History of economic thought

The history of economic thought deals with different thinkers and theories in the subject that became political economy and economics from the ancient world to the present day. It encompasses many disparate schools of economic thought. Greek writers such as the philosopher Aristotle examined ideas about the "art" of wealth acquisition and questioned whether property is best left in private or public hands. In medieval times, scholars such as Thomas Aquinas argued that it was a moral obligation of businesses to sell goods at a just price.

British philosopher Adam Smith is often cited as the father of modern economics for his treatise The Wealth of Nations (1776).^[1][2] His ideas built upon a considerable body of work from predecessors in the eighteenth century particularly the Physiocrats. His book appeared on the eve of the Industrial Revolution with associated major changes in the economy.^[3] Smith's successor's included such classical economists as the Rev. Thomas Malthus, David Ricardo, and John Stuart Mill. They examined ways the landed, capitalist and labouring classes produced and distributed national output and modeled the effects of population and international trade. In London, Karl Marx castigated the capitalist system, which he described as exploitative and alienating. From about 1870, neoclassical economics attempted to erect a positive, mathematical and scientifically grounded field above normative politics.

After the wars of the early twentieth century, John Maynard Keynes led a reaction against what has been described as governmental abstention from economic affairs, advocating interventionist fiscal policy to stimulate economic demand and growth. With a world divided between the capitalist first world, the communist second world, and the poor of the third world, the post-war consensus broke down. Others like Milton Friedman and Friedrich von Hayek warned of The Road to Serfdom and socialism, focusing their theories on what could be achieved through better monetary policy and deregulation. As Keynesian policies seemed to falter in the 1970s there emerged the so called New Classical school, with prominent theorists such as Robert Lucas and Edward Prescott. Governmental economic policies from the 1980s were challenged, and development economists like Amartya Sen and information economists like Joseph Stiglitz introduced new ideas to economic thought in the twenty first century.

More recent approaches in economics include the development of real business cycle theory and new Keynesian economics which have changed the field of macroeconomics. In microeconomics, the development of behavioral economics, experimental economics, financial analysis, game theory and Nash equilibrium, study how human, social, cognitive and emotional factors enable better understanding of economic decisions by consumers, borrowers, and investors. Sustainability issues which involve environmental economics and ecological economics^[4] have become important elements of economic thought.^[5]