EC 101.

03 FALL 2017

What is Economics?
It’s the study of scarcity, the study of how people use resources and respond to incentives, or the
study of decision-making. Economics is a broad discipline that helps us understand historical
trends, interpret today’s headlines, and make predictions about the coming years.

Historical Evolution of Economics

1776: Division of labor and invisible hand by Adam Smith

1803: The population growth theory by Thomas Robert Maltus

1804: Say’s Law by Jean-Baptiste Say

1817: The theory of comparative advantage by David Richardo

1867: The labor theory of value by Karl Marx

1871: Utility theory by William Stanley Jevons

1874: General equilibrium theory by Leon Walras

1879: The theory of value by Alfred Marshall

1889: Theory of conspicuous consumption by Thorstein Veblen

1893: Pareto optimality by Vilfredo Pareto

1936: The general theory of employment, interest and money by John Maynard Keynes

1939: IS-LM model by Paul Samuelson

1955: Kuznet’s Hypothesis by Simon Kuznet

1957: The theory of consumption function by Milton Friedman

1960: Fleming model and open economy of a country by Robert Alexander Mundell

1972: Tobin tax by James Tobin

1979: Prospect theory: An Analysis of Decision under Risk by Daniel Kahneman

1985: Mankiw’s menu cost model by N. Gregory Mankiw

1987: International trade and economics by Paul Krugman

1992: LM curve replaced Taylor’s Taylor Rule by John B. Taylor

2008: Nudge theory in behavioral economics by Richard Thaler