History of Economics

1000 BC

1000

2000

3000

4000

Roman Empire

Ancient Greece

●Black Tuesday

World War II

World War I

●Lehman Brothers Collapsed

Industrial Revolution

The Great Depression

★Today

The Marginal Revolution

Pre-Marginalists

American Insitutionalist

Classical School

Physiocrats

Keynesian Economists

New Classical Economists

Neoclassical Economist
The Marginalists

Austrian School

New-Keynesian Economits

Menger, Carl

Aristotle

Walras, Leon

Xenophon

Petty, William

Cantillon, Richard

Plato

Tourgot, Anne

Quesnay, Francois

Ricardo, David

Bentham, Jeremy

von Bawerk-Böhm, Eugen

Gossen, Hermann Heinrich

Veblen, Thorstein

Ohlin, Bertil

Samuelson, Paul

Fricsh, Ragnar

Freidman, Milton

Smith, Adam

Fisher, Irving

Haavelmo, Trygve

Lucas, Robert

Wicksell, Knut

Jevons, William S.
Malthus, Thomas

Say, Jean-Bapiste

Mill, James

Mill, John Stuart

Marx, Carl

von Thünen, Johann Hermann

Cournot, Antoine Augustin

Dupuit, Arsène Jules Étienne

von Weiser, Freidrich

Marshall, Alfred

Keynes, John Maynard

Edgeworth, Francis Ysidro

Pareto, Wilfed

Slutsky, Evgeny E.

Hicks, John R.

Modigliani, Franco

Krugman, Paul

Stiglitz, Joseph

Prescott, Edward

Kydland, Finn

Arrow, Kenneth

Solow, Robert

●"The Theory of Political Economy"

●Tableau Economique

●"The Wealth of Nations"

●An Essay on the Principles of Population

●Principles - The Principles of Political Economy

●Theory of Wealth

●Principles of Economics

●Mathematical Psychics

●The Treatise on Money

●The Probability Approach in Econometrics

●Economics: An Introductionary Analysis

●Lucas Critique

●On the theory of the budget of the consumer

●Value and Capital

●The General Theory of Employment, Interest and Money

Eras
Schools
Economists
Works
Eras
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 industrial 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.

World War I
1914 - 1918
The Great Depression
10/29/1929 - 1940

The Great Depression was a severe worldwide economic depression in the decade preceding World
War II. The timing of the Great Depression varied across nations, but in most countries it started in
1930 and lasted until the late 1930s or middle 1940s. It was the longest, most widespread, and
deepest depression of the 20th century. The depression originated in the U.S., after the fall in stock
prices that began around September 4, 1929, and became worldwide news with the stock market
crash of October 29, 1929 (known as Black Tuesday). The Great Depression had devastating effects
in countries rich and poor. Personal income, tax revenue, profits and prices dropped, while
international trade plunged by more than 50%. Unemployment in the U.S. rose to 25%, and in some
countries rose as high as 33%.

Black Tuesday
10/29/1929
World War II
1939 - 1945
Lehman Brothers Collapsed
09/15/2008

Lehman Brothers Holdings Inc. was a global financial services firm. Before declaring bankruptcy in
2008, Lehman was the fourth-largest investment bank in the US, doing business in investment
banking, equity and fixed-income sales and trading (especially U.S. Treasury securities), research,
investment management, private equity, and private banking.

Today
2013
Schools
Physiocrats
1710 - 1765
Physiocracy is an economic theory developed by the Physiocrats, a group of economists who
believed 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
Wikipedia

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
- Mill, James
- Mill, John Stuart
- Say
Wikipedia

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

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.
- Jevons
- Walras
- Menger
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 neoclassical 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 maximize profits.
- People act independently on the basis of full and relevant information.
- Jevons
- Menger
- Walras
- von Weiser
- von Böhm-Bawerk
- Marshall
- Wicksell
- Fisher
- Slutsky
- Pareto
- Hicks

Austrian School
1865 - 1920

The Austrian School of economics is a school of economic thought which bases its study of
economic phenomena on the interpretation and analysis of the purposeful actions of individuals It
derives 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.
- Menger
- von Böhm-Bawerk
- von Weiser

American Insitutionalist
1918 - 1950

The ‘institutional approach’ to economics goes back to a conference paper in 1918 by Walton
Hamilton titled ‘The Institutional Approach to Economic Theory’. The paper was a call for the
profession at large to adopt the ‘institutional approach’ and a conception of economic theory that
was:
(i) capable of giving unity to economic investigations of many different areas;
(ii) relevant to the problem of social control;
(iii) relate to institutions as both the ‘changeable elements of economic life and the agencies through
which they are to be directed’;
(iv) concerned with ‘process’ in the form of institutional change and development; and
(v) based on an acceptable theory of human behaviour, in harmony with the ‘conclusions of modern
social psychology’.
At its inception, then, institutionalism could be seen as a very promising programme – modern,
scientific, pointing to a critical investigation and analysis of the existing economic system and its
performance.
Institutionalism was critical of marginal utility theory as a basis for a theory of consumption and
emphasized the social nature of the formation of consumption values.
Institutional economics after 1945
Institutionalism had a strong position in American economics in the interwar period, but declined in
prestige after WWII from mainstream of American economics to a heterodox tradition on the margins
of the discipline.

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
- Hicks
- 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
framework. 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

microeconomic 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 in price and wage setting to help explain why prices and wages can become “sticky”,
1

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.

Economists
Xenophon
430 bc - 355 bc

Oikonomikos

Plato
428 bc - 347 bc

The ideal state.

Aristotle
384 bc - 322 bc

“Politics” and “Nicomachean Ethics”

Petty, William
1623 - 1687

Contributions to classical political economy in methods, concepts and analysis. Argued for optimal
taxation. A notion of surplus.

Quesnay, Francois
1694 - 1774

“Tableau Economique” – circular flow of economy – and founder of Physiocrats. Agriculture only
sector that produced net surplus.

Cantillon, Richard
1697 - 1734

His only work rediscovered by Jevons. Influenced by Petty. Land/Labour theory of value.
Demand/Supply determining market prices. Major influence on Quesnay.

Smith, Adam
1723 - 1790
Adam Smith is without doubt one of the most important economist throughout history. Although most
of the content in “The Wealth of Nations” were already discussed by earlier economist Smith put
together theoretical elements in a convincing manner and appeared to be dealing with the real world
instead of theoretical aspects. He wrote on the productive organization, the causes of economic
growth, value and distribution. His most famous theory is that of the invisible hand.
Bjerkholt Smith Note

Tourgot, Anne
1727 - 1781

Realized decreasing returns in agriculture. Analysis of productive use of capital in all sectors.
Forerunner to Adam Smith. Laissez-faire.

Bentham, Jeremy
1748 - 1832

Bentham was the founder of the utilitarian ethics and not an economist, but has non the less been
extremely important for the development of economics.

Mill, James
1763 - 1836

James Mill was along with Ricardo one of the founders of the classical school. However, his
contributions has been rather overshadowed by his son, John Stuart Mill, and by his colleague
Ricardo.

Malthus, Thomas
1766 - 1834

Argued against economist which believed in limitless improvement of society. Malthus placed the
longer-term stability of the economy above short-term expediency and thought that the dangers of
population growth would preclude endless progress towards a utopian society.

Say, Jean-Bapiste
1767 - 1832

Say was a French economist who became most famous for the “Say Law”, stating that “supply
creates its own demand”. He had classical liberal views, and argued for free trade.

Ricardo, David
1772 - 1823

Ricardo demonstrated the possibilities of using the abstract method of reasoning to formulate
economic theories. Ricardo’s theorizing attracted a band of a scholars, corroborating, amending and
extending his theories. His most important topics can be summarized to:
- The Theory of Rent
- The Labour Theory of Value
- The Distribution Problem
- The Currency Question
- Comparative Advantage
- Ricardian Equivalence

von Thünen, Johann Hermann

1783 - 1850

Von Thünen (1783-1850) was an important contributor to the ideas of profit maximization and
marginal productivity. One important insight was the idea of diminishing returns, i.e. how marginal
productivity varies with factor inputs.
The importance of going from one factor to two factors should not be underrated, this was the major
contribution by von Thünen.
The works and ideas of von Thünen was, however, not very noted in his own time and did not get
much attention before the rediscovery by Jevons.

Cournot, Antoine Augustin

1801 - 1877

Cournot (1801-1877) had unique insights in applying mathematics in economics and social sciences
and contributed in the theory of prices, monopoly and perfect competition.
Cournot’s ‘demand function’ is not a demand schedule in the modern sense, it summarizes the
empirical relationship between price and quantity sold, rather than the conceptual relationship
between price and the quantity sought by buyers. Cournot’s function is not derived from theories of
individual behavior, he notes that the “accessory ideas of utility, scarcity, and suitability to the needs
and enjoyments of mankind…are variable and by nature indeterminate, and consequently ill suited
for the foundation of a scientific theory” (Cournot, 1838: p.10).
Also Cournot’s works was mostly recognized with the marginal breakthrough in the 1870’s.

Dupuit, Arsène Jules Étienne

1804 - 1866

Dupuit made the first successful connection between marginal utility and demand, though only on a
individual level and did not make any comments upon the aggregate. His remarkable effort at
developing a cost-benefit analysis of public works led him to draw the demand curve in price-
quantity space. Unlike Cournot, Dupuit did not rest his demand curve on empirical intuition but rather
identified the demand curve as the marginal utility curve itself.

Mill, John Stuart

1806 - 1873

Mill’s work on economics were much influenced by his utilitarian views. His early economic
philosophy was one of free markets. However, he accepted interventions in the economy, such as a
tax on alcohol, if there were sufficient utilitarian grounds. He also supported the Malthusian theory of
population. By population he meant the number of the working class only. He was therefore
concerned about the growth in number of labourers who worked for hire. He believed that population
control was essential for improving the condition of the working class so that they might enjoy the
fruits of the technological progress and capital accumulation. He propagated birth control as against
moral restraint.
Gossen, Hermann Heinrich
1815 - 1858

Gossen independently presented, in 1854, a theory where demand was derived from the process of
utility-maximizing by the consumer. However, Gossen’s work did not gain much publicity and thus
were not discovered by Jevons until after publishing «The Theory of Political Economy» in 1871.
Gossen’s second law is the crucial one and often referred to nowadays just as ‘Gossen’s Law’. The
idea that, at the margin, the consumer substitutes between goods to obtain the same marginal utility
across goods, yields the downward-sloping demand curve for each of the goods. When the price of
a good rises, the marginal utility in terms of money (MUi/pi) declines and thus (by Gossen’s first law),
less of that good will be bought.

Marx, Carl
1818 - 1883

Marx held that labour power could be considered a commodity, like any other commodity for sale,
whose price could be explained in the same way as other commodities.Marx’s labour theory of value
differed from Ricardo’s by determining the absolute value of goods and services. Use value vs.
exchange value of commodities. Exchange value determined by the “socially necessary labour time”
embodied in the commodity. Marx was one of the first to point out that business cycle fluctuations
was a normal occurrence in capitalist economies. The class struggle leads inevitable to the
overthrow of the capitalist system and the dictatorship of the proletariat.

Walras, Leon
1834 - 1910

Walras was one of the three economist related to the Marginal Revolution, and he was y far the one
who evolved the use of mathematics in economy the most. He formulated the “marginal theory of
value”, independently of Jevons and Menger, and pioneered the development of a general
equilibrium theory.

Jevons, William S.
1835 - 1882

Jevons was one of the three economists related to the Marginal Revolution. His contribution
centered mainly about utility. He argued that utility was the reason for value and that economists
should maximize happiness, i.e. utility.He defined the final degree of utility as the additional utility
gain for the last additional commodity. From this he argued that utility is decreasing in amount of
commodity, that optimal allocation is reached when the final degrees of utility of different uses are
equal. He did not however add a demand curve. All hos theories are worked out independently of
other economists.

Menger, Carl
1840 - 1921

Menger was the third economist related to the Marginal Revolution. Also he developed a theory of
marginal utility, independently of other economists writing on the topic. He also explained how both
sides would gain from trade.
Marshall, Alfred
1842 - 1924

Alfred Marshall succeeded Ricardo and J.S. Mill as the great name of British economics. He
dominated the scene through eight editions of “Principles of Economics” from 1890 to 1920. The
700-page book was like a Bible for British economists and used in universities in other countries as
well. Marshall is regarded as founder of the Cambridge School of Economics. He used the ideas of
predecessors from Ricardo to Jevons and added a number of useful tools, concepts and graphs.

Edgeworth, Francis Ysidro

1845 - 1926

Edgeworth was the leading economist in Britain next to Marshall. His innovative brilliance made him
influential long after Marshall was virtually forgotten.Edgeworth applied utilitarianism as the
appropriate principle of distributive justice through a contractarian approach. He also argued for
maximum utility as the single principle in social sciences.
Edgeworth used Lagrange multipliers and even calculus of variations, techniques few economists
were familiar with. The book was difficult to read, because of both content and style. It was in this
book that Edgeworth introduced the generalized utility function, U(x, y, z, …), and drew the first
indifference curves. Utility curves entered in almost everything Edgeworth did in economics. He was
the first to apply formal mathematical techniques to individual decision making in economics.
Jevons had studied the equilbrium when all agents took prices as given, Edgeworth was concerned
with understanding how an equilibrium could be reached among few or many agents through
contracting. Such contracting led generally to multiple possible outcomes. Edgeworth’s achievement
was to show the conditions under which competition between buyers and sellers, through a barter
process, lead to the same point as when all agents act as price takers.
Edgeworth’s attitude to taxation was similar to that of the major classical economists (and unlike
Wicksell), in rejecting a benefit approach on the argument that taxation is not an economic bargain
governed by competition, it is about determining the distribution of taxes for common purposes.

Pareto, Wilfed
1848 - 1923

Pareto’s name is associated with general equilibrium, welfare economics and ordinal utility. He was
a forerunner of the axiomatic approach culminating with the Arrow–Debreu model. The impact of
Pareto’s work was not immediate and to begin with confined to Italy and France.Pareto was
preoccupied by the idea of the economy as a complete system and by the interaction between the
various parts of the economy, in line with Walras’ thinking and far from the partial equilibrium
analysis of Marshall. One of Pareto’s major contributions was to establish that an ordinal notion of
utility is sufficient for the construction of equilibrium theory. Few have studied general equilibrium
theory without learning about the Edgeworth box. Despite the name, this graphical representation
first appeared in Pareto’s Manuale, where it was used to motivate the attempted proofs of the
welfare theorems in the general case. Pareto provided the standard equilibrium conditions for the
consumer side of economy, with the marginal rate of substitution equal to the price ratio. Of all
Pareto’s contributions it is ‘Pareto optimality’ that has made the greatest impact. Yet, it was not
Pareto who first gave a definition of this concept, as Edgeworth in 1881 had defined a situation in
which the utility of each individual is maximized given the utilities of all others. Pareto had the insight
that this notion of efficiency was independent of all institutional arrangements and distributional
considerations. Pareto went on to establish the first theorem of welfare economics, i.e. a competitive
equilibrium is a Pareto optimum and a tentative version of the second theorem, that any Pareto
optimum can be obtained as a competitive equilibrium from an appropriate distribution of initial
resources.

von Weiser, Freidrich

1851 - 1926

Wieser’s two main contributions are the theory of “imputation”, establishing that factor prices are
determined by output prices (reversing the Classicals) and the theory of “alternative cost” or
“opportunity cost” as the foundation of value theory. These became fundamental “subjectivist” pillars
in neoclassical theory. Wieser can be credited with turning neoclassical economics firmly towards
the study of scarcity and resource allocation – a fixed quantity of resources and unlimited wants – all
based on the principle of marginal utility.

Wicksell, Knut
1851 - 1926

Wicksell’s influence on modern economic thought has been profound and far-reaching. It is noticable
not least in the discussion of saving and investment that preceded the Keynesian breakthrough, in
Hayeks’s overinvestment theory of the business cycle emphasizing the notions of capital shortage
and forced saving, in Schumpeter’s theory of economic development, in Frisch’s dynamic theory of
the busines cycles , and overwhelmingly in Swedish economic thought. Wicksell’s use of
mathematics, although often somewhat hidden by literary form of presentation, set an important
precedent. Wicksell developed the marginal productivity theory of distribution, integrating it with the
theory of capital and interest. His claim to fame today rests much on his contribution to monetary
theory, based on the notion of monetary equilibrium and the distinction between the actual rate of
interest and the “natural” one.
Wicksell’s third contribution is his celebrated feedback policy rule, under which the central bank
stabilizes the price level by adjusting its interest rate in response to price level deviations from target,
stopping only when prices converge to target. A precursor of the modern Taylor rule, Wicksell’s rule
is the prototype of all feedback policy rules discussed in the monetary literature today.

von Bawerk-Böhm, Eugen

1851 - 1914

Böhm-Bawerk is particularly well know for his ‘three reasons’ for interest, which may be viewed as
BB’s personal contribution ot the Austrian economics. 26

Veblen, Thorstein
1857 - 1929

Veblen was primarily an economist who wrote extensively

on methodological issues. Veblen believed that technological developments would eventually lead
toward a socialistic organization of economic affairs, but his views regarding
socialism and the nature of the evolutionary process of economics differed sharply from those of
Marx. While Marx saw socialism as the ultimate goal for civilization and the working-class as the
group that would establish it, Veblen saw socialism more as an intermediate phase in an ongoing
evolutionary
process in society that would be brought about by the natural decay of the business enterprise
system and by the inventiveness of engineers.
Fisher, Irving
1867 - 1947

Irving Fisher is (according to James Tobin) the greatest economist America has produced. He made
seminal and durable contributions on a wide range of economic science. Strongly promoting
mathematical economics (with Cournot
as his great hero). Much of standard neoclassical theory today is Fisherian in origin, spirit and
substance. Most modern models of capital and interest are essentially variations on Fisher’s theme,
the conjunction of intertemporal choices and
opportunities. Fisher’s theory of money and prices is the foundation for much of contemporary
monetary economics. Fisher was deeply involved with quantitative empirical research, index
numbers and their properties (on which
he was a world authority), and other early econometric approaches. Fisher’s ideas have frequently
been rediscovered by others, e.g. distributed lag regression, life cycle saving theory, the ‘Phillips
curve’, ‘consumption tax’ rather than ‘income tax’, the modern quantity theory of money, real vs.
nominal interest rates, and many other standard tools in economists’ kits. Fisher was not fully
appreciated by his contemporaries, partly because he was far ahead of
others, partly due to the reputation he lost.

Slutsky, Evgeny E.
1880 - 1948

Slutsky was a mathematician, statistician and economist, known in economics mainly for the 1915
article, which was unnoticed until the mid-1930s but influenced the further development of consumer
theory. Building on earlier work by Pareto, Slutsky showed that the effect of a price change on the
quantity demanded can be divided into two effects, which we are familiar with as the Slutsky
equation.

Keynes, John Maynard

1883 - 1946

John Maynard Keynes was a British economist whose ideas have fundamentally affected the theory
and practice of modern macroeconomics, and informed the economic policies of governments. He
built on and greatly refined earlier work on the causes of business cycles, and is widely considered
to be one of the founders of modern macroeconomics and the most influential economist of the 20th
century. His ideas are the basis for the school of thought known as Keynesian economics, as well as
its various offshoots. In many ways, subsequent developments in 20th century economics can be
viewed as either building on Keynes’ ideas or reacting against them.
In the 1930s, Keynes spearheaded a revolution in economic thinking, overturning the older ideas of
neoclassical economics that held that free markets would, in the short to medium term, automatically
provide full employment, as long as workers were flexible in their wage demands. Keynes instead
argued that aggregate demand determined the overall level of economic activity, and that
inadequate aggregate demand could lead to prolonged periods of high unemployment. He
advocated the use of fiscal and monetary measures to mitigate the adverse effects of economic
recessions and depressions. Following the outbreak of the Second World War, Keynes’s ideas
concerning economic policy were adopted by leading Western economies.Keynes died in 1946, but
during the 1950s and 1960s the success of Keynesian economics resulted in almost all capitalist
governments adopting its policy recommendations.

Fricsh, Ragnar
1895 - 1973

Frisch defined Econometrics with the following statement; “Intermediate between mathematics,
statistics, and economics, we find a new discipline which, for lack of a better name, may be called
econometrics.
Econometrics has as its aim to subject abstract laws of theoretical political economy or “pure”
economics to experimental and numerical verification, and thus to turn pure economics, as far as
possible, into a science in the strict sense of the word.”
Bjerkholt Notes

Ohlin, Bertil
1899 - 1979

Olin’s name lives on in one of the standard mathematical model of international free trade, the
Heckscher–Ohlin model, which he developed together with Eli Heckscher.

Hicks, John R.
1904 - 1989

Hicks may have been close to being in the last generation of economists who could take up almost
any theoretical problem.
The most familiar of his many contributions in the field of economics were his statement of consumer
demand theory in microeconomics, and the IS/LM model (1937), which summarised a Keynesian
view of macroeconomics. His powerful and original mind first made its mark on what is now called
microeconomics and in welfare economics. Hicks’ best-known work, Value and Capital (1939), goes
beyond microeconomics to offer economic dynamics and discussion of monetary theory which
reaches into macroeconomics. Value and Capital is a work very rich in ideas and a short account
cannot do it justice. It showed that the basic results of consumer theory could be obtained from
ordinal utility; it expounded what became known as the ‘Hicksian substitution effect’, obtained by
varying income as relative prices changed so as to maintain an index of utility constant

Haavelmo, Trygve
1911 - 1999

In 1989 Haavelmo was awarded the Nobel Memorial Prize in Economics for ‘his clarification of the
probability theory foundations of econometrics and his analyses of simultaneous economic
structures’. It is hardly an exaggeration to denote the Probability Approach as the greatest landmark
in the history of econometrics.

Freidman, Milton
1912 - 2006

He theorized there existed a “natural” rate of unemployment, and argued that governments could
increase employment above this rate (e.g., by increasing aggregate demand) only at the risk of
causing inflation to accelerate. He argued that the Phillips curve was not stable and predicted what
would come to be known as stagflation. Milton Friedman’s works include many monographs, books,
scholarly articles, papers, magazine columns, television programs, videos, and lectures, and cover a
broad range of topics of microeconomics, macroeconomics, economic history, and public policy
issues.
Samuelson, Paul
1915 - 2009

Samuelson is considered to be one of the founders of neo-Keynesian economics and a seminal

figure in the development of neoclassical economics. He was also essential in creating the
Neoclassical synthesis, which incorporated Keynesian and neoclassical principles and still
dominates current mainstream economics.

Modigliani, Franco
1918 - 2003

Modigliani made two path-breaking contributions to economic science:

Along with Merton Miller, he formulated the important Modigliani–Miller theorem in corporate finance.
This theorem demonstrated that under certain assumptions, the value of a firm is not affected by
whether it is financed by equity (selling shares) or debt (borrowing money).
He was also the originator of the life-cycle hypothesis, which attempts to explain the level of saving
in the economy. Modigliani proposed that consumers would aim for a stable level of consumption
throughout their lifetime, for example by saving during their working years and spending during their
retirement.

Arrow, Kenneth
1921 - Present

In economics, he is considered an important figure in post-World War II neo-classical economic

theory. Many of his former graduate students have gone on to win the Nobel Memorial Prize
themselves. Arrow’s impact on the economics profession has been tremendous. For more than fifty
years he has been one of the most influential of all practicing economists.
His most significant works are his contributions to social choice theory, notably “Arrow’s impossibility
theorem”, and his work on general equilibrium analysis. He has also provided foundational work in
many other areas of economics, including endogenous growth theory and the economics of
information.
Working with Gérard Debreu, Arrow produced the first rigorous proof of the existence of a market
clearing equilibrium, given certain restrictive assumptions. For this work and his other contributions,
Debreu won the Nobel prize in 1983. Arrow went on to extend the model and its analysis to include
uncertainty, the stability of equilibria, and whether a competitive equilibrium is efficient.

Solow, Robert
1924 - Present

Robert Merton Solow is an American economist particularly known for his work on the theory of
economic growth that culminated in the exogenous growth model named after him.

Lucas, Robert
1937 - Present

One of the most influential economists since the 1970s, he challenged the foundations of
macroeconomic theory (previously dominated by the Keynesian economics approach), arguing that
a macroeconomic model should be built as an aggregated version of microeconomic models (while
noting that aggregation in the theoretical sense may not be possible within a given model). He
developed the “Lucas critique” of economic policymaking, which holds that relationships that appear
to hold in the economy, such as an apparent relationship between inflation and unemployment,
could change in response to changes in economic policy. This led to the development of New
Keynesian economics and the drive towards microeconomic foundations for macroeconomic theory.
Lucas is also well known for his investigations into the implications of the assumption of rational
expectations. He developed a theory of supply that suggests people can be tricked by unsystematic
monetary policy; the Lucas-Uzawa model (with Hirofumi Uzawa) of human capital accumulation; and
the “Lucas paradox”, which considers why more capital does not flow from developed countries to
developing countries. He also contributed foundational contributions to behavioral economics, and
has provided the intellectual foundation that enables us to understand deviations from the law of one
price based on the irrationality of investors.

Prescott, Edward
1940 - Present

Edward Prescott and Finn Kydland Nobel prize for economics was based on two papers Prescott
and Kydland wrote. In the first paper, written in 1977 “Rules Rather than Discretion: : The
inconsistency of optimal planning” Prescott and Kydland argue that purpose and goals of economic
planning and policy is to trigger a desired response from the economy. However, Prescott and
Kydland realized that these sectors are made up of individuals, individuals who make assumptions
and predictions about the future. As Prescott and Kydland stated “Even if there is a fixed and agreed
upon social objective function and policy makers know the timing and magnitude of the effects of
their actions… correct evaluation of the end-of-point position does not result in the social objective
being maximized.” Prescott and Kyland were pointing out that agents in the economy already factor
into their decision making the assumed response by policy makers to a given economic climate.
Additionally Prescott and Kydland felt that the policy makers due to their relationship with
government suffered from a credibility issue. The reason for this dynamic is that the political process
is designed to fix problems and benefit its citizens today. Prescott and Kydland demonstrated this
with a simple yet convincing example. In this example they take an area that has been shown likely
to flood (a flood plain) and the government has stated that the “socially optimal outcome” is to not
have houses be built in that area and therefore the government states that it will not provide flood
protection (dams, levees, and flood insurance) rational agents will not live in that area. However,
rational agents are forward planning creatures and know that if they and others build houses in the
flood plain the government which makes decisions based on current situations will then provide flood
protection in the future. While Prescott never uses these words he is describing a moral hazard.

Kydland, Finn
1943 - Present

Edward Prescott and Finn Kydland Nobel prize for economics was based on two papers Prescott
and Kydland wrote. In the first paper, written in 1977 “Rules Rather than Discretion: : The
inconsistency of optimal planning” Prescott and Kydland argue that purpose and goals of economic
planning and policy is to trigger a desired response from the economy. However, Prescott and
Kydland realized that these sectors are made up of individuals, individuals who make assumptions
and predictions about the future. As Prescott and Kydland stated “Even if there is a fixed and agreed
upon social objective function and policy makers know the timing and magnitude of the effects of
their actions… correct evaluation of the end-of-point position does not result in the social objective
being maximized.” Prescott and Kyland were pointing out that agents in the economy already factor
into their decision making the assumed response by policy makers to a given economic climate.
Additionally Prescott and Kydland felt that the policy makers due to their relationship with
government suffered from a credibility issue. The reason for this dynamic is that the political process
is designed to fix problems and benefit its citizens today. Prescott and Kydland demonstrated this
with a simple yet convincing example. In this example they take an area that has been shown likely
to flood (a flood plain) and the government has stated that the “socially optimal outcome” is to not
have houses be built in that area and therefore the government states that it will not provide flood
protection (dams, levees, and flood insurance) rational agents will not live in that area. However,
rational agents are forward planning creatures and know that if they and others build houses in the
flood plain the government which makes decisions based on current situations will then provide flood
protection in the future. While Prescott never uses these words he is describing a moral hazard.

Stiglitz, Joseph
1943 - Present

Stiglitz’s work focuses on income distribution, asset risk management, corporate governance, and
international trade.

Krugman, Paul
1953 - Present

Krugman is known in academia for his work on international economics (including trade theory,
1011
economic geography, and international finance), liquidity traps, and currency crises. He also writes
on topics ranging from income distribution to international economics. Krugman considers himself a
liberal.

Works
Tableau Economique
1759

Quesnay

"The Wealth of Nations"

1776

Adam Smith

An Essay on the Principles of Population

1798

Thomas Malthus

Theory of Wealth
1838

Cournot

Principles - The Principles of Political Economy

1848

John Stuart Mill

"The Theory of Political Economy"

1871

Jevons’ main work

Mathematical Psychics
1881

Edgeworth

Principles of Economics
1890

Alfred Marshall

On the theory of the budget of the consumer

1915

Slutsky

The Treatise on Money

1930

Keynes

The General Theory of Employment, Interest and Money

1936

Keynes

Value and Capital

1939

Hicks

The Probability Approach in Econometrics

1944

Haavelmo

Economics: An Introductionary Analysis

1948
Samuelson

Lucas Critique
1976