History of Economic Thought Overview

An economic theory (16th-18th centuries) where a nation's wealth is measured by its accumulation of precious metals, like gold and silver, and a positive balance of trade is crucial.

An important school of economic thought in the 1700s-1850s, emphasizing free markets and individual self-interest as drivers of economic growth.

A prominent figure in the Classical School, known for his book "The Wealth of Nations" (1776) and the concept of the "invisible hand".

The idea that individuals pursuing their own self-interest can unintentionally benefit society as a whole, through market forces.

The difference between a country's exports and imports.

An individual, business, or government participating in the economy, such as a household, producer or a company.

"The Wealth of Nations" is a keystone book in economics, famously authored by Adam Smith.

Government policies and regulations affecting the economy.

A renowned economist known for his explanation of the Great Depression and works like 'General Theory of Employment, Interest and Money' and 'Treatise on Money'.

A school of economic thought emphasizing government intervention in the economy to stimulate demand and employment, especially during recessions.

A leading figure in the Neoclassical School, known for his book 'Principles of Economics' (1890) and influential concepts like supply and demand, the Marshallian Cross, and marginalism.

A diagram used in microeconomics to represent the intersection of supply and demand curves, determining the equilibrium price and quantity of a good.

A method in economics where one agent or industry is analyzed in isolation, assuming other factors remain constant.

A Latin phrase meaning 'all else being equal', used in economics to isolate the effect of one variable while assuming others remain constant.

An economic theory that emphasizes the value of additional units of a good, service, or resource.

A country's ability to produce a good or service at a lower opportunity cost than another country, even if it's not the most efficient producer overall.

The idea that population growth will outpace food production, leading to widespread poverty, famine, and misery.

The ethical theory that actions are morally right if they maximize overall utility (happiness), regardless of religious beliefs.

Countries can benefit from trade, even if one is more efficient in producing all goods, as long as they have different relative efficiencies. This means specializing in goods where a country has a lower opportunity cost.

He believed population growth would outpace food production, leading to poverty, famine, and misery. He saw vice, war, and epidemics as potential checks on population growth.

Actions should be judged based on their contribution to overall happiness, maximizing utility for the greatest number of people. This doctrine excludes religious influence.

Mill argued that individuals should be free to act as they please, as long as they don't harm others. He believed that preventing harm to others is the only justification for restricting individual liberty.

Malthus identified 'checks' on population growth as factors that curb population growth, such as vice, war, and epidemics. He believed that these factors would ultimately prevent population from exceeding food production.

The mistaken belief that what's true for an individual economic agent (like a consumer or firm) is automatically true for the entire economy.

A school of thought that emphasizes government intervention to manage economic fluctuations, particularly through fiscal and monetary policies.

The total demand for all goods and services in an economy.

Keynesians prioritize solving short-term economic problems, as opposed to long-term solutions that might take time.

Keynesians believe that government actions like spending, taxes, or adjusting interest rates are necessary to stabilize the economy.

A model used to analyze the relationship between interest rates, output, and the demand for money.

Known as the "American Keynes", Hansen extended Keynesian ideas and was a key figure in developing the IS-LM model.

A challenge to Keynesian theory, where the IS-LM model sometimes produces multiple possible interest rates for a given level of output.