Western Economic Theories and Schools

Group Members: Jenny Kelly Etta Eutene

Content• Introduction Jenny

• Basic Economic Concepts Jenny

• Development Kelly Etta

• Conclusion Eutene

I. Basic Economic Concepts

Definitions of economics

3 basic economic questions

Goals of economic theories

2 Principles:

1. Scarcity • - the limited nature of society’s resources.

2. Opportunity cost• - whatever must be given up to get the item

Definitions of Economics

Definitions of Economics

• Lionel Robbins (1898-1984, LSE) defined economics in 1932:

• “Economics is the science which studies human behavior as a relationship between given ends and scarce means which have alternative uses.”

Three Basic Economic Questions

What to produce

How to produce

For whom to produce.

Goals of Economic Theory

Help society find better answers to the 3 basic questions.

Predict how changes in government policy or market institutions will affect economic outcomes.

2.The Development of Economics• (1). Mercantilism (重商主义 )• (2). Classical Economics (古典经济学 )• (3). Neo-Classical Economics (新古典经济学 )• (4). Contemporary economics （当代经济学）

• 1. Mercantilism (重商主义 )

• A policy to obtain monetary wealth

(1). Mercantilism (重商主义 )

• Background Economic matter: The rise and development of

commercial capitalSocial matter: The great geographical discovery

15th ～ 17th century

(1). Mercantilism (重商主义 )

• BackgroundPolitical matter: Centralized country started

Need more currency

(1). Mercantilism (重商主义 ) Viewpoints Noble metal (money) is the only standard to

measure wealth The more accumulation of gold and silver means

more powerful

Viewpoints

Prohibition of exporting gold and silver, while input increase

Government should intervene in economics International trade is a "zero sum game"零和博弈

√

Early mercantilism(15th ～ the middle of the 16th century）

buy less in foreign trade

prohibit the output of currency

control currency movements Late mercantilism (The second half of the 16th

Century to 17th Century)

sell more

allow the output of currency

protective tariffs (保护关税 )

Development stages

• Representative

• --Thomas Monn 托马斯 ·孟• Output value of commodity must be larger than

the input value to increase the currency input

Background

Viewpoint

Representatives

(2).Classical economics(古典经济学 )

(2). Classical economics

• Background

Workshop handicraft industry(手工业 ) has gradually become the main form

The feudal system(封建制度 ) has seriously hindered the capitalism

about 1750-1875

• Viewpoints

“An invisible hand”—market(看不见的手 ) Laissez-faire principle(自由放任 ), no

government intervention National wealth growth conditions

(2). Classical economics

• Representatives

--Adam Smith(亚当．斯密 ) <The Wealth of Nations>

The economic system to put laissez-faire thought as the center, and the research from the circulation field transfer to the production field

(2). Classical economics

• Representatives

--David Ricardo(大卫．李嘉图 ) <The principles of political economy and

taxation>《政治经济学及赋税原理   》 Success in the labor theory of value and

distribution of the enrichment and perfection of the theory.

(3). NewClassical Economics (新古典经济学 )

The

The refinement of Neo-Classical Economics

(3). NewClassical Economics (新古典经济学 )

1870s~1930s

• Background Inheritance of Classical Economics and economic

liberalism(经济自由主义）The beginning of the marginal revolution (边际革命）

After Industrial Revolution, the unfair distribution of wealth led to social discontent.

• Viewpoints Market economy can solve the problem of

unemployment, slump, while the stable policy of government have no effect on it.

The dilemma of unemployment and inflation not only exist in the long term, but also in the short term.

(3). NewClassical Economics (新古典经济学 )

(3). NewClassical Economics (新古典经济学 )

• Representatives

——Alfred Marshall(阿尔弗雷德 ·马歇尔） “Principle of Economics”《经济学原理》 The theory of supply and demand（供求理论） The theory of production cost （生产费用理论） The theory of marginal utility（边际效用理论） The theory of marginal productivity （边际生产力理论

）

(4). Contemporary economics （当代经济学）

since 1930s• Background

—The putting forward of Keynesianism marks the birth of modern economics

— The establishment and development of Macroeconomics

• Stages of development The Keynes revolution (凯恩斯革命） —putting forward the modern macroeconomics system, in

which national revenue decision is the theory center and government intervention the policy adjustment.

The period of macroeconomics

The revival of Laissez-faire thought (自由放任）

(4). Contemporary economics （当代经济学）

3.Conclusion

• Basic economic concepts

Definition

3 basic questions

The goals of economic theory

• Development

Mercantilism Thomas Men

Classical Economics <The Wealth of Nations>

New classical economics Alfred Marshall

Contemporary Economics The Keynes revolution

• The Nobel Prize for Economics

Not much in common

Even conflict

Fama People’s rational calculation

Shiller Psychological factors

•Thank you!