A Layman’s Guide To The History of Economic Thought

This shouldn’t be taken as definitive or even remotely accurate, and I’m probably going to ruffle a few feathers with this. It’s just me having some fun (over the next few days you’ll see why), and who knows, this post might be useful to somebody. There’s not a few in-jokes here, which I hope my fellow economists might enjoy…I’ve probably missed a few, so feel free to add to my list in the comments, or suggest any changes.

With that, here’s my extremely concise history of economic thought:

Imagine an economy is a bucket of water…

1. Classical economics - An invisible hand fills the bucket with water; this is in accordance with laws of nature and the individual self-interest of the water;

2. Neo-classical economics – An invisible hand fills the bucket with water, but both hand and water enjoy the process less and less;

3. Marxism – the bucket rightfully belongs to the proletariat while the hand is being oppressed by the bourgeois class; the bucket will be filled when the oppressors are overthrown by the scientific process of history;

4. National Socialism/Leninism – both bucket and water belong to me and I’m exterminating the bourgeois class to expand the bucket;

5. German Historical School – Filling the bucket with water can only be understood by knowing how the bucket got there, where the water came from, and the nature of both;

6. General Equilibrium economics - The bucket will always be filled with water…the math proves it;

7. Austrian economics – The bucket will tend to fill with water in a circular motion, as long as the bucket is made of gold…math doesn’t prove anything;

8. Schumpeter - the bucket is filled by entrepreneurs, who occasionally increase the size of the bucket by a process of creative destruction…the math proves it;

9. Keynesian Economics – The bucket can only be filled with water by the government…every bit of water put in will double in size once it’s in the bucket;

10. The Neo-classical synthesis – The bucket is filled by the government but only in the short run…otherwise its filled by the invisible hand;

11. Growth Economics – the bucket will be filled as long as we make technological progress in the process of filling in the water;

12. Development Economics – the water will only fill the bucket if you take out a loan or hire a consulting team from the World Bank…otherwise it will be stuck in a poverty/middle income trap;

13. Institutional Economics – the water will only fill the bucket if the water believes that the government is not corrupt;

14. Trade economics – two buckets are better than one;

15. Monetarism – The bucket will be filled with water as long as you keep the bucket growing at 3%;

16. New Classical Economics – the water molecules are rational, therefore the bucket will fill itself as long as taxes are cut;

17. New Keynesian Economics – the water molecules are rational, but can’t adjust the water level by themselves…government has to do it for them so spending must be raised;

18. Real Business Cycle Theory – the water is both rational and efficient…if the bucket isn’t full then water’s preference for leisure over work has increased;

19. Post Keynesian Economics - The bucket is filled with water by the government, but only if the bucket and the water agree to the level;

20. Islamic economics – the bucket will be always be filled with water if we abolish interest rates and the bucket is made of gold;

21. Modern Monetary Theory – the bucket is filled by everybody, but if households and corporations are on a tea break, government has to do it for them;

22. Behavioural Economics – the bucket and the water play a game to determine how best to fill the bucket;

23. Hyman Minsky/Nicholas Taleb – a full bucket is dangerous, and the longer its filled up the more water will be spilt in the end;

24. Applied Econometrics – there’s either too much or not enough water in the bucket…all the models above are wrong;

25. Econometrics - there’s either too much or not enough water in the bucket…reality must be wrong;