Noble Prize for showing how inputs for one industry create outputs for another. He also strongly advocated for increasing the use of data intensive mathematical analysis in order to make economics more empirical and less theoretical. Leontief educated some of recent history's most prominent economists.
Smith, and Thomas Schelling. His academic career has in large part involved unpacking the ideas embedded in his dissertation. In this work he proves the impossibility theorem, which shows the limitations underlying predicting people's preferences between options. His groundbreaking work in these fields as well as broader topics in general equilibrium theory and welfare theory led to him acquiring the Noble Prize in Arrow was also the first economist to map how learning curves affect entrepreneurial efficiency.
It seems intuitive to say that producers will learn more about how to produce their product as they do so, and will, with the passing of time, do so with ever greater efficiency. Nevertheless, Arrow was the first to prove this phenomenon. His successes have made him a leading figure in post-World War II neo-classical economics. In addition to his contributions to more typical areas of economic study, he also studied developing areas of the field such as endogenous growth theory and the economics of information.
Arrow was given an honorary doctorate from Uppsala University in Sweden, and is also one of the few foreign members of the Royal Society. Some may roll their eyes at those who acknowledge that something works in practice, but still ponder how to make it work in theory. Yet, the dominion of knowledge often broadens the boundaries of knowledge into the unexpected by first securing the cornerstones of common sense.
Gary Becker was both an economist and sociologist at the University of Chicago who systematically explained much intuitive phenomenon in an academically rigorous way. Becker incorporated his knowledge of the social sciences into his understanding of economics in numerous ways. For instance, he challenged the long held Marxist belief that an individual benefits himself via discrimination, he emphasized the central role self-interest plays in economic decision making, and he recast education as a type of investment.
He also studied human capital, altruistic behavior, and the rotten kid theorem. He served as president of the same association in He also helped found an entrepreneurial and charitable consulting company called the TGG Group. Mark Skousen was one of those guys that must have made a lot of his classmates extremely jealous.
Neoclassical Microeconomic Theory
Skousen developed a yearly conference dedicated to liberty called Freedom Fest. This is the largest annual collection of libertarian-minded thinkers in the world. Grantham University renamed its business school, "The Mark Skousen School of Business" in recognition of his many successes. He was recently named one of the 20 most influential living economists by Super Scholar , and appointed the Presidential Fellow at Chapman University from He has written 19 books on various academic and economic topics.
As his fears concerning inflation and his love of free market capitalism suggest, Skousen is a staunch defender of the Austrian School. When looking at the economic juggernaut that Germany became by the latter half of the 20th century and its status as first amongst equals that it acquired under the Eurozone, one would never know that Germany had been devastated by two world wars and the worst hyperinflation of any industrial nation. He was a major figure in the ordoliberalist movement. This school of thought advocated for free trade, but did so while retaining a greater role for central banking than what their Austrian school counterparts wanted.
Nevertheless, he remained critical of intervention laden theories such as Keynesianism. His heavy emphasis on human rights led him to increasingly appreciate Catholic social theory and the general benefits of a spiritually inclined culture. Israel Kirzner studied under Mises at New York University and eventually became a leading authority on his mentor's work. He would later spend the majority of his teaching career at the same school. Kirzner's research covers many topics in both theology and economics. The Liberty Fund has set out to publish his complete works, which is a project that spans ten volumes.
Furthermore, Israel is also a Rabbi and a leading rabbinic scholar. His most significant economic contributions have studied entrepreneurship. Whereas neoclassical economics stressed perfect competition, Kirzner criticized this perspective in his book Competition and Entrepreneurship on the grounds that it under-emphasized the importance of entrepreneurs. For Kirzner, people compete on a multifaceted level. Competition needs to deal with far more categories than what traditional inputs, outputs, and supply and demand models can provide.
Under Kirzner's view the entrepreneur takes on a leadership role within the larger, free society, and that leadership cannot be easily fit into the older perspectives' balancing equations. He received the Global Award for Entrepreneurship Studies in as well as an honorary doctorate from the Universidad Francisco Marroquin. The same university named its Entrepreneurship Center in his honor. He is widely considered the most respected representative of the Austrian school in the post Hayek world.
In many ways the modern central banking system is built in the image of Knut Wicksell. Wicksell was a Swedish economist born into a wealthy family, but he lost both his parents by the time he was Inheriting their substantial estate allowed him to dedicate his life to study. At first he focused on physics and mathematics, but his interests would eventually transition into economics. His biggest contribution to the field came from his defense of using interest rates to maintain price stability. What Wicksell argued for at the time was incredibly radical, remember, the world was still using the simplistic gold standard , but has since become the norm.
Every central bank in the world now, whether that be the People's Bank of China, the Federal Reserve, the European Central Bank, or any number of others, all use interest rates to try and hit their target inflation rates. If it had not been for Wicksell, the justification for letting these institutions exist, let alone dominate the financial markets, would never have formed.
Wicksell was largely a left-leaning social critic. He supported a social welfare state, and was married to the famous feminist Anna Bugge. He spent two months in prison for blasphemy after he wrote a satirical piece criticizing the virgin birth of Jesus. Despite all this, his work also had a substantial impact on the far more conservative Austrian school, which disagreed with his welfare state agenda but drew from many of his ideas about interest rates.
Thorstein B. Veblen represented a radical departure from previous social thinkers. Whereas many economists were accustomed to speaking of consumers as rational economic agents constantly making decisions based off the available evidence, Veblen argued that humans are far more based on instinct. Whereas the enlightenment thought of man as logical, and uniquely positioned within the natural world, by Veblen's day scientists were increasingly seeing humanity as just another part of the animal kingdom. Veblen took substantial training in philosophy and natural history and applied it to economics.
Under his view people were as much guided by sociology and embedded anthropological drives as any rational inclinations. His social theory criticized capitalism and became one of the leading voices in the progressive era. He vehemently attacked production for profit, and gave left-leaning thinkers an alternative to Marxism.
He saw society as plagued by a handful of individuals who controlled the means of production at the expense of everyone else. Veblen is seen as the founder of institutional economics, a school of thought that emphasizes evolution and the role of institutions in economics. This stood in stark contrast to classical views that much more heavily emphasized the individual. Vernon L. Smith is most famous for developing the field of experimental economics. His approach to the economic sciences grew out of his early training in electrical engineering he received his PhD in the field from Caltech in Afterwards he earned his doctorate in economics from Harvard in With this scientific training undergirding his background in economics, Smith found a unique solution to a typical problem.
He was struggling to explain basic microeconomic theory to his students in a succinct way while teaching a class in Principles of Economics. He decided to design an experiment the next semester that would incorporate the students. He wanted them to take part in a mini, simulated economy where the principles being discussed would guide the students' behavior. The class project was such a success that Smith began exploring ways to expand this approach. Eventually his colleagues encouraged him to develop his ideas into a full-blown research methodology, which he did over the course of two influential articles.
Eventually, Smith's work developed into a full-fledged sub-field of economics, and won him the Nobel Prize in Smith has tried to translate his economic expertise into practical, real world change. He has served as an expert for the Copenhagen Consensus, and has been one of the most active economists in open petition aimed at changing government policy.
Many scholars dream of becoming the center of an intellectual movement, of being recognized as the leader in their respective school of thought. A small number of geniuses achieve this in their old age. And then there are a lucky few like Peter Boettke who accomplish this feat amidst youthful vigor. Boettke is a professor of economics and philosophy at George Mason University, as well as the director of the F.
This rapidly rising star with increasingly international appeal has dedicated his time to defending analytical anarchism. This school of thought envisions a radically libertarian economy where individuals and institutions operate without any substantial government influence. The law largely exists to enforce contracts and protect property rights. Under Boettke's view, this extremely free market position would lead to greater prosperity than a more centralized system. Arthur Pigou was one of the finest examples of a British gentleman scholar. His opposition to violence led him to oppose World War I, but his love for his fellow man and his country also led him to volunteer as an ambulance driver and and go on numerous, dangerous missions.
He had many deep criticisms of Keynes, but nevertheless personally funded the man's work and remained friends with his rival throughout their lives. This is especially impressive considering how often Keynes criticized him in his chief work, The General Theory of Employment, Interest and Money. Pigou was part of the classical school of thought, and he specialized in welfare economics.
Pigou's most important work is his book, The Economics of Welfare. This text proposes externality. Under this view, one can correct a social problem by introducing a tax now called a Pigovian tax. This view has been utilized numerous times to correct excess and social ills.
Right now its biggest application is connected to environmentalism, since many would like to implement taxes on behaviors and products that damage the environment, such as the carbon tax. Pigou spent most of his career at Cambridge University when Cambridge was highly regarded as the leading economics institution in the world. There are two kinds of people in the world; those who try to fit our chaotic existence into a semblance of order, and those who believe that the best one can do is surf the waves of chaos as reality hurls them at you.
The latter group has much to thank Nassim Nicholas Taleb for. Taleb's famous book, The Black Swan , describes the power of unforeseeable events, and the damage they can wreak on unsuspecting societies. This Lebanese-American writer and statistician thinks of himself as an epistemologist of randomness as opposed to a businessman.
His work on probability examines the limitations of knowledge, and likewise proves the importance of anticipating seemingly impossible scenarios. This extremely skeptical starting point has led Taleb to oppose large scale social theorizing. He has gone so far as to say that the Nobel Prize in economics should be done away with, for the damage that economic metanarratives does is immense. Instead, he advances what he calls "robustification" and "anti-fragility. Regardless of whether you think Taleb goes too far in his sweeping rebuttal of most economic theorizing, at the very least this very bright man's words are a much needed call for sobriety in a market otherwise known for excess.
However, his regular column with the New York Times and common television appearances also make him a public intellectual. Part of this public persona is his brilliance, and part of it is his willingness to follow Keynesian logic to its absolute conclusion in a colorful manner.