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Overview of the schools of cconomic thought
From "The Concise Guide To Economics": a book by Jim Cox
Introduction
The purpose of this work is to allow the reader who is interested in some difficult economic topics to grasp them and the free market viewpoint with very little effort. Having experienced the frustration of attempting to counter some of the statist viewpoints common in economic texts, news stories and other works and in discussions without such a reference guide, I decided to produce just such a work.
The reader will find the topics to be some of the most common ones about which anti-free market writers find fault along with analysis of some technical items normally addressed in a modern economics course with which this author finds fault. It is hoped that in the space of one or two pages the reader will see the plausibility of the free market perspective and the fallacy of the opposite view. Here, in a short space the essence of the views will be presented with a reference listing for material which the reader can consult if interested in further pursuing the topic. This reference book provides an easy alternative source of information for those unfamiliar with all of the works and arguments advanced in regard to economic theory and the virtues of the free market.
An abbreviated chronology of economic thought
1350 - 1700 / Spanish Scholastics
1766 / A. R. J. Turgot (1727 - 1781) Reflections
1776 / Adam Smith (1704 - 1790) The Wealth of Nations
1848 / Karl Marx (1815 - 1878) The Communist Manifesto
1912 / Ludwig von Mises (1881 - 1973) The Theory of Money and Credit
1936 / John Maynard Keynes (1890 - 1947) The General Theory
1962 / Milton Friedman (1912 - ) Capitalism and Freedom
1962 /
Murray N. Rothbard (1926 - 1995) Man, Economy, and State
About the Author...
Jim Cox is an Associate Professor of Economics and Political Science at the Gwinnett Campus of Georgia Perimeter College in Lawrenceville, Georgia and has taught the principles of Economics courses since 1979. Great Ideas for Teaching Economics includes nine of his submissions. As a Fellow of the Institute for Humane Studies his commentaries were published in The Cleveland Plain Dealer, The Wichita Journal, The Orange County Register, The San Diego Business Journal, and The Justice Times as well as other newspapers. His articles have also been published in The Atlanta Journal and Constitution, The Margin Magazine, Creative Loafing, The LP News, The Georgia Libertarian, The Gwinnett Daily News, The Atlanta Business Chronicle, The Gwinnett Post, The Gwinnett Citizen, The Gwinnett Business Journal and APC News. Cox has been a member of the Academic Board of Advisors for the Georgia Public Policy Foundation, and is currently on the Board of Scholars of the Virginia Institute for Public Policy. His website is gpc.edu/~jcox
Four major economic schools of thought
There are four major schools of economic thought today. An understanding of these four schools of thought is necessary for an understanding of economics. The four schools are Marxist, Keynesian, Monetarist, and Austrian.
Marxist economic thought is based on the writings of Karl Marx and Friedrich Engels, who wrote in the mid to late 1800's. Essentially, Marxist thought is based on economic determinism wherein societies go through the developmental stages of primitive communism, slave systems, feudalism, capitalism, socialism and finally communism. In each of these stages the economic system determines the views of those living during that system. Each includes a class struggle which leads inevitably to the next stage of societal development. Thus feudalism has a class struggle between landlord and serf which produces the next stage, capitalism. In capitalism the two classes are capitalist and worker. The conflict between capitalist and worker results in the overthrow of capitalism by the working class thus ushering in socialism and ending class conflicts. Socialism leads to the ultimate fate of humanity--communism.
* Marx, Karl and Friedrich Engels / The Communist Manifesto, / (New York: Pocket Books, 1964) /* Mises, Ludwig von / Historical Setting of the Austrian School, / (Auburn, Alabama: Ludwig von Mises Institute, 1984)
Keynesian views are named for the writings of John Maynard Keynes, particularly his 1936 book The General Theory. In this incredibly difficult book Keynes set forth an aggregated view of economic variables--total supply, total demand--working directly upon one another with no necessary tie to the actions of the individual decision-maker. Thus a "macro" economics was established. Keynesians call for government to manage total demand--too little demand leads to unemployment while too much demand leads to inflation. Thus a dichotomy was established in theory: either the problem of inflation would attend or the problem of unemployment, but never both simultaneously. Keynes viewed the free market as generating either too much or too little demand, inherently. Thus the need (ever so conveniently for the job prospects of Keynesian economists!) for demand management by government informed by the wisdom of the Keynesians.
* Keynes, John Maynard / The General Theory of Employment, Interest and Money, / (New York: Harcourt, Brace & Co., 1936)
Monetarist views are best represented by Milton Friedman and his followers who retained the Keynesian "macro" approach. However, while viewing the economy in this manner Monetarists lay the emphasis not on spending so much as on the total supply of money--thus the name Monetarist. In other than the macro economic issues--inflation, unemployment and the ups and downs of the business cycle--Monetarists tend to take the individual actor as the basis of their economic reasoning in areas such as regulation, function of prices, advertising, international trade, etc.
Friedman, Milton / Capitalism and Freedom, / (Chicago: University of Chicago Press, 1962)
The Austrian school was begun by Carl Menger in the late 1800's and was ultimately developed to its fullest by Ludwig von Mises--both of Austria. The Austrian school developed a body of thought with a conscious emphasis on the acting individual as the ultimate basis for making sense of all economic issues. Along with this individualist emphasis is a subjectivist view of value and an orientation that all action is inherently future-oriented. This book is written in the Austrian tradition.
* Rothbard, Murray N. / The Essential Ludwig von Mises, / (Auburn, Alabama: The Ludwig von Mises Institute, 1983)
* Schumpeter, Joseph / History of Economic Analysis, / (New York: Oxford University Press, 1978)