The Most Important Economic Schools of Thought | Economics Explained
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An economy is a collection of production and consumption processes that are all working towards solving the central economic problem.
The problem is that we only have access to a finite amount of resources, but the potential for human consumption of goods and services is pretty much limitless.
This is the foundation of economics, every study, every paper, every theory, economic policy, or experiment is ultimately an attempt to find a solution to a problem, that by its very nature, has no solution.
Economics is considered a social science, and although some other scientists from more “rigorous” fields don’t always welcome it into their little club, it still follows the same processes to explore the world around us.
And, as with science, or anything that is extremely complex for that matter, there are disagreements between practitioners at all levels of academia and throughout the entire history of the subject.
The economic schools of thought are very broad ways that economists are clumped into basic groups.
Now the first thing to know about all of these schools of thought is that they all agree with one another on most issues.
In the same way that two physicists will obviously agree with one another that and object at rest will remain at rest, but might disagree about string theory. Two economists will obviously agree that there are opportunity costs for every unit of production, but they might disagree on the long term implications of a consumption tax.
The economy impacts our financial situations, our governments, retirements, environments, crime rates, and basically anything else that is going to make news headlines.
As with anything that people are invested in they form opinions around it. And those opinions are held by everybody from Nobel laureate career economists to that crazy guy advocating for a seed-based economy.
If this contention wasn’t enough then there is one other issue that makes these schools of thought difficult to deal with, and that is that there are no strong borders between them.
There are plenty of economists that agree with some of the principles of one school of thought and then disagree wildly on some other areas. Which is actually a good thing. But more on that later.
For now, to try and make sense of this wild world we are going to look at three major schools, Classical, Austrian, and Keynesian.
To show the differences between these schools we are going to look at the way they suggest solving the central economic problem in key areas.
What they suggest the role of government is.
What do they think the role of the individual is.
What they propose doing in an economic crisis.
And finally what is the key to delivering a wealthier happier economy?
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If you’d like to dive deeper in to the topics discussed in this video, we recommend checking out these fantastic books:
📚 Wealth of Nations by Adam Smith - https://amzn.to/3ihm0U8
📚 The General Theory of Employment, Interest and Money by John Maynard Keynes - https://amzn.to/3ihms4M
(Note: as an Amazon Associate, we earn from qualifying purchases).
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#Austrian #Keynesian #Economics
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