Evolution of Economic Thought

• Industrial revolution
  • social thinkers → Economics
  • Kautilya to plato but this was systematic and persistant developement
  • characteristic: social & production org
  • problem of incentives
• Evolution
  • Adam Smith →
  • Social science embraces Pluralism
  • Undergrad textbook (Marshall-Walrus tradition): Neo-classical is truth → Market is the best way for resource alloc → not consistent with other compelling paradigms
• Criticisms, internal/external
  • internal: accepts premise of self-seeking individuals, criticizes fundamental theorems of welfare economics (information economics)
  • external: inductive tradition sucks! Why analyze atomistic individual to understand society (Marx and Veblen)
• Evolution of economic thought
  1. Pre-classical → Physiocrats, mercantilists.
  2. Classical policitical econ → Adam Smith, David Ricardo, Malthus, Karl Marx
  3. Information Economics critique of welfare theorem → Stiglitz
  4. Controversy between classical & Keynesian macroecon
  5. Recent developments: New Classical, New Keynesian, Real Business Cycle models
  6. Empirical economics and microeconomics

Introduction

Marshallian & Walrasian Stable

• Marshallian: \(Q\) follows \(P\)
• Walrasian: \(P\) follows \(Q\)