HISTORY OF ECONOMICS

 Ancient Greece (600 bc - 200 bc)

 Roman Empire (27 BC – 476)
 Industrial Revolution (1760 – 1830)
The Industrial Revolution is one of the most significant changes in recent human history. The
transition included people moving from countryside to larger cities, going from hand production to
the use of machines, increased use of steam power and going from wood and other bio-fuels to the
use of coal. For the first time in recent history the living standard of the masses of ordinary people
began experienced a sustainable growth. The classical school was largely influenced by the indus-
trial revolution and thus influenced economics.
 The Marginal Revolution (1865 – 1880)
There are four main reasons for this period being called the Marginal Revolution. First, during the
late nineteenth century much of the focus in economics turned from the classical long-term
development, that is the theory of population, welfare and growth, towards shorter terms. The use of
capital and labour in production, the choices of the consumer and utility became important subjects.
As hinted by the phrasing «the Marginal Revolution», the theory of decisions made at the margin
was much studied and strongly influenced future economics. This goes especially for the theory of
marginal utility. Second, the use of mathematics became more and more common, though Jevons
did not particularly contribute to this development. Walras was the major contributor on this field.
As mentioned earlier, von Thünen, Cournot and some others began this way of looking at
economics some years before Jevons’ time, but the majority did not. However, in the 1870's, largely
due to the major advances in natural science, the general view in economics took a more
mathematical approach. More than the pioneers mentioned earlier, Jevons, Menger and Walras
incorporated these new theories into a system. And perhaps more importantly, more than earlier
these thoughts gained acceptance among the scientific environment. Although both Walras and
Menger wrote important works in the field of marginal utility and the use mathematics in
economics, Jevons developed his theories rather individually. Finally, the generation of economist
including Jevons was, as mentioned earlier, among the first to have a formal education in
economics. Thus the scientific field gradually turned towards being a profession, which is rather
different from earlier economists.
 Physiocrats (1710 – 1765)
Physiocracy is an economic theory developed by the Physiocrats, a group of economists who be-
lieved that the wealth of nations was derived solely from the value of "land agriculture" or "land
development." Their theories originated in France and were most popular during the second half of
the 18th century. Physiocracy is perhaps the first well-developed theory of economics.
Quesnay, Cantillon, Tourgot
 Classical School (1735 – 1860)
Classical economics is widely regarded as the first modern school of economic thought. Its major
developers include Adam Smith, Jean-Baptiste Say, David Ricardo, Thomas Malthus and John
Stuart Mill. Classical economists claimed that free markets regulate themselves, when free of any
intervention. Adam Smith referred to a so-called invisible hand, which will move markets towards
their natural equilibrium, without requiring any outside intervention.
Pre-runner: - Adam Smith
Ricardo, Malthus, Say
 Pre-Marginalists (1800 – 1850)
The pre-marginalist did, as the marginalists, focus upon maximization and individual behaviour,
either on the production or the demand side of the economy. However, contrary to the marginalist,
they did not achieve much publication and fame in the scientific environment.
von Thünen, Dupuit, Cournot
 Neoclassical Economist (1850 – 1970)
Irving Fisher introduced the term neoclassical economy in 1900, but it was later used to include the
works of also earlier writers. The term is a umbrella term for several different schools including
marginalism. However, excluding institutional economics and Marxism. As expressed by E. Roy
Weintraub, neoclassical economics rests on three assumptions, although certain branches of neo-
classical theory may have different approaches: - People have rational preferences among outcomes
that can be identified and associated with a value. - Individuals maximize utility and firms maxim-
ize profits. - People act independently on the basis of full and relevant information.
Jevons, Menger, Walras, Marshall, Fisher, Pareto, Hicks
 The Marginalists (1850 – 1900)
The Marginalists includes Jevons, Menger and Walras, who were the most important contributors to
the Marginal Revolution. They worked on the decisions made by individuals in the economy and
developed the demand and supply curves. The three of the began the process of making economics
a profession.
Walras, Menger
 Austrian School (1865 - 1920)
The Austrian School of economics is a school of economic thought which bases its study of eco-
nomic phenomena on the interpretation and analysis of the purposeful actions of individuals It de-
rives its name from its origin in late-19th and early-20th century Vienna with the work of Carl
Menger, Eugen von Böhm-Bawerk, Friedrich von Wieser, and others.
 Keynesian Economists (1945 – 1980)
Neo-Keynesian economics is a school of macroeconomic thought that was developed in the post-
war period from the writings of John Maynard Keynes. A group of economists (notably John Hicks,
Franco Modigliani, and Paul Samuelson), attempted to interpret and formalize Keynes' writings,
and to synthesize it with the neo-classical models of economics. Their work has become known as
the neo-classical synthesis, and created the models that formed the core ideas of neo-Keynesian
economics. These ideas dominated mainstream economics in the post-war period, and formed the
mainstream of macroeconomic thought in the 1950s, 60s and 70s.
Pre-runner: - John Maynard Keynes
Modigliani, Samuelson
 New Classical Economists (1970 – Present)
New classical macroeconomics, sometimes simply called new classical economics, or monetarists,
is a school of thought in macroeconomics that builds its analysis entirely on a neoclassical frame-
work. Specifically, it emphasizes the importance of rigorous foundations based on microeconomics,
especially rational expectations.
New classical macroeconomics strives to provide neoclassical microeconomic foundations for
macroeconomic analysis. This is in contrast with its rival new Keynesian school that uses
microfoundations such as price stickiness and imperfect competition to generate macroeconomic
models similar to earlier, Keynesian ones. One of the most famous new classical models is the real
business cycle model, developed by Edward C. Prescott and Finn E. Kydland.
 New-Keynesian Economits (1991 – Present)
New Keynesian economics is a school of contemporary macroeconomics that strives to provide mi-
croeconomic foundations for Keynesian economics. It developed partly as a response to criticisms
of Keynesian macroeconomics by adherents of New Classical macroeconomics.
Two main assumptions define the New Keynesian approach to macroeconomics. Like the New
Classical approach, New Keynesian macroeconomic analysis usually assumes that households and
firms have rational expectations. But the two schools differ in that New Keynesian analysis usually
assumes a variety of market failures. In particular, New Keynesians assume that there is imperfect
competition[1] in price and wage setting to help explain why prices and wages can become "sticky",
which means they do not adjust instantaneously to changes in economic conditions.
Wage and price stickiness, and the other market failures present in New Keynesian models, imply
that the economy may fail to attain full employment. Therefore, New Keynesians argue that
macroeconomic stabilization by the government (using fiscal policy) or by the central bank (using
monetary policy) can lead to a more efficient macroeconomic outcome than a laissez faire policy
would.