Competing Schools of Economic Thought

by Tsoulfidis, Lefteris

• ISBN13: 9783540926924
• ISBN10: 3540926925
• Format: Hardcover
• Copyright: 2010-06-30
• Publisher: Springer Verlag

Summary

The greatest works of economists have the potential to provide insights on current economic developments and policy challenges long after they are written. This book seeks to investigate the evolution of the core ideas and policy recommendations of the major schools of economic thought, and to present and critically evaluate those theories that have survived over time and can inform us about current developments and economic policies. The theories of major economists are presented and used to promote an understanding of the underlying mechanisms of the economy and to address contemporary problems and issues. In addition, the book explores the fascinating dynamics of shifting from one school of economic thought to another. Each chapter concludes with a summary, critical remarks, a set of questions for reflection and discussion, and recommendations for further reading.

Table of Contents

Introduction	p. 1
Introduction	p. 1
The Origins of Economic Theory	p. 5
Introduction	p. 5
Mercantilism	p. 7
Physiocracy	p. 9
Fundamental Physiocratic Principles	p. 10
The Tableau Economique	p. 11
The Tableau Economique as an Input-Output Model	p. 13
The Single-Tax Scheme	p. 16
Summary and Conclusions	p. 17
Adam Smith's Wealth of Nations	p. 21
Introduction	p. 21
The Theory of Moral Sentiments	p. 21
The Market Mechanism	p. 23
The Theory of Value	p. 25
The Making of Economic Science	p. 29
Smith's Model of Economic Growth	p. 33
The Falling Rate of Profit and the Stationary Economy	p. 37
The Stationary Economy	p. 39
Productive and Non-Productive Labour	p. 42
General Statements on Taxation	p. 45
On Public Debt	p. 48
Summary and Conclusions	p. 49
Appendix: The Labour Commanded Theory of Value	p. 54
David Ricardo's Principles of Political Economy	p. 57
Introduction	p. 57
The Theory of (Exchange) Value	p. 58
Modifications due to Unequal Capital-Labour Ratios	p. 61
Modifications due to Changes in Distribution	p. 62
Modifications due to Unequal Turnover Times	p. 63
The Rate of Profit in the Long Run and the Stationary State	p. 65
The Principle of Comparative Advantage	p. 69
On the Question of Machinery	p. 72
Ricardo's Theory of Taxation	p. 75
Ricardo on Public Debt	p. 78
Concluding Remarks	p. 81
Karl Marx's Das Kapital	p. 85
Introduction	p. 85
Commodity Production and Value	p. 87
Concrete and Abstract Labour	p. 88
Socially Necessary Labour Time	p. 89
The Law of Value in Marx	p. 91
Money and Price	p. 92
Surplus Value and Profit	p. 93
Marx's Theory of Money	p. 95
Convertible Paper Money	p. 98
Non-convertible Paper Money	p. 100
The Transformation Problem	p. 101
Marx's Solution	p. 103
The Critique of von Bortkiewicz	p. 106
Shaikh's Solution	p. 107
Marx on Competition	p. 111
Competition Between Industries	p. 112
Competition Within Industries	p. 114
Regulating Capitals	p. 115
The Falling Tendency of the Rate of Profit	p. 116
General Rate of Profit and Economic Crisis	p. 118
Summary and Conclusions	p. 120
Appendix	p. 127
The Mathematics of the Falling Rate of Profit	p. 127
The Incremental Rate of Profit and its Components	p. 128
The Structure of Classical Theory	p. 133
Introduction	p. 133
The Long Period Method of Analysis	p. 135
Given Output	p. 138
Given Technique	p. 138
Given Real Wage	p. 139
The Determination of the Level of Output, or Say's Law of Markets	p. 141
The Linear Model of Production	p. 142
The Malthus-Ricardo Controversy on Say's Law	p. 143
Summary and Conclusions	p. 147
Appendix A	p. 150
The Input-Ouput Analysis	p. 150
Price Determination	p. 152
A Numerical Example	p. 152
The Marxian Theory of Value and Direct Prices	p. 153
Prices of Production	p. 154
The Structure of the Neoclassical Theory	p. 157
Introduction	p. 157
The Silent Marginal Revolution	p. 158
Salient Features of the Neoclassical Theory	p. 162
The Model of Pure Exchange Economy	p. 164
A Formal Presentation	p. 172
Walras Law	p. 173
From Pure Exchange to Production	p. 175
Summary and Conclusions	p. 181
Theory of Capital and Cambridge Controversies	p. 187
Introduction	p. 187
Production with Produced Means of Production	p. 188
Production with Capital and the First Neoclassical Economists	p. 190
Samuelson's Surrogate Production Function	p. 196
From the One-Commodity World to the Real Economy	p. 201
Wicksell Effects	p. 206
Summary-Conclusions	p. 207
Between Competition and Monopoly	p. 213
Introduction	p. 213
Neoclassical Theory and Perfect Competition	p. 214
Economies of Scale	p. 217
Cost Curves	p. 219
Sraffa's Critique of the Marshallian Theory of the Firm	p. 222
Model Differentiation: Robinson Vs. Chamberlin	p. 225
The Rise and Fall of a Revolution	p. 233
Summary and Conclusions	p. 237
Appendix A	p. 241
Full Cost Pricing of Hall and Hitch	p. 241
Keynes's General Theory	p. 243
Introduction	p. 244
The Principle of Effective Demand	p. 245
The Income Determination Model	p. 247
The Marginal Efficiency of Capital	p. 251
The Falling MEC	p. 252
The Liquidity Preference Theory	p. 256
Money Rate of Interest and Returns on Assets	p. 260
The Effects of Wage Reduction	p. 263
Keynes on Economic Policy	p. 264
Summary and Conclusions	p. 266
The Neoclassical Synthesis	p. 271
Introduction	p. 271
Hicks's Analysis of IS-LM	p. 272
Hicks and Keynes	p. 276
Modigliani's Synthesis	p. 279
Summary and Conclusions	p. 282
Disequilibrium Macroeconomics: From Its Brief Ascent to the Rapid Decline	p. 287
Introduction	p. 287
Walrasian Vs. Keynesian Models	p. 288
Effective Demand and Notional Demand	p. 289
The Microeconomic Foundations of Disequilibrium Macroeconomics	p. 292
The Effectiveness of Economic Policy	p. 295
The Critique of Richard Kahn	p. 297
Summary and Conclusions	p. 297
The Rise and Fall of Monetarism	p. 301
Introduction	p. 301
The Phillips Curve	p. 302
Short-Run and Long-Run Phillips Curve	p. 303
Expectations-Augmented Phillips Curve	p. 306
Quantity Theory of Money and Monetarism	p. 307
Friedman's Demand for Money	p. 311
The Monetarist Approach to the Balance of Payments	p. 313
Economic Policy Conclusions	p. 315
Keynesian Responses	p. 317
Summary and Conclusions	p. 320
New Classical Macroeconomics	p. 325
Introduction	p. 325
The Rational Expectations Hypothesis	p. 327
Continuous Market Clearing	p. 329
The Lucas Supply Curve	p. 330
The New Classical Economics and the Business Cycle	p. 332
The Ineffectiveness of Government Intervention	p. 334
Barro's Ricardian Equivalence Theorem	p. 335
The Lucas Critique	p. 337
Concluding Remarks	p. 338
The Real Business Cycles Approach	p. 343
Introduction	p. 343
Salient Features of the RBC Approach	p. 344
A Short Historical Excursion	p. 346
Economic Growth and Cycles	p. 349
Shocks in Technology	p. 351
Simulation Models	p. 353
Economic Policy Implications	p. 354
Summary and Concluding Remarks	p. 357
The Return of (New) Keynesian Economics	p. 363
Introduction	p. 363
Nominal Rigidities	p. 364
Real Rigidities	p. 367
Models of Implicit Contracts	p. 369
The Efficient Wage Hypothesis	p. 370
The Insider-Outsider Hypothesis	p. 371
Economic Fluctuations	p. 372
Fluctuations Caused by Nominal Rigidities	p. 372
Fluctuations Caused by Uncertainty	p. 374
New Consensus Macroeconomics	p. 375
Policy Implications	p. 378
Summary and Conclusions	p. 379
Economic Theory in Historical Perspective	p. 383
Introduction	p. 383
Core Characteristics of Competing Economic Theories	p. 384
Elements for a New Direction	p. 392
References	p. 395
Index	p. 413
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