The History of Economic Thought
Rewind the clock and take a look at how our modern economy was shaped by ideas from as far as revolutionary 14th century philosophers.
Introduction:
Seen through a history from Babylonion marketplaces to the stock exchanges on Wall Street we know today, it is undeniable that the events of our past are interconnected with how our financial systems operate in the present. As we usher in new eras of economics in our society, it is imperative to consider the process of which these establishments came to be. The evolution of economic thought is a reflection of the mission to understand how the forces that manage wealth and resources operate in our world today.
Ancient Beginnings:
Tracing back to the roots of our economy, ancient Egyptian and Babylonian civilizations laid the foundations for economic thought by managing agrarian economies. During this era, theologians sought to connect religious principles with commerce in the Middle Ages. This period was characterized by an overall sense of ethics and morals when approaching economics.
The Rise of Trade & Empires:
Moving forward, the Age of Exploration signified the emergence of mercantilism during the late 15th century. Philosophers such as Thomas Mun and Jean-Baptiste Colbert became popular due to their work in advocating for strong state intervention in order to increase prosperity in the nation. From colonies to monopolies, many resources acted as tools that were used to balance trading systems, which is a reflection of how international trade was characterized by notable competitiveness.
Classical Economics:
During the 17th and 18th centuries, the Enlightenment was a culturally significant event for its effects on shaping economic thought. For instance, Adam Smith—coined as the father of economics—revolutionized the economy with his work The Wealth of Nations. Smith’s ideas became the basis for classical economics; his work emphasized free markets, competition, and individualistic interests in fueling economic prosperity and success. In addition, public figures like David Ricardo and Thomas Malthus also advanced various aspects of classical economics with their ideas on the distribution of wealth and the role of government.
The Modern Age:
Following the Marginal Revolution, which brought about a paradigm shift that introduced marginal utility, the next monumental event in economic thought is the Great Depression of the 1930s. The faith in classical economics was drastically weakened because of the global economic downturn, and John Maynard Keynes rose to popularity from being an advocate for active government intervention through fiscal and monetary policies. Though Keynesian economics became influential on a global scale, it saw strong opposition from stagflation in the 1970s. From then on, Milton Friedman led the rise of monetarism and highlighted the role of monetary policy and criticized excessive government intervention.
Conclusion:
Zooming out, the history of economic thought is truly a reflection of the dynamic nature of human curiosity. From ancient civilizations to modern philosophers, every economic era has contributed to a deeper understanding of the financial forces that shape our world. The evolution of economic thought will inevitably continue, constantly driven by the spirit of inquiry in our world’s challenges and opportunities.
Sources: