The Economic Schools Of Thought

Two major economic thinkers of the of the early twentieth century, John Maynard Keynes and Friedrich A. Hayek, hold very different economic viewpoints. Keynes is among the most famous economic philosophers. Keynes, who's theories gained a reputation during the Great Depression in the 1930s, focused mainly on an economy's bust. It is where the economy declines and finally bottoms-out, that Keynesian economics believes the answers lie for its eventual recovery. On the other hand, Hayek believed that in studying the boom answers would be provided to lead the economy out of the bust that was sure to follow. Hayek backed the Austrian school of economics.

First and foremost, market is inherently composed of government part as a policy-maker. Some ideal economist may argue that a free market without the existence of government will optimize the social utility and make every single person better off. However, the model of supply and demand is just simply a model which merely provides us with theoretic research and a murky outlook to a piece of complicated and cruel real world. For instance, a lot of African countries are suffered from pain of war and economic depression, stuck into the chaotic vortex and lacked of the ability to escape away. The essence behind this phenomenon is quite astonishing. According to a United Nations development program’s report which places much poverty on bad government,

Economics is the social science that deals with the production, distribution, and consumption of goods and services and with the theory and management of economies or economic systems. All economists agree on one thing, the economy is large and it is unpredictable. However, throughout the years economists have developed some simple but widely applicable principles that are useful when trying to understand decisions that are made by everyday people to the workings of highly complex markets. There are Seven Core Principles of Economics. These principles are: Scarcity Principle, Cost-Benefit Principle, Principle of Unequal Costs, Principle of Comparative Advantage, Principle of Increasing Opportunity Cost, Equilibrium Principle, and

During the Great depression, British economist John Maynard Keynes developed what is known as the Keynesian economics. Keynesian economics is an economic theory of aggregate demand or the total spending in the economy. (Investopedia, LLC., 2003)

In the book, Naked Economics: Undressing the Dismal Science, Charles Wheelan is able to explain the complex science of economics in a way that makes it easy to understand and fun to read. Charles Wheelan connects current economic situations to past ones, like how recessions occur and how they can be ended or prevented. He also talks about how the Fed closely watches interest rates and inflation, and the relationship between inflation and money supply. Even though these topics are very important Charles Wheelan discusses many different interesting topics and that is why this book is an excellent book to help you understand this difficult topic.

For example, when a good is scarce, the prices goes up, so consumers try to avoid buying and therefore conserving the resource. Then, the suppliers want to find more of the source as to get a better profit. The reasons behind their actions are selfish, yet they benefit all of society. Smith identified that the pursuit of profit and the power of self-interest would increase motivation and result in more advances in technology. His model of capitalism was on the basis of freedom and selfishness as a motivator for society. It was also on the basis that the economy would go through recessions and expansions but fix itself. Recessions are periods in the economy in which unemployment goes up, while profits and spending goes down; a slowdown of the economy. An expansion is essentially the exact opposite. The classical model of economics states that the economy will continue to go through these fluctuations over time and will fix itself with no help, thus not needing a government to give influence.

Neoclassical economics dominates microeconomics, and together with Keynesian economics forms the neoclassical synthesis which dominates mainstream economics today. Although neoclassical economics has gained widespread acceptance by contemporary economists, there have been many critiques of neoclassical economics, often incorporated into newer versions of neoclassical

The author surveys three influential economists of the Classical era—Ricardo, Marx, and John Stuart Mill—and introduces the reader to their Macroeconomic perspectives based on some of their more prominent Macroeconomic theories.

Economics is based primarily on the ideas of two important figures; Adam Smith and Karl Marx. The two individuals; each with their distinctively different ideas on the “ideal” economy have inspired and allowed other individuals such as John Maynard Keynes and Milton Friedman to craft their own economic concepts as well as enhance previous ones. However, many differences in economic theories arise between the grandfathers of economics and two of the most important theorists of the 20th century.

Two economic models of thought are classical and Keynesian models. Each model takes a diverse approach to the economic education of financial policy, buyer behavior, and government spending. The classical model, which traces its origins to the 1770s, was the first systematic attempt to explain the determinants of the price level and the national levels of real GDP, employment, consumption, savings, and investments. Classical economist Adam Smith and others assumed that all wages and prices were flexible and that competitive markets existed throughout the economy. Classical economic theory is fixed in the theory of an (no government) unrestrictive economic market. This model especially its focus toward macroeconomics relies on four major assumptions: pure competition exists, wages and prices are flexible, people are motivated by self-interest, and people cannot be fooled by money illusion.

New Ideas From Dead Economics, written by Todd G. Buchholz, introduces different economic ideas from great economists throughout history. The book starts with the basic introduction of economists, and then points out the issue in the past of the ignorance of the economists. From his insightful perspective, Todd G. Buchholz illustrated the theories of the great economic thinkers in history and developed the modern economic thought based on those theories. Adam Smith’s “invisible hand” and “division of labors”, Alfred Marshall’s “economic time” and “elasticity model”, and John Maynard Keynes’s “Keynesian thoughts” are the five most intriguing ideas presented in the book that contributes to the modern economics.

The Great Depression of 1930 came as a shock to what was then the conventional wisdom of economics and to be able to see why it is crucial that we look into the classical tradition of the macroeconomics that dominated the economics profession when the recession began and the Keynesian economics approach used to correct the challenge. It is said that the Great Depression and the classical economics did not cooperate because the Great Depression reveals numerous flaws in the economics while Keynesian economics collaborated well with the Great Depression, the reason been that Keynesians found a solution to the great challenge that shook the entire countries of the world.

Nonetheless, when evaluating economic models, we should take into account the description, explanation and understanding of the world. In this essay, by using the Ricardian model as an example, I will illustrate that even if one only cares about the prediction, we should also address the importance of assumptions, which would then lead us to explore the true purpose of science.

As part of our term project for the Topics in Macroeconomics class we were assigned the topic of linking the Keynesian view with the Great Depression of the 1930s as well as using it to explain and critically evaluate the United States Federal Reserve’s Quantitative Easing policy, which was employed in an effort to combat the downfall of the world economy in the wake of the financial crisis of 2008.

Some of the most compelling topics that I learned in this topic only came into focus at the end of the course. Economics is a very large and complex study and reflecting on this subject, piece by piece, requires some patience and ability to put the pieces together. The relationships between simple choices, such as supply and demand, drives all economic and commercial exchange but only through the lens of economic models that attempt to layout this system by combing mathematical principles and psycho-social evaluation. All in all, this was very interesting introduction to some of the complex drivers that propel society.