Economic History

obligatory courses

Intermediate micro- and macroeconomics

The subject of the course is the evolution of economic ideas and major theories in the history of economic thought. The evolution of economic thought is traced from the ancient Greek philosophers to the end of the 20th century, concentrating on the two and a quarter centuries since the publication of Smith's Wealth of Nations. The course will focus on classical economics, the ideas of the Marginalist Revolution, neo-classical and institutional economics, in the 20th century the Keynesian Revolution and Monetarist Counter-revolution and in the final section the dispute between Real Business Cycle Theory and The New Keynesian Macroeconomics. These ideas and theories will be examined within their original historical, social, political and philosophical context.

I. Introduction

1. Economics and its history

Economics as a science. Benefits from studying the history of thought.

2. Early economic thought

Xenophon and economics. Aristotle: economics vs. chrematistics; exchange, money and value; justice in exchange and distribution. Thomistic economics.

3. Mercantilism and the Physiocracy

Mercantilism: power and wealth. Physiocracy: the philosophy of natural order. The economics of Physiocracy.

II. Classical Economics

4. Freedom and the wealth of nations: Adam Smith

Smith: the causes of the wealth of nations; theory of value; the theory of production; productive and unproductive labor; the social philosophy of the Wealth of Nations.

5. Distribution and growth of wealth: David Ricardo

The distribution of wealth. Theory of exchange value; the influence of distribution of exchange relations; Fundamental laws of distribution.

6. Crises or stability of the economy: Malthus vs. Say

Say’s Law. Malthus: arguments against Say’s Law, the role of effective demand.

7. The synthesis and decline of classical economic: J. St. Mill

Mill: the economics of liberal institutions; theory of value, laws of production and distribution; the social philosophy – social liberalism.

III. Against Classical Economics

8. Critics of liberal institutions and classical economics

Utopian socialism. Older Historical School: the integrity of social phenomena, development and economic laws.

9. Dialectical development of capitalism: Karl Marx

Theory of exchange value: commodity and the value of commodity. The theory of surplus value. Contradictions between labor and capital. Value and the price of production. The laws of motion of capitalism.

IV. The marginalist revolution

10. The begginings of marginalist analysis

Founders of the revolution: C. Menger, W.St. Jevons, L. Walras. Theory of marginal utility. The value of economic commodity.

11. Further development of marginalism

The theory of marginal productivity. Production decisions by the firms. Distribution theory base on the idea of marginal productivity. Ethical implications of the distribution theory.

12. General equilibrium theory: L. Walras

Outline of general equilibrium model. The premises of formalization of the model.

V. Neoclassical Economics

13. Neoclassical Economics: A. Marshall

Theory of value and price: utility and costs of production. Theory of value. The factors of production, supply and costs.

VI. Institutionalism and historical schools

14. Analysis of institutions and ideal types: T. Veblen and M. Weber

Institutionalism: T. Veblen; institutional analysis of capitalism; the theory of leisure class. Historical School: M. Weber.

VII. Modern economics: mainstream current

15. Macroeconomics of unemployment: Keynesian revolution

The principle of effective demand, the role of investment. Equilibrium unemployment. Liquidity trap. The principles of economic policy. Keynes’ social philosophy.

16. Neoclassical synthesis

J.R. Hicks: "Mr. Keynes and the Classics". IS – LM Model. Hicks-Hansen interpretation of Keynes.

17. Formalistic revolution in economics

The role of mathematics in economics. The rise and development of econometrics. Game theory and economics. Progress in general equilibrium theory.

18. Macroeconomics of unemployment and inflation: Monetarist counter-revolution

Monetarist account of inflation and unemployment. The theory of natural rate of unemployment. The principles of economic policy.

19. New macroeconomics: classical vs. Keynesian

Rational expectations hypothesis. The role of Philips curve in New Classical Macroeconomics. New Keynesian macroeconomics.

VIII. Modern economics: heterodox currents

20. Austrian School of Economics

C. Menger – the founder of Astrian School. Continuators: Mises and Hayek. The theory of spontaneous order.

21. Trends in institutional economics

(i) From Veblen to Galbraith. (ii) New Institutional Economics.

VIII. Conclusions

22. Economics in retrospect

H. Landreth, D.C. Colander, History of economic thought. Houghton Mifflin Company; 4th edition, 2002.

Recommended but not required readings:

M. Blaug, Economic theory in retrospect, Cambridge University Press, 1997.

R.B. Ekelund i R.F. Hebert, A History of Economic Theory and Method. New York, McGraw-Hill, 1990.

M. Beaud i G. Dostaler, Economic Thought Since Keynes, Edward Elgar 1995.

B. Snowdon, H. Vane, P. Wynarczyk, A Modern Guide to Macroeconomics: An Introduction to Competing Schools of Thought, Edward Elgar, 1994.

After completing the course the student should:

- possess knowledge about the historical origins of modern economics;

- better understand the origins of contemporary economic schools;

- be able to form rational historically-based arguments in modern debates on important economic topics;

- have improved skills in logical evaluation of economic theories.

KK03, KW01, KW02, KU01, KK01, KK02, KK03

Grades for the lecture are based on final exam consisting of test and problem questions.