The History of Economic Thought

The History of Economic Thought Lecture, 2009/2010 (60 hours)

Timetable: Autumn and Spring Semesters – Thursdays, 1:15–2:50 PM, Room F (Room E in Spring Semester) Instructor: Michał Brzeziński Office: Department of Economics, Warsaw University, 44/50 Długa Street, Room 304. Office hours: Thursdays, 3:00-4:00 PM Email: [email protected] Webpage: http://coin.wne.uw.edu.pl/mbrzezinski Email is a best mean of communication with me. I read email regularly and I try to respond quickly. Course webpage: Go to: http://coin.wne.uw.edu.pl/mbrzezinski and choose (from the top menu the following options: “Teaching” and further “History of Economic Thought (lecture)”. Beside syllabus, I will post slides for lectures on the webpage.

Course objectives The main purpose of the course is to acquaint the student with 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 Adam Smith Wealth of Nations in 1776. The course will focus on classical economics, the ideas of the Marginalist Revolution, neo-classical and institutional economics, 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 and political context and they will also be related to the scientific, philosophical and cultural ideas of the time. The course will develop an insight into the evolution of economics and will provide an opportunity for better understanding of the nature of economic science.

Teaching methods Lectures There will be an 1.5-hour lecture each week. You are encouraged to ask questions at any time in lectures. For each lecture I will provide PPT slides covering the main points, which will be published on the course web page (see above). If you have questions that you do not wish to raise in lectures, whether about the course organization or about material covered, you are welcome to come to see me during my Office Hours or use email. Assessment One final 1 hour exam in the June exam period will consist of test questions. I will provide you sample questions later in Summer semester. 1

Textbook The lectures are based on a following textbook: Harry Landreth, David C. Colander, History of economic thought. Houghton Mifflin Company, 4th edition, 2002. You can also use the 3rd edition of the book. Both editions are available in the Department of Economics Library.

Course outline (main topics) I. Introduction and the beginnings of economics 1. Economics and its history Why study the history of economics? Benefits from studying the history of thought. Broad chronology of main events in the history of economics. 2. Early economic thought Xenophon and economics. Aristotle: economics vs. chrematistics; exchange, money and value; justice in exchange and distribution. Thomistic economics: theory of value, the just price doctrine, theory of money. 3. Mercantilism and the Physiocracy Mercantilism: power and wealth; money and the causes of wealth; the theory of an active trade balance. Physiocracy: the philosophy of natural order and its practical consequences. The economics of Physiocracy: net product; Tableau Économique, „single tax‟ policy. II. Classical Economics 4. Freedom and the wealth of nations: Adam Smith Smith: the causes of the wealth of nations; theory of value; measures of value; the theory of distribution: wage, profit and rent; the theory of production: economic resources and capital; productive and unproductive labor; money and revenues of state; the social philosophy of the Wealth of Nations. 5. Distribution and growth of wealth: David Ricardo The subject of Ricardian economics: the distribution of wealth. Theory of exchange value: labor time; the cost of capital; the influence of distribution of exchange relations; invariable measure of value. Fundamental laws of distribution. Accumulation of the capital and economic growth. Money and international trade. 6. Crises or stability of the economy: Malthus vs. Say Say‟s Law. Malthus: arguments against Say‟s Law, the role of effective demand. Ricardo: technical unemployment. Keynes on Malthus and Ricardo. 2

7. The synthesis and decline of classical economic: J. St. Mill The development of economics after Ricardo. Mill: the economics of liberal institutions – the role of government, private property and competition; theory of value, laws of production and distribution; static vs. dynamic analysis; the social philosophy – social liberalism. III. Against Classical Economics 8. Dialectical development of capitalism: Karl Marx The dialectics of social development. 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 accumulation of capital and laws of motion of capitalism. IV. The marginalist revolution 9. The begginings and development of marginalist analysis. Founders of the revolution: C. Menger, W.St. Jevons, L. Walras. Criticism of classical theory of value and price. Theory of marginal utility. The value of economic commodity. The Principle of equality of marginal utilities of different commodities. Theory of exchange.The theory of marginal productivity. Production decisions by the firms. Distribution theory base on the idea of marginal productivity. Clark, Wicksteed and Wicksell. Ethical implications of the distribution theory. V. Neoclassical Economics 10. Neoclassical Economics: A. Marshall Theory of value and price: utility and costs of production. Theory of value: utility and demand, demand and price; price elasticity of demand, consumer‟s rent. The factors of production, supply and costs. Market: demand – supply – price; market period, short period, long period of analysis; the theory of distribution. 11. General equilibrium theory: L. Walras Outline of general equilibrium model. The premises of formalization of the model. Model in mathematical form. VI. Heterodox economics 12. Institutionalism and historical schools Institutionalism: T. Veblen; the criticism of neoclassical economics, institutional analysis of capitalism; the theory of leisure class; stability and development of capitalism. Historical School. 13. The Austrian School of Economics C. Menger – the founder of Austrian School; methodological assumptions. Continuation: Mises and Hayek. The socialist calculation debate. The revival of Austrian School in America. VII. Modern economics: mainstream current 14. Modern microeconomics Formalist revolution in economics. The role of mathematics in economics. Progress in general equilibrium theory. The rise of game theory and other approaches: microeconomics since 1980s.

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15. Modern macroeconomics before Keynes. Growth theory, theory of the general level of prices, business cycle theories. 16. Macroeconomics of unemployment: Keynesian revolution Criticism of the assumptions of classical economics. The principle of effective demand, the role of investment. Equilibrium unemployment. The theory of employment, liquidity preference. Liquidity trap. The principles of economic policy: fiscal and monetary policy. Keynes‟ social philosophy. 17. Macroeconomics after Keynes. Neoclassical synthesis; Monetarist counter-revolution. New Classical Macroeconomics, Real Business Cycles theory, New Keynesian Macroeconomics; Growth theory: exogenous and endogenous. VIII. Other issues in modern economics 18. Development of empirical methods in modern economics The rise of econometrics. The Cowles Commission approach to econometrics and its decline. Experimental economics. 19. Heterodox currents in modern economics. Radical economics; modern institutionalists; Post-Keynesians, neo-Austrians, public choice advocates; feminist economics.

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