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Western Economic Theories and Schools. Group Members: Jenny Kelly Etta Eutene. Content. Introduction Jenny Basic Economic Concepts Jenny Development Kelly Etta Conclusion Eutene.

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Western economic theories and schools

Western Economic Theories and Schools

Group Members: Jenny Kelly Etta Eutene


  • Introduction Jenny

  • Basic Economic Concepts Jenny

  • Development Kelly Etta

  • Conclusion Eutene

I basic economic concepts
I. Basic Economic Concepts

  • Definitions of economics

  • 3 basic economic questions

  • Goals of economic theories

Definitions of economics
Definitions of Economics

2 Principles:

1. Scarcity

  • - the limited nature of society’s resources.

    2. Opportunity cost

  • - whatever must be given up to get the item

Definitions of economics1
Definitions of Economics

  • Lionel Robbins (1898-1984, LSE) defined economics in 1932:

  • “Economics is the science which studies human behavior as a relationship between given ends and scarce means which have alternative uses.”

Three basic economic questions
Three Basic Economic Questions

  • What to produce

  • How to produce

  • For whom to produce.

Goals of economic theory
Goals of Economic Theory

  • Help society find better answers to the 3 basic questions.

  • Predict how changes in government policy or market institutions will affect economic outcomes.

2 the development of economics
2.The Development of Economics

  • (1). Mercantilism (重商主义)

  • (2). Classical Economics (古典经济学)

  • (3). Neo-Classical Economics (新古典经济学)

  • (4). Contemporary economics (当代经济学)

1. Mercantilism (重商主义)

A policy to obtain monetary wealth

1 mercantilism
(1). Mercantilism (重商主义)


Economic matter: The rise and development of commercial capital

Social matter: The great geographical discovery

15th~17th century

1 mercantilism1
(1). Mercantilism (重商主义)

  • Background

    • Political matter: Centralized country started

Need more currency

1 mercantilism2
(1). Mercantilism (重商主义)


  • Noble metal (money) is the only standard to measure wealth

  • The more accumulation of gold and silver means more powerful


  • Prohibition of exporting gold and silver, while input increase

  • Government should intervene in economics

  • International trade is a "zero sum game"零和博弈

Development stages

  • Early mercantilism(15th~the middle of the 16th century)

    buy less in foreign trade

    prohibit the output of currency

    control currency movements

  • Late mercantilism (The second half of the 16th Century to 17th Century)

    sell more

    allow the output of currency

    protective tariffs (保护关税)

  • Representative

  • --Thomas Monn 托马斯·孟

  • Output value of commodity must be larger than the input value to increase the currency input

Background viewpoint representatives

(2).Classical economics





2 classical economics
(2). Classical economics

about 1750-1875

  • Background

    • Workshop handicraft industry(手工业) has gradually become the main form

    • The feudal system(封建制度) has seriously hindered the capitalism

2 classical economics1
(2). Classical economics

  • Viewpoints

  • “An invisible hand”—market(看不见的手)

  • Laissez-faire principle(自由放任), no government intervention

  • National wealth growth conditions

2 classical economics2
(2). Classical economics

  • Representatives

  • --Adam Smith(亚当.斯密)

    <The Wealth of Nations>

    The economic system to put laissez-faire thought as the center, and the research from the circulation field transfer to the production field

  • Representatives

  • --David Ricardo(大卫.李嘉图)

    <The principles of political economy and taxation>《政治经济学及赋税原理》 

    Success in the labor theory of value and distribution of the enrichment and perfection of the theory.

3 newclassical economics

(3).NewClassical Economics (新古典经济学)


The refinement of Neo-Classical Economics

3 newclassical economics1
(3).NewClassical Economics (新古典经济学)


  • Background

  • Inheritance of Classical Economics and economic liberalism(经济自由主义)

  • The beginning of the marginal revolution (边际革命)

  • After Industrial Revolution, the unfair distribution of wealth led to social discontent.

3 newclassical economics2
(3).NewClassical Economics (新古典经济学)

  • Viewpoints

  • Market economy can solve the problem of unemployment, slump, while the stable policy of government have no effect on it.

  • The dilemma of unemployment and inflation not only exist in the long term, but also in the short term.

3 newclassical economics3
(3).NewClassical Economics (新古典经济学)

  • Representatives

    ——Alfred Marshall(阿尔弗雷德·马歇尔)

    “Principle of Economics”《经济学原理》

  • The theory of supply and demand(供求理论)

  • The theory of production cost (生产费用理论)

  • The theory of marginal utility(边际效用理论)

  • The theory of marginal productivity (边际生产力理论)

4 contemporary economics
(4).Contemporary economics (当代经济学)

since 1930s

  • Background

    —The putting forward of Keynesianism marks the birth of modern economics

    — The establishment and development of Macroeconomics

4 contemporary economics1
(4).Contemporary economics (当代经济学)

  • Stages of development

  • The Keynes revolution (凯恩斯革命)

    —putting forward the modern macroeconomics system, in which national revenue decision is the theory center and government intervention the policy adjustment.

  • The period of macroeconomics

  • The revival of Laissez-faire thought (自由放任)

3 conclusion

  • Basic economic concepts


3 basic questions

The goals of economic theory

Mercantilism Thomas Men

Classical Economics <The Wealth of Nations>

New classical economics Alfred Marshall

Contemporary Economics The Keynes revolution

Not much in common

Even conflict

Fama People’s rational calculation

Shiller Psychological factors