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Economics · A History of Economic Thought by V Lokanathan

Chapter 25 : NEO-CLASSICISM

Table of contents28 sections
  1. 1.NEO-CLASSICISM
  2. 2.Key Terms
  3. 3.Knut Wicksell (1851-1926)
  4. 4.Main Theories of Wicksell
  5. 5.Wicksell's Theory of Capital and Interest
  6. 6.Natural Rate of Interest and Monetary Rate of Interest
  7. 7.Monetary Reform
  8. 8.Views on Competition
  9. 9.Population, Taxation, and Welfare
  10. 10.Key Terms
  11. 11.📌 Exam Tidbits
  12. 12.J. B. Clark (1847-1938)
  13. 13.Dynamic Theory of Profits
  14. 14.Key Terms
  15. 15.📌 Exam Tidbits
  16. 16.Irving Fisher (1867-1947)
  17. 17.Quantity Theory of Money and Equation of Exchange
  18. 18.Criticism
  19. 19.Trade cycles
  20. 20.Key Terms
  21. 21.📌 Exam Tidbits
  22. 22.Taussig (1859-1940)
  23. 23.Wages
  24. 24.Profits
  25. 25.International Trade
  26. 26.Key Terms
  27. 27.📌 Exam Tidbits
  28. 28.Quick-Recall Box

Chapter preview

NEO-CLASSICISM

Neo-classical synthesis is described as "a marriage of micro and macro economics." It emerged after the marginal revolution, attempting to synthesize the new ideas of the marginal utility school with the ideas of the old classical school.

  • Classical economics refers to early 19th-century theories developed mainly by Ricardo and formulated best by J. S. Mill in his Principles.
  • New schools developed in England, Austria, Sweden, and America.
  • Alfred Marshall is regarded as the leader of the neo-classical school in England.
  • Haney (1890) stated: "By breaking down partitions, cutting windows, and adding rooms he remodelled the classical system so effectively that since the appearance of the "Principles of Economics” in 1890, his "Neo-classicism" has been recognized in the English speaking world as the most secure, convenient, and harmonious stepping place now available for economic science."
  • Knut Wicksell became the leader of the Swedish/Scandinavian school.
  • In America, notable neo-classical economists included J. B. Clark, F. W. Taussig, and Irving Fisher.
  • Taylor on Taussig: "F. W. Taussig remained as a theorist closer than others to the old classical, Ricardo-Mill tradition, and only half-absorbed or accepted the new ideas of his generation; but he had great wisdom, produced much good work, and taught and formed a great many younger American economists of outstanding merit."
  • Taylor on Fisher: "Irving Fisher stood out as the one great American mathematical economist on his own, not Walrasian lines."
  • The neo-classical economists made significant contributions to the theory of money, interest, and profit.

Key Terms

ConceptDefinition
Neo-classical synthesisDescribed as "a marriage of micro and macro economics," attempting a synthesis of the new ideas of the marginal utility school with the ideas of the old classical school.
Classical economicsRefers to the early nineteenth century theories developed mainly by Ricardo and later on formulated in the best manner by J. S. Mill in his Principles.

Knut Wicksell (1851-1926)

Knut Wicksell was the founder of the Swedish school. Born in 1851 , he initially studied philosophy and mathematics, taking an interest in economics only at age 35 . After 10 years…

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Chapter 26 : THE INSTITUTIONALIST SCHOOL