Some of the most prominent economists during the Classical Period include David Ricardo, Thomas Malthus and Jean-Baptiste Say.
Ricardo made great strides in the world of economics mainly due to his theories on comparative advantage and increased specialization. This increased specialization is shown through trade between countries, where it is more cost-effective for one country to focus on areas where they have a greater natural or economic advantage over another. One example would be if England was very good at catching fish but not farming, while France had an abundance of arable land but no fishing boats. Trade would allow both countries to specialize in their preferred tasks and then trade with each other for the goods that are harder or less efficient for them to produce themselves.
Ricardo believed that free trade was beneficial to all parties involved, whereas his rival Malthus believed that only developed countries would benefit. Thomas Malthus famously wrote “An Essay on the Principle of Population” where he outlines his ideas of population control and economic growth. Say’s Law is one of the most famous theories, which states that supply creates its own demand. As per Peter DeCaprio this theory has been used in modern times by some politicians to advocate for spending cuts during bad economic periods rather than increasing government revenue through raising taxes.
What Are Some Prominent Economists During The Neoclassical Period of Economics?
The neoclassical period starts with Alfred Marshall, who became one of the dominant figures in economics after publishing his textbook Principles of Economics in 1890. His emphasis on the subject was to approach economics like a science, which is in contrast with how it had been approached in the past. He advocated for each country to specialize in their own natural or economic advantages and then trade with other countries that shared similar specialization.
One of his lesser known ideas was the consumer surplus, which is when people are willing to pay more than what they actually end up paying for an item. For example, if I wanted to buy a coffee but would only be willing to pay $1 but can get it elsewhere for $2, once I make this purchase my consumer surplus would be $1-$2=$1 . This idea has become integral to modern day economics mainly because it shows just how much extra money people are willing to spend on goods, which can be used as a gauge for how likely people will buy something.
Marshall also developed the concept of diminishing marginal utility, which is when the value derived from each additional unit falls as one unit is consumed more and more within a set time frame. This idea became important mainly because it demonstrated that people were unlikely to overindulge, meaning that demand curves would typically have a downward slope and thus increase in quantity demanded at a slower rate than price.
What Are Some Prominent Economists During The Keynesian Period of Economics?
The Keynesian period takes its name from British economist John Maynard Keynes. His Keynesian theory was based off of his belief that governments had an active role in creating economic policy and that they should manage the amount of money in circulation in order to meet the final demands of consumers.
“During World War II, Keynesian policy-makers argued that increasing aggregate demand would help to overcome high unemployment and win the war.”
Keynes believed much like his predecessors that countries should specialize in their economic advantage and then trade with other nations to obtain goods they would struggle to produce themselves. He got international recognition when he was called upon by President Roosevelt at a conference in Bretton Woods, New Hampshire to come up with a solution for how an international economy could function. Keynes believed in a system of fixed exchange rates and the Bretton Woods agreement was an attempt to do so.
What is Say’s Law?
Say’s Law or Say’s Law of Markets states that “supply creates its own demand,” which means that if you produce more, then you will naturally consume more because you need to sell it somewhere. This has been used by some politicians to argue for spending cuts instead of increasing government revenue through raising taxes during bad economic periods.
This quote from Maynard Keynes shows his support for this theory: “If the baker puts more flour on the shelf, he has more bread to sell; if we send more soldiers to France, we shall get more French goods in return.”
Conclusion by Peter DeCaprio:
This article was to summarize the main ideas from a lecture on economic thought as well as some of the most influential people within those time periods. The neoclassical period studied by this post starts with Alfred Marshall and ends with John Maynard Keynes, with Keynesian economics being the focus of the second half.