# History of Economics

> An interactive timeline of the history of economics: 53 milestones · 178 ideas, from Ancient & Medieval to Contemporary, with the connections between them.

- Interactive version: https://timelinegraph.app/examples/economics
- Published on [Timeline Graph](https://timelinegraph.app/), a free diagonal timeline maker
- Sources: [Compiled from public sources; summaries for illustration](https://en.wikipedia.org/wiki/History_of_economic_thought)

## Eras

- **Ancient & Medieval** (700 BCE to 1377): 8 items
- **Mercantilism & Enlightenment** (1556 to 1776): 8 items
- **Classical & Marginalist** (1798 to 1899): 11 items
- **Depression, Keynes & Synthesis** (1920 to 1963): 13 items
- **Contemporary** (1970 to 2019): 13 items

## Kinds of connection

- Builds on
- Critiques / reacts against

## Ancient & Medieval

### Hesiod’s Works and Days (c. 700 BCE)

Hesiod’s didactic poem gives practical advice to a small farmer and is often cited as the earliest Western reflection on scarcity, work and competition. It frames the human condition as one in which livelihoods must be wrested from a reluctant world through toil.

Topics: Labor, Value Theory, Greece, poetry

Further reading: [Read more](https://en.wikipedia.org/wiki/Works_and_Days)

- The poem opens from the premise that the gods keep the means of life hidden from humans, so that subsistence requires constant labour — an early statement of scarcity.
- Hesiod distinguishes a destructive Strife from a “good” Strife that spurs the potter to vie with the potter and the neighbour to emulate a prosperous neighbour.
- “Work is no disgrace; it is idleness which is a disgrace” — the poem treats diligent labour and careful timing of farm tasks as the path to wealth.

Later built on by: Xenophon’s Oeconomicus

### Xenophon’s Oeconomicus (c. 4th century BCE)

A Socratic dialogue on the management of an estate, the Oeconomicus gave us the word oikonomia (“household management”). Xenophon treats efficient administration, training of staff and orderly stores as skills that increase wealth.

Topics: Markets, Labor, Greece, household

Further reading: [Read more](https://en.wikipedia.org/wiki/Oeconomicus)

- Socrates and the landowner Ischomachus define estate management as a body of knowledge by which a household’s wealth can be increased.
- Ischomachus describes training his wife and stewards to keep inventories and orderly stores, an early treatise on management.
- In the Cyropaedia Xenophon observes that crafts are more specialised in large cities than in small towns, because a bigger market supports a finer division of labour.

Builds on: Hesiod’s Works and Days
Later built on by: Aristotle on Exchange & Money, Adam Smith’s Wealth of Nations

### Aristotle on Exchange & Money (c. 350–330 BCE)

In the Politics and Nicomachean Ethics Aristotle analysed exchange, money and the pursuit of gain. His distinctions between natural household provisioning and limitless money-making shaped economic ethics for two millennia.

Topics: Value Theory, Money & Banking, Greece, ethics

Further reading: [Read more](https://en.wikipedia.org/wiki/Chrematistics)

- Politics I contrasts oikonomia, the natural acquisition of what a household needs, with chrematistike, the unlimited pursuit of money for its own sake.
- A shoe can be worn or traded: Aristotle’s distinction between an object’s use and its exchange anticipates the later use-value / exchange-value distinction.
- Money (nomisma) exists by convention (nomos) and serves as a common measure that makes unlike goods commensurable in exchange.
- Aristotle condemns usury as the most unnatural form of gain, since it makes money breed money rather than serve exchange.

Later built on by: Scholastics & the Just Price, Oresme’s De moneta, Ibn Khaldun’s Muqaddimah, Modern Monetary Theory, Marx’s Capital
Builds on: Xenophon’s Oeconomicus

### Kautilya’s Arthashastra (c. 3rd c. BCE – 3rd c. CE)

Attributed to Kautilya (Chanakya), adviser to the Mauryan emperor Chandragupta, the Arthashastra is a Sanskrit treatise on statecraft and political economy. It sets out detailed rules for the treasury, taxation, markets, weights and measures, and state enterprises.

Topics: State & Policy, Markets, India, statecraft

Further reading: [Read more](https://en.wikipedia.org/wiki/Arthashastra)

- The text declares that all undertakings depend on the treasury, and devotes long sections to revenue collection, audits and preventing embezzlement.
- Superintendents of trade, mines, weights and measures and other sectors were to regulate markets and run state enterprises.
- It specifies wages, contracts and penalties for artisans, labourers and employers, treating labour relations as a matter of state law.

### Discourses on Salt and Iron (81 BCE)

In 81 BCE the Han court convened a debate on the state monopolies over salt, iron and liquor created under Emperor Wu. Huan Kuan’s record of it preserves one of the earliest sustained arguments over state intervention versus private enterprise.

Topics: State & Policy, Markets, China, Han

Further reading: [Read more](https://en.wikipedia.org/wiki/Discourses_on_Salt_and_Iron)

- Emperor Wu established state monopolies on salt and iron in 117 BCE to finance wars against the Xiongnu.
- Minister Sang Hongyang defended the monopolies and price-stabilisation schemes; Confucian scholars argued they burdened the people and corrupted officials.
- After the debate the liquor monopoly was abolished, but the salt and iron monopolies were retained.

### Scholastics & the Just Price (c. 1265–1300)

Medieval theologians asked when a price or a loan was morally just. Thomas Aquinas and his successors built on Aristotle to develop doctrines of just price and usury, while thinkers such as Peter John Olivi probed the roots of value in scarcity and utility.

Topics: Value Theory, Markets, Europe, Church

Further reading: [Read more](https://en.wikipedia.org/wiki/Just_price)

- In the Summa Theologica Aquinas holds that selling a thing for more than it is worth, or buying it for less, is unjust in itself.
- Aquinas condemns taking interest on a loan of money as selling something that does not exist, following Aristotle on the barrenness of money.
- Many scholastics identified the just price with the “common estimation” of the market rather than a fixed cost of production.
- Peter John Olivi’s treatise on contracts (c. 1290s) explained value through scarcity, usefulness and desirability, foreshadowing subjective value theory.

Builds on: Aristotle on Exchange & Money
Later built on by: School of Salamanca, Marginal Revolution

### Oresme’s De moneta (c. 1355–1360)

The French bishop Nicole Oresme wrote one of the first treatises devoted entirely to money. He argued that coinage belongs to the community rather than the prince and condemned debasement as a hidden tax.

Topics: Money & Banking, State & Policy, France, coinage

Further reading: [Read more](https://en.wikipedia.org/wiki/Nicole_Oresme)

- Oresme argued that money belongs to the community that uses it, so the ruler has no right to alter its weight or alloy for profit.
- He condemned debasement as worse than usury — a covert tax that robs holders of coin and disrupts trade.
- His observation that good coin flees when bad coin is overvalued anticipated what was later called Gresham’s law.

Builds on: Aristotle on Exchange & Money
Later built on by: School of Salamanca

### Ibn Khaldun’s Muqaddimah (1377)

The Muqaddimah, the introduction to Ibn Khaldun’s universal history, analysed the rise and fall of dynasties in social and economic terms. It discusses labour as the source of value, the division of labour, prices and the effects of taxation.

Topics: Labor, State & Policy, North Africa, history

Further reading: [Read more](https://en.wikipedia.org/wiki/Muqaddimah)

- Ibn Khaldun held that profit and wealth are the value realised from human labour, and that cooperation and specialisation multiply output.
- Early in a dynasty low tax rates yield large revenues; late in its life high rates yield little — an argument later invoked by Arthur Laffer.
- He related prices in cities to demand, population and the luxury of urban life, noting that large cities have dearer food and labour.

Builds on: Aristotle on Exchange & Money

## Mercantilism & Enlightenment

### School of Salamanca (c. 1530–1600)

Spanish late-scholastic theologians confronted the flood of American silver and the growth of international trade. They developed early versions of the quantity theory of money and defended market-determined prices.

Topics: Money & Banking, Value Theory, Spain, scholastics

Further reading: [Read more](https://en.wikipedia.org/wiki/School_of_Salamanca)

- Martín de Azpilcueta (1556) explained that money is worth less where it is abundant, linking American bullion to rising Spanish prices.
- The Price Revolution of the 16th century saw European prices rise several-fold as silver from Potosí and elsewhere poured into Spain.
- Luis de Molina and others argued that the just price is the price freely set by common estimation in the market, varying with supply and demand.

Builds on: Scholastics & the Just Price, Oresme’s De moneta
Later built on by: Hume’s Political Discourses

### Mercantilism & Thomas Mun (written c. 1630, published 1664)

Mercantilist writers treated national wealth as a positive balance of trade that brought in gold and silver. Thomas Mun, a director of the East India Company, gave the doctrine its classic English statement.

Topics: Trade, State & Policy, England, bullion

Further reading: [Read more](https://en.wikipedia.org/wiki/Mercantilism)

- Mun’s England’s Treasure by Forraign Trade held that a nation grows rich by selling more to strangers yearly than it consumes of theirs in value.
- Defending the East India Company, Mun argued that exporting bullion was acceptable if re-exported Asian goods brought more bullion back overall.
- Jean-Baptiste Colbert, Louis XIV’s finance minister from 1665, applied mercantilism through tariffs, royal manufactures and chartered trading companies.
- England’s Navigation Acts (from 1651) reserved colonial trade for English ships, a cornerstone of mercantilist empire.

Later critiqued by: Hume’s Political Discourses, Adam Smith’s Wealth of Nations, Physiocrats & the Tableau économique
Later built on by: Friedrich List’s National System

### Bank of England (1694)

The Bank of England was founded as a private joint-stock company to lend £1.2 million to William III’s government for war with France. It became the model for central banking and the management of a permanent national debt.

Topics: Money & Banking, State & Policy, England, central bank

Further reading: [Read more](https://en.wikipedia.org/wiki/Bank_of_England)

- Subscribers raised £1.2 million, lent to the Crown at 8% interest in exchange for a charter and the right to issue notes.
- Long-term borrowing backed by parliamentary taxation created a funded national debt that let Britain outspend larger rivals in war.
- The Bank’s notes circulated as money; the Bank Charter Act of 1844 eventually gave it a near-monopoly of note issue in England and Wales.
- Walter Bagehot’s Lombard Street (1873) set out the lender-of-last-resort rule: lend freely, at a high rate, against good collateral.

Later built on by: John Law & the 1720 Bubbles, Friedman & Monetarism, Minsky’s Financial Instability Hypothesis

### John Law & the 1720 Bubbles (1716–1720)

The Scottish financier John Law persuaded the French regency to back a note-issuing bank and the Mississippi Company. The resulting speculative boom and its collapse in 1720, alongside Britain’s South Sea Bubble, became a lasting lesson in financial mania.

Topics: Money & Banking, Crises, France, paper money

Further reading: [Read more](https://en.wikipedia.org/wiki/Mississippi_Company)

- In Money and Trade Considered (1705) Law argued that more money, including paper money backed by land, would stimulate trade and employment.
- Law’s Banque Générale (1716) became the state Banque Royale in 1718, issuing paper notes on a large scale.
- Mississippi Company shares rose about twentyfold in 1719 before collapsing in 1720, ruining investors and discrediting paper money in France for decades.
- Britain’s South Sea Company bubble burst the same year, prompting the Bubble Act restricting joint-stock companies.

Builds on: Bank of England
Later built on by: Cantillon’s Essai, Efficient-Market Hypothesis
Later critiqued by: Hume’s Political Discourses

### Hume’s Political Discourses (1752)

In essays such as “Of Money” and “Of the Balance of Trade” David Hume argued that trying to hoard gold is self-defeating. His price–specie flow mechanism became a cornerstone of classical international economics.

Topics: Money & Banking, Trade, Scotland, essays

Further reading: [Read more](https://en.wikipedia.org/wiki/Price–specie_flow_mechanism)

- An inflow of gold raises domestic prices, reducing exports and increasing imports until the gold flows out again — so a permanent trade surplus is impossible.
- Hume held that the quantity of money matters little in the long run, but that a rising money supply can stimulate industry in the interval before prices adjust.
- “Of the Jealousy of Trade” (1758) argued that a neighbour’s prosperity benefits rather than threatens a trading nation.

Critiques: Mercantilism & Thomas Mun, John Law & the 1720 Bubbles
Later built on by: Adam Smith’s Wealth of Nations, Friedman & Monetarism
Builds on: School of Salamanca

### Cantillon’s Essai (written c. 1730, published 1755)

Richard Cantillon’s Essai sur la Nature du Commerce en Général, circulated in manuscript before its 1755 publication, has been called the first systematic treatise on economics. It analysed markets, the entrepreneur and how new money spreads through an economy.

Topics: Markets, Money & Banking, France, entrepreneur

Further reading: [Read more](https://en.wikipedia.org/wiki/Richard_Cantillon)

- Cantillon described the entrepreneur as one who buys at a certain price to sell at an uncertain one, bearing market risk.
- New money first benefits those who receive it and raises prices unevenly as it spreads — later called the Cantillon effect.
- He traced how landlords’ rents circulate through farmers, artisans and towns, an early model of the circular flow of income.
- Cantillon related value to land and labour, seeking a “par” between the two as the intrinsic value of goods.

Later built on by: Physiocrats & the Tableau économique, Say’s Treatise & Say’s Law
Builds on: John Law & the 1720 Bubbles

### Physiocrats & the Tableau économique (1758–1776)

François Quesnay and his followers held that only agriculture yields a net surplus and urged free trade in grain and a single tax on land. Their Tableau économique was the first diagram of an economy’s flows between classes.

Topics: Value Theory, State & Policy, France, agriculture

Further reading: [Read more](https://en.wikipedia.org/wiki/Physiocracy)

- Quesnay’s Tableau économique (1758) traced the annual circulation of produce and money among farmers, landlords and the “sterile” class.
- Only land produced a produit net (net product); manufacturing and commerce merely transformed or moved existing value.
- The physiocrats popularised Vincent de Gournay’s maxim “laissez faire, laissez passer” against guild and trade restrictions.
- As finance minister (1774–1776) Turgot freed the grain trade and abolished the corvée before being dismissed amid opposition.

Builds on: Cantillon’s Essai
Critiques: Mercantilism & Thomas Mun
Later built on by: Adam Smith’s Wealth of Nations

### Adam Smith’s Wealth of Nations (1776)

An Inquiry into the Nature and Causes of the Wealth of Nations founded classical political economy. Smith argued that the division of labour, extended by markets, is the source of rising productivity, and attacked the mercantile system of trade restrictions.

Topics: Markets, Labor, Trade, Scotland, classical

Further reading: [Read more](https://en.wikipedia.org/wiki/The_Wealth_of_Nations)

- In the pin factory ten workers each performing a few operations could make some 48,000 pins a day, far more than if each worked alone.
- A merchant pursuing his own gain is “led by an invisible hand to promote an end which was no part of his intention.”
- Book IV attacks the “mercantile system”, arguing that wealth consists in consumable goods, not bullion, and that monopolies and tariffs harm consumers.
- Smith treated labour as the real measure of exchangeable value, while explaining prices through wages, profit and rent.

Critiques: Mercantilism & Thomas Mun
Builds on: Hume’s Political Discourses, Physiocrats & the Tableau économique, Xenophon’s Oeconomicus
Later built on by: Ricardo’s Principles, Say’s Treatise & Say’s Law, Marx’s Capital, Arrow–Debreu General Equilibrium
Later critiqued by: Friedrich List’s National System, Marginal Revolution

## Classical & Marginalist

### Malthus on Population (1798–1820)

Thomas Robert Malthus argued that population tends to outgrow the food supply, keeping most people near subsistence. His later Principles of Political Economy questioned whether demand would always be sufficient to absorb output.

Topics: Labor, Inequality, England, population

Further reading: [Read more](https://en.wikipedia.org/wiki/An_Essay_on_the_Principle_of_Population)

- Population, when unchecked, grows geometrically while subsistence grows only arithmetically.
- Population is held down by “positive” checks such as famine and disease and “preventive” checks such as delayed marriage.
- In his Principles (1820) Malthus argued, against Ricardo and Say, that a general glut of unsold goods was possible.

Later built on by: Ricardo’s Principles, Keynes’s General Theory
Later critiqued by: Marx’s Capital, Amartya Sen on Famines & Capabilities

### Say’s Treatise & Say’s Law (1803)

Jean-Baptiste Say’s Traité d’économie politique popularised Smith on the Continent while emphasising utility and the entrepreneur. He is best known for the law of markets, which holds that production creates the means to purchase other production.

Topics: Markets, Value Theory, France, classical

Further reading: [Read more](https://en.wikipedia.org/wiki/Say's_law)

- Products are paid for with products: since each sale finances a purchase, a general overproduction of all goods cannot persist.
- Say grounded value in utility — the capacity of goods to satisfy wants — rather than in labour alone.
- He gave the entrepreneur a central role as the coordinator who combines land, labour and capital into production.

Builds on: Cantillon’s Essai, Adam Smith’s Wealth of Nations
Later critiqued by: Marx’s Capital, Keynes’s General Theory
Later built on by: Marginal Revolution, Schumpeter & Creative Destruction

### Ricardo’s Principles (1815–1817)

David Ricardo’s On the Principles of Political Economy and Taxation gave classical economics its most rigorous form. He developed the theory of comparative advantage, differential rent and a labour theory of value, and opposed the Corn Laws.

Topics: Trade, Value Theory, Inequality, England, classical

Further reading: [Read more](https://en.wikipedia.org/wiki/On_the_Principles_of_Political_Economy_and_Taxation)

- With England, Portugal, cloth and wine, Ricardo showed that both countries gain by specialising according to comparative, not absolute, advantage.
- Rent arises because cultivation extends to less fertile land, so landlords capture a growing share as population rises.
- The relative value of commodities depends on the relative quantity of labour needed to produce them.
- Ricardo argued that the Corn Laws raised food prices and rents at the expense of profits; they were repealed in 1846.

Builds on: Adam Smith’s Wealth of Nations, Malthus on Population
Later critiqued by: Friedrich List’s National System, Marginal Revolution, Development Economics
Later built on by: J. S. Mill’s Principles, Marx’s Capital, Piketty’s Capital in the 21st Century

### Friedrich List’s National System (1841)

Friedrich List’s The National System of Political Economy argued that late-developing nations need temporary tariff protection to build industries able to compete with Britain. He drew on American experience and inspired later developmental states.

Topics: Trade, State & Policy, Germany, protection

Further reading: [Read more](https://en.wikipedia.org/wiki/Friedrich_List)

- List defended protective tariffs for infant industries until they could compete, after which free trade would be beneficial.
- He built on Alexander Hamilton’s Report on Manufactures (1791) and his own years in the United States.
- List argued Britain had risen behind protection and now urged free trade on others — the image later called “kicking away the ladder”.

Builds on: Mercantilism & Thomas Mun
Critiques: Ricardo’s Principles, Adam Smith’s Wealth of Nations
Later built on by: Development Economics, Washington Consensus

### J. S. Mill’s Principles (1848)

John Stuart Mill’s Principles of Political Economy was the leading economics textbook for half a century. It synthesised Ricardian economics with a reforming liberalism open to cooperatives, inheritance taxes and the improvement of workers’ conditions.

Topics: Inequality, State & Policy, England, liberalism

Further reading: [Read more](https://en.wikipedia.org/wiki/Principles_of_Political_Economy)

- Mill held that the laws of production are fixed by nature but the distribution of wealth is a matter of human institutions.
- He welcomed an eventual “stationary state” in which capital and population stop growing and attention turns to the art of living.
- In 1869 Mill recanted the wages-fund doctrine, conceding that trade unions could raise wages.

Builds on: Ricardo’s Principles
Later built on by: Marshall’s Principles, Piketty’s Capital in the 21st Century

### Marx’s Capital (1867–1894)

Karl Marx’s Das Kapital offered a critique of political economy that extended the classical labour theory of value into a theory of exploitation. Volumes II and III were edited by Friedrich Engels after Marx’s death.

Topics: Value Theory, Labor, Inequality, Germany, socialism

Further reading: [Read more](https://en.wikipedia.org/wiki/Das_Kapital)

- Workers sell their labour-power for a wage worth less than the value they create; the difference is surplus value appropriated by capital.
- Competition compels capitalists to accumulate, concentrating capital and creating a “reserve army” of the unemployed.
- Volume III (1894) argues that a tendency of the rate of profit to fall drives recurrent capitalist crises.
- The Communist Manifesto (1848), with Engels, framed history as class struggle and predicted capitalism’s overthrow.

Builds on: Ricardo’s Principles, Adam Smith’s Wealth of Nations, Aristotle on Exchange & Money
Critiques: Malthus on Population, Say’s Treatise & Say’s Law
Later critiqued by: Austrian School & Methodenstreit, Socialist Calculation Debate
Later built on by: Socialist Calculation Debate, Schumpeter & Creative Destruction, Piketty’s Capital in the 21st Century

### Marginal Revolution (1871)

In 1871 William Stanley Jevons in England and Carl Menger in Austria independently argued that value depends on marginal utility rather than labour cost. With Léon Walras they launched neoclassical economics.

Topics: Value Theory, Methods & Math, Jevons, Menger

Further reading: [Read more](https://en.wikipedia.org/wiki/Marginalism)

- Jevons’s Theory of Political Economy declared that “value depends entirely upon utility” and set out the theory in calculus.
- Menger’s Principles of Economics derived value from individuals’ subjective valuations of goods, founding the Austrian school.
- Marginal utility resolved the diamond–water paradox: water is useful but abundant, so its last unit is valued little.

Builds on: Say’s Treatise & Say’s Law, Scholastics & the Just Price
Critiques: Ricardo’s Principles, Adam Smith’s Wealth of Nations
Later built on by: Walras & General Equilibrium, Austrian School & Methodenstreit, Marshall’s Principles, Socialist Calculation Debate
Later critiqued by: Veblen & Institutional Economics

### Walras & General Equilibrium (1874–1906)

Léon Walras’s Elements of Pure Economics modelled the whole economy as a system of simultaneous supply and demand equations. His successor at Lausanne, Vilfredo Pareto, recast welfare analysis in terms of ordinal preferences.

Topics: Methods & Math, Markets, Lausanne

Further reading: [Read more](https://en.wikipedia.org/wiki/Léon_Walras)

- Walras represented all markets as interdependent equations and asked whether prices exist that clear every market at once.
- His imagined auctioneer adjusts prices by “groping” (tâtonnement) until excess demands vanish.
- Pareto’s Manual of Political Economy (1906) defined an allocation as optimal if no one can be made better off without making someone worse off.

Later built on by: Arrow–Debreu General Equilibrium, Marshall’s Principles, Socialist Calculation Debate, Game Theory
Builds on: Marginal Revolution
Later critiqued by: Amartya Sen on Famines & Capabilities

### Austrian School & Methodenstreit (1883–1896)

Menger’s defence of abstract theory against Gustav Schmoller’s German Historical School sparked the Methodenstreit, a bitter dispute over economic method. Eugen von Böhm-Bawerk extended Austrian theory to capital and interest and attacked Marx.

Topics: Methods & Math, Value Theory, Vienna, method

Further reading: [Read more](https://en.wikipedia.org/wiki/Methodenstreit)

- Menger’s Investigations into the Method of the Social Sciences (1883) defended deductive theory; Schmoller insisted on historical and statistical study.
- Böhm-Bawerk’s Capital and Interest (1884–1889) explained interest by time preference and the productivity of “roundabout” production.
- Karl Marx and the Close of His System (1896) argued that Marx’s labour theory of value could not be reconciled with observed prices.

Builds on: Marginal Revolution
Critiques: Marx’s Capital
Later built on by: Veblen & Institutional Economics, Hayek & the Use of Knowledge

### Marshall’s Principles (1890)

Alfred Marshall’s Principles of Economics fused marginal utility with cost of production in the familiar supply-and-demand diagram. It defined the toolkit of partial-equilibrium analysis and made economics a professional academic discipline.

Topics: Markets, Methods & Math, Cambridge, neoclassical

Further reading: [Read more](https://en.wikipedia.org/wiki/Principles_of_Economics_(Marshall))

- Value is set by supply and demand together, like the two blades of a pair of scissors.
- Marshall introduced or popularised price elasticity, consumer surplus and the distinction between short and long periods.
- Partial-equilibrium analysis isolates one market “other things being equal” (ceteris paribus).
- He established a separate economics degree (Tripos) at Cambridge in 1903, training Keynes and Pigou.

Later built on by: Samuelson & the Neoclassical Synthesis
Builds on: Marginal Revolution, Walras & General Equilibrium, J. S. Mill’s Principles

### Veblen & Institutional Economics (1898–1899)

Thorstein Veblen’s The Theory of the Leisure Class satirised the consumption habits of the rich and founded American institutional economics. He criticised neoclassical theory for ignoring habits, institutions and evolution.

Topics: Inequality, Methods & Math, United States, institutions

Further reading: [Read more](https://en.wikipedia.org/wiki/The_Theory_of_the_Leisure_Class)

- Veblen coined “conspicuous consumption” for spending meant to display status rather than to satisfy needs.
- He mocked the marginalist “lightning calculator of pleasures and pains” in “Why Is Economics Not an Evolutionary Science?” (1898).
- Institutions — habits of thought and law — evolve and shape economic behaviour, an approach carried on by John R. Commons and Wesley Mitchell.

Critiques: Marginal Revolution
Builds on: Austrian School & Methodenstreit
Later built on by: Thaler & Behavioral Economics

## Depression, Keynes & Synthesis

### Socialist Calculation Debate (1920–1940)

Ludwig von Mises argued that without market prices for capital goods a socialist planner could not calculate rationally. Oskar Lange and Abba Lerner replied with models of market socialism, and the debate shaped later thinking on prices and information.

Topics: Markets, State & Policy, planning, socialism

Further reading: [Read more](https://en.wikipedia.org/wiki/Socialist_calculation_debate)

- Mises’s “Economic Calculation in the Socialist Commonwealth” (1920) held that without private ownership of the means of production there are no prices to guide their use.
- Oskar Lange (1936–1937) proposed that planners could mimic markets by adjusting prices through trial and error.
- The Soviet Union launched its first Five-Year Plan in 1928, the largest experiment in central planning.

Builds on: Marginal Revolution, Walras & General Equilibrium, Marx’s Capital
Critiques: Marx’s Capital
Later built on by: Hayek & the Use of Knowledge
Later critiqued by: Hayek & the Use of Knowledge

### The Great Depression (1929–1939)

The Wall Street Crash of 1929 was followed by the deepest downturn in industrial history. Bank failures, deflation and collapsing trade discredited the self-correcting view of markets and transformed economic policy.

Topics: Crises, Money & Banking, crash, unemployment

Further reading: [Read more](https://en.wikipedia.org/wiki/Great_Depression)

- The New York stock market crashed in October 1929; US unemployment reached about 25% by 1933.
- Around 9,000 US banks failed between 1930 and 1933 as the money supply contracted by roughly a third.
- The Smoot–Hawley Tariff (1930) raised US duties and drew retaliation as world trade collapsed.
- Countries that left the gold standard earlier, such as Britain in 1931, generally recovered sooner.

Later built on by: Keynes’s General Theory, Bretton Woods System, Friedman & Monetarism
Later critiqued by: Bretton Woods System

### Keynes’s General Theory (1936)

John Maynard Keynes’s The General Theory of Employment, Interest and Money argued that economies can remain stuck with mass unemployment because of insufficient aggregate demand. It founded modern macroeconomics and justified active fiscal policy.

Topics: State & Policy, Crises, Cambridge, macroeconomics

Further reading: [Read more](https://en.wikipedia.org/wiki/The_General_Theory_of_Employment,_Interest_and_Money)

- Output and employment are determined by effective demand; nothing guarantees that it settles at full employment.
- Keynes rejected what he summarised as Say’s law — “supply creates its own demand” — as the hidden premise of classical theory.
- Interest is the reward for parting with liquidity, so money demand and uncertainty affect real activity.
- Using Richard Kahn’s multiplier (1931), public spending could raise income by more than its own amount.

Builds on: The Great Depression, Malthus on Population
Later built on by: Samuelson & the Neoclassical Synthesis, Minsky’s Financial Instability Hypothesis, Bretton Woods System, Global Financial Crisis, Modern Monetary Theory
Critiques: Say’s Treatise & Say’s Law
Later critiqued by: Hayek & the Use of Knowledge, Friedman & Monetarism

### Schumpeter & Creative Destruction (1911–1942)

Joseph Schumpeter placed the innovating entrepreneur at the heart of capitalist dynamics. In Capitalism, Socialism and Democracy he described capitalism as a process of “creative destruction” that renews itself by destroying old industries.

Topics: Markets, Crises, innovation

Further reading: [Read more](https://en.wikipedia.org/wiki/Creative_destruction)

- The Theory of Economic Development (1911) cast the entrepreneur as the source of new combinations that disturb equilibrium.
- Creative destruction “incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.”
- Schumpeter predicted that capitalism’s very success would breed bureaucratic socialism.

Builds on: Say’s Treatise & Say’s Law, Marx’s Capital

### Game Theory (1944–1950)

John von Neumann and Oskar Morgenstern’s Theory of Games and Economic Behavior analysed strategic interaction mathematically. John Nash’s equilibrium concept made game theory the central language of microeconomics.

Topics: Methods & Math, Markets, von Neumann, Nash

Further reading: [Read more](https://en.wikipedia.org/wiki/Theory_of_Games_and_Economic_Behavior)

- Von Neumann and Morgenstern (1944) formalised zero-sum games and coalitions as a new foundation for economics.
- Their second edition (1947) gave axioms for expected-utility maximisation under risk.
- Nash (1950) defined an equilibrium in which no player gains by changing strategy alone; he shared the 1994 Nobel prize.

Builds on: Walras & General Equilibrium
Later built on by: Arrow–Debreu General Equilibrium
Later critiqued by: Kahneman & Tversky’s Prospect Theory

### Hayek & the Use of Knowledge (1944–1947)

Friedrich Hayek’s The Road to Serfdom warned that central planning leads toward tyranny. His 1945 essay on knowledge recast the price system as a mechanism for communicating dispersed information.

Topics: Markets, State & Policy, Austrian, liberalism

Further reading: [Read more](https://en.wikipedia.org/wiki/The_Road_to_Serfdom)

- The Road to Serfdom (1944) argued that comprehensive economic planning requires coercion incompatible with liberty.
- “The Use of Knowledge in Society” (1945) presented prices as signals that coordinate knowledge no planner could gather.
- In the early 1930s Hayek’s Prices and Production clashed with Keynes over the causes of the slump and the role of credit.
- Hayek founded the Mont Pelerin Society in 1947, a network that nurtured postwar free-market thought.

Builds on: Socialist Calculation Debate, Austrian School & Methodenstreit
Critiques: Socialist Calculation Debate, Keynes’s General Theory
Later built on by: Friedman & Monetarism, Efficient-Market Hypothesis, Washington Consensus

### Bretton Woods System (1944–1971)

Delegates from 44 Allied nations met at Bretton Woods, New Hampshire, in July 1944 to design the postwar monetary order. They created the IMF and the World Bank and fixed exchange rates to a dollar convertible into gold.

Topics: Money & Banking, Trade, State & Policy, IMF, World Bank

Further reading: [Read more](https://en.wikipedia.org/wiki/Bretton_Woods_system)

- Currencies were pegged to the US dollar, which was convertible into gold at $35 an ounce.
- The International Monetary Fund and the International Bank for Reconstruction and Development were created to stabilise payments and finance rebuilding.
- Keynes’s plan for a global clearing union and a bancor currency lost out to Harry Dexter White’s dollar-centred plan.
- The General Agreement on Tariffs and Trade (1947) began successive rounds of tariff reduction.

Builds on: The Great Depression, Keynes’s General Theory
Critiques: The Great Depression
Later critiqued by: Nixon Shock & Floating Rates
Later built on by: Nixon Shock & Floating Rates, Washington Consensus

### Samuelson & the Neoclassical Synthesis (1947–1955)

Paul Samuelson recast economics in mathematical form and, through his best-selling textbook, combined Keynesian macroeconomics with neoclassical microeconomics. This “neoclassical synthesis” dominated the postwar profession.

Topics: Methods & Math, State & Policy, MIT, textbook

Further reading: [Read more](https://en.wikipedia.org/wiki/Neoclassical_synthesis)

- Foundations of Economic Analysis (1947) unified economic theory around constrained optimisation and comparative statics.
- His textbook Economics (1948) became the best-selling economics textbook and introduced “neoclassical synthesis” in its 1955 edition.
- The synthesis built on John Hicks’s IS–LM model (1937), which condensed Keynes into interacting goods and money markets.

Builds on: Keynes’s General Theory, Marshall’s Principles
Later built on by: Solow Growth Model, Phillips Curve
Later critiqued by: Rational Expectations Revolution

### Development Economics (1943–1958)

Decolonisation made the poverty of newly independent nations a central concern. Economists such as W. Arthur Lewis, Raúl Prebisch and Paul Rosenstein-Rodan argued that deliberate policy was needed to move labour and capital into modern industry.

Topics: Inequality, Trade, Labor, Global South

Further reading: [Read more](https://en.wikipedia.org/wiki/Development_economics)

- Rosenstein-Rodan (1943) argued that coordinated investment across many industries — a “big push” — was needed to escape underdevelopment.
- The Prebisch–Singer hypothesis (1950) held that primary-commodity prices decline relative to manufactures, motivating import-substituting industrialisation.
- Lewis’s dual-sector model (1954) described growth as surplus rural labour moving into a capitalist industrial sector at near-constant wages.

Builds on: Friedrich List’s National System
Critiques: Ricardo’s Principles
Later critiqued by: Amartya Sen on Famines & Capabilities, Washington Consensus, Randomised Trials & the Credibility Revolution

### Arrow–Debreu General Equilibrium (1951–1959)

Kenneth Arrow and Gérard Debreu proved that, under specific conditions, a set of prices clearing all markets exists. Their work, along with the welfare theorems, gave Walras’s vision a rigorous mathematical footing.

Topics: Methods & Math, Markets, existence proof

Further reading: [Read more](https://en.wikipedia.org/wiki/Arrow–Debreu_model)

- Arrow and Debreu (1954) used fixed-point theorems to prove the existence of competitive equilibrium.
- The fundamental welfare theorems link competitive equilibria to Pareto-efficient allocations.
- Arrow’s impossibility theorem (1951) showed no voting rule can satisfy a short list of reasonable fairness conditions.
- Debreu’s Theory of Value (1959) treated goods in different dates and states of the world as distinct commodities.

Builds on: Walras & General Equilibrium, Game Theory, Adam Smith’s Wealth of Nations
Later built on by: Amartya Sen on Famines & Capabilities

### Solow Growth Model (1956–1957)

Robert Solow’s model of economic growth showed that capital accumulation alone cannot sustain growth in output per worker. His growth accounting attributed most of the long-run rise in US productivity to technical change.

Topics: Methods & Math, Labor, growth

Further reading: [Read more](https://en.wikipedia.org/wiki/Solow–Swan_model)

- With diminishing returns to capital, economies converge to a steady state where only technology drives growth per worker.
- Solow (1957) found that about seven-eighths of US growth in output per hour from 1909 to 1949 was due to technical change — the “Solow residual”.
- The model predicts that poorer countries with similar fundamentals should grow faster and converge on richer ones.

Builds on: Samuelson & the Neoclassical Synthesis
Later built on by: Rational Expectations Revolution
Later critiqued by: Piketty’s Capital in the 21st Century

### Phillips Curve (1958–1960)

A. W. Phillips found an inverse relationship between unemployment and the rate of change of money wages in Britain. Policymakers soon read it as a menu of trade-offs between inflation and unemployment.

Topics: Labor, Money & Banking, State & Policy, inflation, unemployment

Further reading: [Read more](https://en.wikipedia.org/wiki/Phillips_curve)

- Phillips (1958) plotted UK wage inflation against unemployment for 1861–1957 and found a stable downward-sloping curve.
- Samuelson and Solow (1960) recast it as a policy menu: lower unemployment could be bought with higher inflation.
- Phillips had earlier built the MONIAC (1949), a hydraulic computer that modelled the flow of income through the economy.

Builds on: Samuelson & the Neoclassical Synthesis
Later critiqued by: Friedman & Monetarism, Stagflation & the Volcker Shock

### Friedman & Monetarism (1962–1968)

Milton Friedman led a monetarist counter-revolution against Keynesian fine-tuning. With Anna Schwartz he blamed the Great Depression on Federal Reserve policy, and he predicted the breakdown of the Phillips-curve trade-off.

Topics: Money & Banking, State & Policy, Chicago

Further reading: [Read more](https://en.wikipedia.org/wiki/Monetarism)

- A Monetary History of the United States (1963) argued the Fed turned a recession into the Great Contraction by letting the money supply collapse.
- His 1967 AEA presidential address argued there is no lasting trade-off: unemployment returns to a natural rate as expectations adjust.
- Friedman proposed a fixed rule for steady money growth instead of discretionary policy.
- Capitalism and Freedom (1962) championed floating exchange rates, school vouchers and a negative income tax.

Builds on: Bank of England, The Great Depression, Hume’s Political Discourses, Hayek & the Use of Knowledge
Critiques: Keynes’s General Theory, Phillips Curve
Later built on by: Nixon Shock & Floating Rates, Rational Expectations Revolution, Stagflation & the Volcker Shock, Washington Consensus, Global Financial Crisis

## Contemporary

### Efficient-Market Hypothesis (1965–1981)

Eugene Fama’s efficient-market hypothesis held that asset prices fully reflect available information, so no one can consistently beat the market. It became the foundation of modern finance and of index investing — and a prime target after bubbles.

Topics: Markets, Money & Banking, finance, Chicago

Further reading: [Read more](https://en.wikipedia.org/wiki/Efficient-market_hypothesis)

- Fama’s 1970 review defined weak, semi-strong and strong forms of market efficiency.
- Robert Shiller (1981) showed stock prices move far more than later dividends justify; he shared the 2013 Nobel with Fama.

Builds on: Hayek & the Use of Knowledge, John Law & the 1720 Bubbles
Later critiqued by: Minsky’s Financial Instability Hypothesis, Global Financial Crisis
Later built on by: Global Financial Crisis

### Nixon Shock & Floating Rates (1971–1973)

On 15 August 1971 President Nixon suspended the dollar’s convertibility into gold, ending the Bretton Woods system. By 1973 the major currencies were floating against each other.

Topics: Money & Banking, Trade, gold window

Further reading: [Read more](https://en.wikipedia.org/wiki/Nixon_shock)

- Nixon closed the gold window and imposed a 10% import surcharge and wage-price controls.
- The Smithsonian Agreement (December 1971) tried to restore fixed parities at new rates but collapsed within two years.
- Floating exchange rates and fiat money became the norm for major economies.

Critiques: Bretton Woods System
Builds on: Friedman & Monetarism, Bretton Woods System
Later built on by: Stagflation & the Volcker Shock, Modern Monetary Theory

### Rational Expectations Revolution (1961–1982)

Building on John Muth’s idea that expectations are model-consistent, Robert Lucas, Thomas Sargent and others rebuilt macroeconomics on optimising agents. They questioned whether systematic policy could fool people into higher output.

Topics: Methods & Math, State & Policy, new classical

Further reading: [Read more](https://en.wikipedia.org/wiki/Rational_expectations)

- Lucas’s “Expectations and the Neutrality of Money” (1972) showed how monetary surprises, not systematic policy, could move output.
- The Lucas critique (1976) argued that relationships estimated under one policy regime break down when policy changes.
- Kydland and Prescott (1977) showed discretionary policy suffers from time inconsistency, a key argument for independent central banks.
- Real business cycle models (1982) explained fluctuations as efficient responses to technology shocks.

Builds on: Friedman & Monetarism, Solow Growth Model
Critiques: Samuelson & the Neoclassical Synthesis
Later built on by: Stagflation & the Volcker Shock

### Stagflation & the Volcker Shock (1973–1982)

The 1973 oil embargo and loose monetary policy produced simultaneous high inflation and unemployment, which the simple Phillips curve said should not happen. Paul Volcker’s Federal Reserve broke inflation with sharply higher interest rates.

Topics: Crises, Money & Banking, oil shock, inflation

Further reading: [Read more](https://en.wikipedia.org/wiki/Stagflation)

- The OPEC oil embargo of October 1973 roughly quadrupled oil prices and helped push Western economies into recession.
- Inflation and unemployment rose together through the 1970s, undermining confidence in Keynesian demand management.
- Fed chairman Paul Volcker (from 1979) let the federal funds rate approach 20% in 1981, ending double-digit inflation at the cost of a deep recession.

Critiques: Phillips Curve
Builds on: Friedman & Monetarism, Nixon Shock & Floating Rates, Rational Expectations Revolution
Later built on by: Modern Monetary Theory, Washington Consensus

### Kahneman & Tversky’s Prospect Theory (1974–1979)

Psychologists Daniel Kahneman and Amos Tversky documented systematic departures from rational choice. Prospect theory, published in Econometrica in 1979, became the founding text of behavioural economics.

Topics: Value Theory, Methods & Math, psychology, behavioural

Further reading: [Read more](https://en.wikipedia.org/wiki/Prospect_theory)

- “Judgment under Uncertainty: Heuristics and Biases” (1974) catalogued shortcuts such as anchoring and availability.
- People evaluate outcomes as gains and losses relative to a reference point, and losses loom larger than gains.

Later built on by: Thaler & Behavioral Economics
Critiques: Game Theory

### Thaler & Behavioral Economics (1980–2017)

Richard Thaler brought psychological findings into mainstream economics through concepts such as the endowment effect and mental accounting. His work on “nudges” influenced government policy design worldwide.

Topics: Value Theory, State & Policy, behavioural, nudge

Further reading: [Read more](https://en.wikipedia.org/wiki/Nudge_theory)

- “Toward a Positive Theory of Consumer Choice” (1980) described the endowment effect: people value what they own more than identical things they do not.
- Nudge (2008, with Cass Sunstein) proposed “libertarian paternalism” through choice architecture and defaults.

Builds on: Kahneman & Tversky’s Prospect Theory, Veblen & Institutional Economics

### Amartya Sen on Famines & Capabilities (1981–1999)

Amartya Sen showed that famines result from collapses in people’s entitlements to food rather than simply from lack of food. His capability approach redefined development as the expansion of people’s real freedoms.

Topics: Inequality, State & Policy, welfare, development

Further reading: [Read more](https://en.wikipedia.org/wiki/Amartya_Sen)

- Poverty and Famines (1981) argued that the 1943 Bengal famine occurred without a large drop in food availability, as wages and purchasing power collapsed.
- The capability approach judges well-being by what people are able to do and be, not by income or utility alone.
- With Mahbub ul Haq, Sen helped create the UN Human Development Index, first published in 1990.

Critiques: Malthus on Population, Development Economics, Walras & General Equilibrium
Builds on: Arrow–Debreu General Equilibrium
Later built on by: Randomised Trials & the Credibility Revolution

### Minsky’s Financial Instability Hypothesis (1975–1992)

Hyman Minsky argued that stability breeds instability: calm periods encourage ever riskier borrowing until the financial system becomes fragile. Long neglected, his ideas were widely revisited after 2007.

Topics: Crises, Money & Banking, post-Keynesian

Further reading: [Read more](https://en.wikipedia.org/wiki/Hyman_Minsky)

- Borrowers shift from hedge finance to speculative finance and finally Ponzi finance, which depends on rising asset prices.
- Stabilizing an Unstable Economy (1986) argued for big government and a lender of last resort to contain recurrent crises.
- Economist Paul McCulley coined “Minsky moment” in 1998 for the point where over-indebted borrowers are forced to sell assets.

Builds on: Keynes’s General Theory, Bank of England
Critiques: Efficient-Market Hypothesis
Later built on by: Global Financial Crisis

### Washington Consensus (1989–2002)

John Williamson’s term summarised ten policy reforms favoured by Washington institutions for Latin America: fiscal discipline, liberalisation, privatisation and deregulation. It became shorthand for market-oriented structural adjustment and a target of critics after the crises of the 1990s.

Topics: Trade, State & Policy, IMF, liberalisation

Further reading: [Read more](https://en.wikipedia.org/wiki/Washington_Consensus)

- Williamson’s 1989 list included fiscal discipline, tax reform, trade and capital liberalisation, privatisation and secure property rights.
- IMF and World Bank structural adjustment programmes attached similar conditions to loans in indebted developing countries.
- The 1997 Asian financial crisis, following rapid capital-account liberalisation, intensified criticism of the approach.
- Joseph Stiglitz’s Globalization and Its Discontents (2002) criticised IMF policy as rigid and damaging.

Builds on: Friedman & Monetarism, Bretton Woods System, Friedrich List’s National System, Stagflation & the Volcker Shock, Hayek & the Use of Knowledge
Critiques: Development Economics

### Randomised Trials & the Credibility Revolution (1994–2021)

From the 1990s economists increasingly relied on natural experiments and randomised controlled trials to identify causal effects. Field experiments on poverty, led by J-PAL, earned the 2019 Nobel prize.

Topics: Methods & Math, Inequality, empirics, J-PAL

Further reading: [Read more](https://en.wikipedia.org/wiki/Abdul_Latif_Jameel_Poverty_Action_Lab)

- Card and Krueger (1994) compared fast-food restaurants in New Jersey and Pennsylvania and found no employment loss from a minimum-wage rise.
- Mexico’s Progresa conditional cash transfer programme (1997) was rolled out with a randomised evaluation, a model for later policy trials.
- Abhijit Banerjee, Esther Duflo and Sendhil Mullainathan founded J-PAL at MIT in 2003 to run randomised evaluations of anti-poverty programmes.

Critiques: Development Economics
Builds on: Amartya Sen on Famines & Capabilities

### Global Financial Crisis (2007–2010)

The collapse of the US housing bubble and the mortgage-backed securities built on it triggered the worst financial crisis since the 1930s. Governments and central banks responded with bailouts, near-zero interest rates and quantitative easing.

Topics: Crises, Money & Banking, State & Policy, Lehman, Great Recession

Further reading: [Read more](https://en.wikipedia.org/wiki/2008_financial_crisis)

- Lehman Brothers filed for bankruptcy on 15 September 2008, freezing interbank lending worldwide.
- The Federal Reserve cut rates to near zero and began large-scale asset purchases (quantitative easing) in late 2008.
- TARP (2008) and the American Recovery and Reinvestment Act (2009) revived Keynesian fiscal stimulus.
- The Dodd–Frank Act (2010) and Basel III tightened bank capital and oversight.

Builds on: Minsky’s Financial Instability Hypothesis, Friedman & Monetarism, Keynes’s General Theory, Efficient-Market Hypothesis
Critiques: Efficient-Market Hypothesis
Later built on by: Modern Monetary Theory

### Piketty’s Capital in the 21st Century (2013–2014)

Thomas Piketty’s Capital in the Twenty-First Century used centuries of tax data to trace the distribution of income and wealth. It argued that when returns on capital exceed growth, wealth concentrates — and became an unlikely bestseller.

Topics: Inequality, State & Policy, wealth, data

Further reading: [Read more](https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century)

- When the rate of return on capital (r) exceeds the growth rate (g), inherited wealth tends to grow faster than output and income.
- Work with Emmanuel Saez (2003) on top income shares built long series from tax records, later collected in the World Inequality Database.
- Wealth-to-income ratios in Europe followed a U-shape: high before 1914, compressed by wars and depression, rising again after 1980.
- Piketty proposed a progressive global tax on capital to curb concentration.

Builds on: Marx’s Capital, Ricardo’s Principles, J. S. Mill’s Principles
Critiques: Solow Growth Model

### Modern Monetary Theory (1990s–2020)

Modern Monetary Theory holds that a government issuing its own fiat currency cannot be forced to default in that currency, so its real constraint is inflation rather than financing. Developed in the 1990s, it gained wide attention in late-2010s US policy debates.

Topics: Money & Banking, State & Policy, heterodox, fiscal

Further reading: [Read more](https://en.wikipedia.org/wiki/Modern_monetary_theory)

- MMT draws on Georg Friedrich Knapp’s chartalism (1905): money’s value rests on the state’s acceptance of it for taxes.
- Warren Mosler, L. Randall Wray and others developed the framework in the 1990s, emphasising that taxes drive demand for currency.
- Proponents favour a federal job guarantee as an automatic stabiliser and price anchor for labour.
- Stephanie Kelton’s The Deficit Myth (2020) brought MMT to a general audience; mainstream critics warned of inflation risks.

Builds on: Aristotle on Exchange & Money, Nixon Shock & Floating Rates, Keynes’s General Theory, Global Financial Crisis, Stagflation & the Volcker Shock