Lecture 1

Introduction
Why study History of Econ
thoughts?
Economic conditions through
the years
Overview of the
Evolution of Econ Thoughts
Five Major Questions
for each school of
thoughts
Why STUDY
the PAST?
Why STUDY
the History of
Economic Thoughts?
 2 VIEWS

no need to study the One cannot possess knowledge of

because it is a any economic doctrine until one
history of errors. knows something of its history.
 From the book What’s Wrong with Economics?
•Robert Skidelsky
https://doi.org/10.12987/9780300252767-012

“The main reason for studying the history of economic

thought is to question the claim that economic knowledge
is cumulative. Mainstream economics views economics as
part of the Ascent of Man. It believes that all useful
economic knowledge from the past is incorporated in
present theories”.
 study of the origin and
development of
economic ideas and
their interrelations

“a critical account of the development of

economic ideas, searching into their origin,
interrelations and manifestations”
~ Prof. Hanley (Boston College)
 Econ 104
2nd Semester, SY 2022-2023
Definition

Theory – is a body of knowledge made up

of different explanation about specific or
related phenomena.

- An explanation about how and why a

certain event occur.
 Econ 104
2nd Semester, SY 2022-2023

Economic Theory – represents the way in

which economists conceptually organize
or model the interdependent
components of economic life including
production, consumption, incomes, prices,
employment, exports, imports, savings and
investment.
 Econ 104
2nd Semester, SY 2022-2023

Rationale of Studying Economics and

Its History
ü Economic Theories
Ø A study on economic theories allow
us to gain an understanding of how
an economy works; that is, what
makes it hang together and function;
 Econ 104
2nd Semester, SY 2022-2023

Rationale of Studying Economics and

Its History
ü Economic Theories
Ø It helps society reach the economic
goals which it has selected for itself.
Society can progress faster in
achieving economic goals through a
knowledge of economics.
 Econ 104
2nd Semester, SY 2022-2023

Rationale of Studying Economics and

Its History
ü Economic Theories
Ø A study on economic theories
enhances ones understanding of
contemporary economic thought
 Econ 104
2nd Semester, SY 2022-2023

Rationale of Studying Economics and

Its History
ü Economic Thoughts
Ø The vast amount of analysis and
evidence which economists have
generated over the decades can
provide a closer check on
irresponsible generalizations
 Econ 104
2nd Semester, SY 2022-2023

Rationale of Studying Economics and

Its History
ü Economic Thoughts
Ø It provides perspective and
understanding of our past, of
changing ideas and problems, and
of our direction or movement
 Econ 104
2nd Semester, SY 2022-2023

Rationale of Studying Economics and

Its History
ü Economic Thoughts
Ø It helps us appreciate that no group has
a monopoly on the truth, and that many
groups and individuals have contributed
to the richness and diversity of our
intellectual, cultural, and material
inheritance
 Econ 104
2nd Semester, SY 2022-2023

Rationale of Studying Economics and

Its History
ü Economic Thoughts
Ø The study of the evolution of economic
thought and the changing social
background associated with it can
illuminate changes in other areas of
concern to us, such as politics, art,
literature, music, philosophy and science.
 Econ 104
2nd Semester, SY 2022-2023

Rationale of Studying Economics and

Its History

ü A better understanding of these

areas of knowledge can help explain
changing economic ideas.
 Econ 104
2nd Semester, SY 2022-2023

Rationale of Studying Economics and

Its History

UNFORTUNATELY, the
accumulation of
knowledge and
understanding does not
necessarily lead to a
better world.
 Econ 104
2nd Semester, SY 2022-2023

Rationale of Studying Economics and

Its History

üEVEN if all people are perfectly

well-informed on economic matters,
disagreements and conflicts would
continue because of different ideas,
for example about:
 Econ 104
2nd Semester, SY 2022-2023

a) what is good and what is bad;

b) which good should be adopted and
which rejected;
c) What the priority of each goal
should be.
 Econ 104
2nd Semester, SY 2022-2023

üEVEN if we agree on the goal for the

economy, we will disagree on their relative
importance.
üBUT, the study of economics helps us
devise systems through which the common
good can be individually and socially
defined and through which people can
pursue their interests while simultaneously
contributing to the well-being of others.
 Econ 104
2nd Semester, SY 2022-2023
 Econ 104
2nd Semester, SY 2022-2023

Economic thought consists of both a vision and a

formal theory.

The vision is the broad perception with which

individuals look at the world.

The theory comprises the specific models that

capture the vision.

To understand the thought of individual economists,

one must understand both their vision and their
model.
 Econ 104
2nd Semester, SY 2022-2023

Economic Conditions/Characteristics

üA.D.1500–3000 B.C.

Ø There was little trade

Ø Most goods were produced for
consumption in the community
Ø Money and credit not widely
used
 Econ 104
2nd Semester, SY 2022-2023

Economic Conditions/Characteristics
üA.D.1500–3000 B.C.

Ø Strong national status and

integrated national economies
had not yet evolved to a
considerable extent
- Nor had any schools of economic
thought been formed
 Econ 104
2nd Semester, SY 2022-2023

Economic Conditions/Characteristics
üSince 1500 A.D.
- Highly divergent economic conditions from
one time to another, and one place to
another
- Trade was expanding rapidly because of
geographical exploitation
- Money economy increasingly superceded
the natural or self sufficient economy
 Econ 104
2nd Semester, SY 2022-2023

Economic Conditions/Characteristics

üSince 1500 A.D.

- National status and unified national
economies became a dominant force
- Economic schools arose representing a
unified and systematic bodies of thought
and policy formulation
Evolution of Economic Thought

1700 1725 1750 1775 1800 1825 1850 1875 1900 1925 1950 1975

From MERCANTILISM GROWTH

1500 MUN, MALYNES Forerunners: & DEV’T
DAVENANT, COLBERT HARROD,
PETTY Other schools DOMAR,
SCHUMPETER
NURKSE,
PHYSIOCRACY LEWIS,
QUESNAY, TURGOT SCHULTZ

NORTH, CANTILLON, HUME

CLASSICISM
SMITH, MALTHUS, RICARDO
BENTHAM, SAY, SENIOR, MILL

UTOPIAN SOCIALISM MARXISM & SOCIALISM

OWEN, FOURIER, SAINT-SIMON MARX, BLANC, KINGSLEY

1700 1725 1750 1775 1800 1825 1850 1875 1900 1925 1950 1975
1775 1875 1900 1925 1950 1975

NORTH, CANTILLON, HUME IMPERFECT

COMPETITION
CLASSICISM SRAFFA, CHAMBERLIN,
SMITH, MALTHUS, RICARDO ROBINSON
BENTHAM, SAY, SENIOR, MILL
NEW CLASSICISM
FRIEDMAN, STIGLER,
BECKER
COURNOT, DUPUIT, VON THUNEN
MARGINALISM & NEOCLASSICISM/ JEVONS, MENGER, VON WIESER,
VON BOHM-BAWERK, EDGEWORTH, CLARK, MARSHALL

MATHEMATICAL ECONOMICS
WALRAS, LEONTIFF, VON NEUMANN, MORGENSTERN, HICKS

KEYNESIAN ECONOMICS
KEYNES, HANSEN, LERNER, SAMUELSON
POST KEYNESIAN NEW KEYNESIAN

MONETARY ECONOMICS
WICKSELL, FISHER, HAWTREY

WELFARE ECONOMICS
PARETO, PIGOU, VON MISES, LANGE,
ARROW, BUCHANAN

INSTITUTIONALISM
GERMAN HISTORICISM VEBLEN, MITCHELL, GALBRAITH
ROSCHER, SCHMOLLER, WEBER

1775 1875 1900 1925 1950 1975

Overwhelm?
Evolution of Economic Thought
 Econ 104
2nd Semester, SY 2022-2023

Five Major Questions

1. What are the historical background
of the school;
2. What are the major tenets of the
school;
3. Whom did the school benefit or seek
to benefit;
 Econ 104
2nd Semester, SY 2021-2022

Five Major Questions

4. How was the school valid, useful

or correct in its time; and
5. Which tenets of the school
become lasting contributions or
contributions which have stood
the test of time.
 Econ 104
2nd Semester, SY 2022-2023

PPT Made by
DOE/mhibellezas2022

Revised by CBCRUZ/ March 2023