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What Is Economics and Who Have Contributed to the Theories That Have Applied to Modern Economic Thought

Autor:   •  November 4, 2013  •  Essay  •  2,211 Words (9 Pages)  •  818 Views

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What is Economics and who have contributed to the theories that have applied to modern economic thought.

Economics is the study of how the forces of supply and demand allocate scarce resources. Subdivided into microeconomics, which examines the behavior of firms, consumers and the role of government; and macroeconomics, which looks at inflation, unemployment, industrial production, and the role of government.

There have been many contributors to economic thought and theory throughout the centuries from the classical economic theorists to the modern day application of many other theorists. Throughout different era's, economic strategies have been adopted and applied to best suit the circumstances from the classical view up to the 1920's to the more Keynesian approach up to the 1960's. The role of governments cannot be overlooked and , in particular, how they applied the theories of such economists and their theories. While it is difficult of outline the contribution of all economists, for the purpose of this essay, I will outline the contribution of Adam Smith, Alfred Marshall, John Maynard Keynes and Milton Friedman. As well as looking at their economic theories, I will also consider how they have been applied to economies at different stages and what role they play in economic thought today.

Adam Smith (1723-1790) is often regarded as the founder of modern economics, and while he is not credited with inventing some of his idea's, he is recognized at the one who complied and published them in a manner in which they could be presented to the average reader. His two main published works are The Theory of Moral Sentiments in 1759 and An Inquiry Into the Nature and Causes of the Wealth of Nations in 1776. The later publication, also known as The Wealth of Nations, contains most of the modern day contributions of Smith to economic theory. I will discuss his thoughts his contributions which include his "invisible hand" theory and his theory on labour specialization.

The "invisible hand" theory suggests in a free market, a market free of government intervention, each individual will, by pursuing their own self interest, benefit society more as a whole. This theory is based on the idea that each person, looking out for themselves, inadvertently helps to create the best possible outcome for all. Smith wrote "It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest". The butcher, the brewer or the baker Smith refers to intend to make a living by selling products to their customers, whose needs are met by the products. Smith reasoned that such a system creates wealth not just for the butcher, baker or brewer, but for society as a whole by ensuring people are working in a more productive manner for themselves.

Smith believed that the role of government


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