DIRECTORY
This book examines some of the most important ideas in economic thought, from its earliest beginnings to the evolution of political economy and the wide-ranging subject as we know it today. In doing so it inevitably looks at the ideas and achievements of major economists such as Adam Smith, John Maynard Keynes, and Friedrich Hayek. However, there are, of course, many other economists who have made important contributions, often in more than one area of study, and who deserve more than a passing mention. The thinkers discussed in the following pages have all played a part in establishing economics as a vital subject in modern industrial society, making sense of complexity, and expanding our understanding of economic activity in the world today.
JEAN-BAPTISTE COLBERT
Although born into a family of merchants in Rheims, France, Jean-Baptiste Colbert chose a career in politics rather than commerce. He rose to become Finance Minister to Louis XIV in 1665, and brought in measures to end political corruption. He also reformed the tax system, introduced policies to boost French industry and encourage overseas trade, and instituted improvements to the French infrastructure.
See also: The tax burden
PIERRE DE BOISGUILBERT
A French aristocrat, Pierre Le Pesant, sieur de Boisguilbert, pursued a career in law. He was a magistrate, then judge, and in 1690 became the bailie—the King’s representative in charge of administration and justice for the city of Rouen, a post he held until his death in 1714. Seeing the effect of tax on the local economy, he opposed the tax system introduced by Jean-Baptiste Colbert. He believed that production and trade generated wealth, and proposed a reform of taxes to encourage freer trade.
See also: The tax burden
YAMAGATA BANTO
One of the most respected scholars of the city of Osaka, Japan, Yamagata Banto was also a money-exchange merchant. Along with others in the Kaitokudo School of Osaka, he introduced Western ideas of rationalism to Japanese institutions, helping to end Japan’s feudal society, which had until then been built on Confucian ideas. Banto’s multi-volume Yume no shiro (“Instead of Dreams”) was critical of the old system, which he saw as dominated by the “age of gods,” and proposed a rational, scientific approach to the social, political, and economic structure of modern Japan, founded on industry and trade.
See also: Comparative advantage
HENRI DE SAINT-SIMON
Claude Henri de Rouvroy was born into a noble family in Paris, France, but rejected his rightful title of comte because he advocated a form of socialism. His views were influenced by seeing the new society created in the US after the American Revolution. He argued that poverty could be eliminated through cooperation and technological innovation, and that education would remove the greed that drove people to seek social privilege and exploit others. His work influenced socialist thinkers of the 19th century, notably Karl Marx.
See also: Marxist economics
FRIEDRICH LIST
Friedrich List started his career as a civil servant in his hometown of Reutlingen, Germany, and rose quickly to high office. However, in 1822 he was imprisoned for his views on reform, and escaped to France and then England. He emigrated to the US, becoming the US consul in Hamburg and then Leipzig. In 1843, he founded a newspaper to air his views on a “National System,” whose expanded customs union could unite all of Germany. Ill health and financial problems dogged his final years, and he committed suicide in 1846.
See also: Comparative advantage
JOSEPH BERTRAND
The son of a French writer of popular science, Joseph Bertrand showed a precocious aptitude for mathematics from an early age. In 1856, he became a professor at the École Polytechnique in Paris. He made his name in the fields of number theory and probability, and opposed the theory of oligopoly described by his compatriot Antoine Augustin Cournot, proposing instead an alternative model of price competition.
See also: Effects of limited competition
CARL MENGER
One of the founders of the Austrian School of economics, Carl Menger was born in Galicia, now in Poland. His Principles of Economics (1871) outlined his theory of marginality (goods derive their value from the worth of each additional unit), which became key to the Austrian School’s thinking. While professor of economics at the University of Vienna, he wrote the Method of the Social Sciences, which marked the final split from the German Historical School, which was based on 19th-century romantic ideals.
See also: Economic liberalism
LUJO BRENTANO
Born in Bavaria, Germany, Lujo Brentano earned doctorates in both law and economics. In 1868, he made a trip to Britain with the statistician Ernst Engel to study trade unionism, and his ideas were influenced by the experience. A member of the German Historical School, Brentano nonetheless challenged many of its theories, arguing for social reform, human rights, and state responsibility for public welfare. His influence was particularly evident in the formation of the social market economies.
See also: The social market economy
EUGEN VON BÖHM-BAWERK
A founder of the Austrian School of economics, Eugen von Böhm-Bawerk was born in Brünn, Austria (now in the Czech Republic). He studied law at the University of Vienna and had a successful academic and political career, twice serving as Minister of Finance in the 1890s, during which he was able to put his frugal budget-balancing ideas into practice. His critiques of Marxist economics and theories of interest and capital were highly influential, especially on his students Joseph Schumpeter and Ludwig von Mises.
See also: Central planning
FRIEDRICH VON WIESER
Friedrich von Wieser was born in Vienna. Like his brother-in-law Eugen von Böhm-Bawerk, he originally studied law but switched to economics after reading Carl Menger’s work. After working for some years as a civil servant, in 1903 he succeeded Menger as professor in Vienna. His first major contribution was in value theory, in which he was influenced by Léon Walras and Vilfredo Pareto, and he is credited with coining the term “marginal utility” (the satisfaction gained from each additional unit). He then turned his attention to applying economic theory to sociology, devising the important theory of social economy and its idea of opportunity cost.
See also: Opportunity cost
THORSTEIN VEBLEN
Famous as a maverick among US economists, Thorstein Veblen was the son of Norwegian immigrants who lived on a farm in Minnesota. His unconventional background gave him an outsider’s view of US society, which led him to reject the conventional wisdom of his teachers. He developed a new institutionalist approach that combined sociology and economics. In 1899, he published The Theory of the Leisure Class, which introduced the idea of “conspicuous consumption” and criticized the inefficiency and corruption of the capitalist system and its “parasitic” business class.
See also: Conspicuous consumption
ARTHUR PIGOU
Born in Ryde, Isle of Wight, Arthur Pigou studied history at Cambridge University, UK, where he developed an interest in economics and met Alfred Marshall. After graduating, Pigou lectured at Cambridge until the outbreak of World War I, taking over Marshall’s professorship in political economy in 1908. He is best known for the “Pigouvian taxes” he devised to offset externalities (costs or benefits that “spill over” onto third parties).
See also: External costs
NIKOLAI DMITRIYEVICH KONDRATIEV
Brought up in a peasant family near Kostroma, Russia, Nikolai Kondratiev studied economics at the University of St. Petersburg, then worked for the government. When Tsar Nicholas II was ousted in 1917, Kondratiev was a member of the Revolutionary Socialist Party and was made Minister of Supply. A month later, the provisional government was overthrown and Kondratiev returned to academic life. He developed a theory of 50- to 60-year cycles in capitalist economies, now known as Kondratiev waves. In 1930, his ideas fell out of favor. He was arrested, and executed eight years later.
See also: Boom and bust
RAGNAR FRISCH
Born in Christiana, Norway, Ragnar Frisch was a pioneer in the use of mathematics and statistics in economics. He coined the terms econometrics, microeconomics, and macroeconomics. He initially trained as a goldsmith, intending to join the family firm, but then studied economics and mathematics in France and England. In 1932, he founded the Oslo Institute of Economics, and in 1969 he became the first recipient of the Nobel Prize in Economic Sciences with his colleague Jan Tinbergen.
See also: Testing economic theories
PAUL ROSENSTEIN-RODAN
Born into a Polish-Jewish family in Austrian-ruled Kraków, Rosenstein-Rodan began as a member of the Austrian School of economists. In 1930, he fled anti-Semitism in his homeland for London, where he lectured at the London School of Economics. In the 1940s his interest moved to development economics, and he proposed what came to be known as the “Big Push” theory. After World War II he moved to the US, working for the World Bank and as an adviser to the governments of India, Italy, Chile, and Venezuela.
See also: Development economics
JAN TINBERGEN
Joint winner of the first Nobel Prize in Economic Sciences with Ragnar Frisch in 1969, Dutch theorist Jan Tinbergen initially studied mathematics and physics, then began to apply scientific principles to economic theory and, in so doing, laid the foundations for the new field of econometrics. He worked as an adviser to the League of Nations and the Dutch Central Bureau of Statistics, where, in 1936, he developed a new national macroeconomic model. It was later adopted by other governments.
See also: Testing economic theories
RICHARD KAHN
Richard Ferdinand Kahn was born in London to German parents and gained a degree in physics at Cambridge University, UK, before switching to economics, obtaining an honors degree in one year under the supervision of John Maynard Keynes. At the age of 25 he made his name with an article describing the multiplier, a building block of Keynesian economics. A practical economist, he advised the British government during World War II before returning to Cambridge University, where he taught until his retirement in 1972.
See also: The Keynesian Multiplier
RAGNAR NURKSE
Born in Käru, Estonia (then part of the Russian Empire), Ragnar Nurkse studied law and economics at the University of Tartu. He continued his studies in Scotland and then Vienna. In 1934, Nurkse began working as a financial analyst for the League of Nations, which influenced his interest in international and development economics. After World War II he moved to the US, teaching at Columbia and Princeton universities. With Paul Rosenstein-Rodan he established the modern field of development economics, and was an advocate of the “Big Push” theory.
See also: Development economics
JOHN KENNETH GALBRAITH
Born in Ontario, Canada, John Kenneth Galbraith studied economics in Canada and the US. He later taught at Cambridge University, UK, where he was greatly influenced by John Maynard Keynes. During World War II he was deputy head of the US government Office of Price Administration, but his advocacy of permanent price controls led to his resignation in 1943. He worked as a journalist, academic, and economic adviser to President John F. Kennedy and gained a popular readership in 1958 with his book The Affluent Society.
See also: Conspicuous consumption
GEORGE STIGLER
Greatly influenced by Frank Knight, his PhD supervisor at Chicago University, George Stigler went on to become a leading member of the Chicago School of economists, working with his friend and contemporary Milton Friedman. Known for his research into the history of economic thought, he also worked in the field of public choice theory (analysis of government behavior), and was one of the first to explore the field of information economics. In 1982, he won the Nobel Prize.
See also: Searching and matching
JAMES TOBIN
James Tobin was born in Illinois and is popularly known today for the so-called “Tobin tax” that he devised to discourage speculation in currency transactions. Tobin is better known to economists as an advocate of Keynesian economics and for his academic work on investment and fiscal (tax) policy. Tobin went to Harvard University in 1935, where he met John Maynard Keynes. In 1950, he took up a teaching post at Yale, remaining there for the rest of his life. As a consultant to the Kennedy administration he helped to shape US economic policy throughout the 1960s, and in 1981 he won the Nobel Prize.
See also: Depressions and unemployment • The Keynesian multiplier
ALFRED CHANDLER
Born in Delaware, Alfred Chandler graduated from Harvard University in 1940. After serving in the US Navy in World War II he wrote his PhD thesis on management structures, based on documents left to him by his great-grandfather, the financial analyst Henry Varnum Poor. From the 1960s on he focused his attention on managerial strategy and the organization of large corporations. He wrote a large number of books, and his 1977 work, The Visible Hand, won the Pulitzer Prize. The book described the rise of large-scale corporations as a “second industrial revolution.”
See also: Economies of scale
ROBERT LUCAS
One of the most influential economists of the Chicago School of economics, Robert Lucas is also one of the founders of new classical macroeconomics. He studied at Chicago University and has been a professor there since 1974. He overturned Keynesian ideas, and his research into rational expectations (the idea that because people make well-informed, rational decisions, their actions can alter the intended course of government policy) influenced monetary policy during the 1980s.
See also: Rational expectations
EUGENE FAMA
A third-generation Italian-American, Eugene Fama was the first in his family to go to college. He initially studied French but became fascinated by economics. He was awarded a scholarship to study for a PhD at the University of Chicago, where he has taught ever since. He is best known as the originator of the efficient market hypothesis, which says that in any market with many, well-informed traders, the price reflects all the available information. He is also known for demonstrating the correlation between market efficiency and equilibrium.
See also: Efficient markets
KENNETH BINMORE
British academic Kenneth Binmore is a mathematician, economist, and game theorist. His work has pioneered the integration of traditional economics with new mathematical techniques and the use of experiments. He has developed theories of bargaining behavior and theories in the field of evolutionary game theory.
See also: Competition and cooperation
PETER DIAMOND
US economist Peter Diamond graduated in mathematics from Yale University, then studied economics at the Massachusetts Institute of Technology (MIT), where he has taught for most of his career. He is best known for his research into social insurance and has acted as a government adviser on Social Security policy. His later work on search and matching theory in the labor market led to him sharing the 2010 Nobel Prize with Dale Mortensen and Christopher Pissarides.
See also: Searching and matching
MICHAEL TODARO
US economist Michael Todaro graduated from Haverford College in Pennsylvania, then spent a year in Africa with his mentor, Professor Philip Bell, which inspired a passion for development economics. His 1967 PhD thesis formed the basis of a theory of migration in developing countries and set out what became known as the Todaro paradox. He worked for the Rockefeller Foundation in Africa and the Population Council in New York before taking up a permanent professorship at New York University.
See also: Development economics
ROBERT AXELROD
US economist and political scientist Robert Axelrod has taught for most of his career at the University of Michigan, which he joined in 1974. He is best known for his contribution to the theories of cooperation and complexity. His exploration of the “Prisoner’s dilemma” in his book The Evolution of Cooperation (1984) showed that a “tit for tat” strategy could generate cooperative behavior in hostile and friendly situations. Axelrod has advised the United Nations, World Bank, and the US Department of Defense on promoting cooperation between countries.
See also: Competition and cooperation
MICHAEL SPENCE
Michael Spence’s father was based in Ottawa during World War II, and although actually born in New Jersey, Spence was brought up in Canada. He studied philosophy at Princeton University, but then switched to economics for his PhD at Harvard University. He has spent most of his career teaching at the universities of Harvard and Stanford. His work has focused mainly on information economics (how information affects an economy) and the idea of “signaling” information indirectly (such as when a job hunter “signals” his or her ability for a certain job through academic qualifications). In 2001 he won the Nobel Prize with George Akerlof and Joseph Stiglitz for his work on asymmetric (unbalanced) information in markets.
See also: Market uncertainty
JOSEPH STIGLITZ
One of the most influential (often controversial) economists of his generation, Joseph Stiglitz was born in Indiana to a family that he says “liked to debate political issues.” He has held professorships at several prestigious universities in the US and the UK, served as an adviser to Presidents Clinton and Obama, and was Chief Economist for the World Bank. He made his name in the 1970s for his work on the economics of information (how information affects an economy), for which he was a joint winner of the 2001 Nobel Prize. In the 1990s he was a critic of the Washington Consensus, especially as applied to developing countries.
See also: Incentives and wages
ALICE AMSDEN
Described as a “fearless” economist, Alice Amsden focused on the development and industrialization of emerging economies. A graduate of Cornell University, she studied for her PhD at the London School of Economics, and then worked at the World Bank and the Organization for Economic Cooperation and Development (OECD), while also holding high-level academic posts. In 2009, she was appointed to a three-year seat on the United Nations. She is especially remembered for her challenges to conventional ideas of globalization, through books such as The Rise of “The Rest” (2001).
See also: Asian Tiger economies
ROBERT BARRO
US economist Robert Barro originally studied physics, but then switched to economics at the PhD level. He has taught at many universities in the US and is honorary dean of the China Economics and Management Academy at the Central University of Finance and Economics in Beijing. Barro was a leading figure in the formation of the new classical macroeconomics and first drew attention in 1974 with his theories on the effect of present borrowing and future taxation. His later work has focused on the influence of culture on political economy.
See also: Borrowing and debt
CHRISTOPHER PISSARIDES
Born in the Greek-Cypriot village of Agros, Christopher Pissarides studied for a degree in economics at the University of Essex, UK. He then earned a PhD at the London School of Economics in 1973, where he has been on the staff since 1976. His most significant contribution has been in the field of searching and matching theory in the labor market, and unemployment. In the 1990s he developed a model of job creation and destruction with Dale Mortensen. He and Mortensen, along with Peter Diamond, were awarded the 2010 Nobel Prize for their analysis of markets.
See also: Searching and matching
PAUL KRUGMAN
Winner of the Nobel Prize in 2008 for his analysis of trade patterns, US economist Paul Krugman is known for his pioneering work in international trade and finance, and for his analysis of currency crises and fiscal (tax) policy. He has held many university teaching posts and worked as an economic adviser to the Reagan administration during the 1980s but is considered Left-leaning, politically. In the 1990s he developed an approach to the analysis of international trade that is now known as new trade theory.
See also: Trade and geography
DANI RODRIK
Born in Istanbul, Turkey, Dani Rodrik moved to the US for his university studies. Now Professor of International Political Economy at Harvard University, his main fields of interest are international and development economics. He has worked as a consultant for many international organizations, including the Centre for Economic Policy Research, the Center for Global Development, and the Institute for International Economics.
See also: Market integration • Resisting economic change
HA-JOON CHANG
Born in South Korea, Ha-Joon Chang is a leading critic of mainstream economics. He graduated from the National University in Seoul before moving to the UK to gain a PhD from the University of Cambridge, where he continues his research. Chang has acted as a consultant to several United Nations agencies, the World Bank, the Asian Development Bank, and a number of national government agencies and NGOs. He criticizes conventional development policies as espoused by the World Bank, and his book, 23 Things They Don’t Tell You About Capitalism (2010) helped to popularize aspects of alternative economics.
See also: Asian Tiger economies
RENAUD GAUCHER
A graduate in psychology, history, and geography as well as economics, French thinker Renaud Gaucher has sought to integrate elements of the social sciences into economic thinking and take a more holistic approach. He has examined the psychology of money and behavioral economics from the point of view of positive psychology, with an emphasis on the “economics of happiness,” following the research of economists such as Richard Easterlin, and considering its place in policies for development and climate change.
See also: The economics of happiness