Modern Schools of Economics: A Family Tree

The picture below is a simplified diagram of the modern schools of economics. One will have to open it in a new window to see it properly.

Economics is a discipline in which there are many different competing economic theories, and most of these theories are not just inconsistent on minor issues, but fundamentally contradictory in terms of their major and most fundamental theories.

It follows as a matter of straightforward logic that many competing theories that contradict one another in fundamental ways cannot all be true, and that a great deal of them – that is, theories that are mutually incompatible – are likely to be wrong.

Modern economics begins with Adam Smith and the Classical School, which had two offshoots: (1) Marxism (which in many ways is a development of the thought of David Ricardo) and (2) neoclassical economics.

Around the 1870s, Classical theory was fundamentally reformulated and changed in the so-called marginalist revolution, the great figures of which were Alfred Marshall (1842–1924), Carl Menger (1840–1921), and Léon Walras (1834–1910).

Walras and Marshall stand out as the founders of two main neoclassical traditions. Austrian economics is an offshoot of the work of Carl Menger.

Both the economics of Marshall and Walras still stands at the heart of modern neoclassical economics, the most important theories of which are listed on the top line, and are as follows:

(1) New Classical economics;

(2) Monetarism;

(3) New Institutionalism, and

(4) New Keynesianism.

The alternative neoclassical tradition that stems from Alfred Marshall leads to probably the most important economist of the past 100 hundred years: John Maynard Keynes.

Keynes began his career as a Marshallian neoclassical economist but by the time of his fundamental work the General Theory of Employment, Interest and Money (1936) Keynes had essentially repudiated the neoclassical paradigm (though admittedly not completely).

Important historical rivals to neoclassical economics are the German Historical School and the Old Institutionalist tradition.

The German Historical School was a major rival of both Classical and neoclassical economics, and it rise to both English and French offshoots but also fundamentally to the Old (American and European) Institutionalist tradition, which by the early 20th century had come to replace the German Historical School as the fundamental competitor to neoclassical economics.

Of course, one must realise that the Old Institutionalists did not all repudiate the neoclassical tradition, and many of them followed the Marshallian neoclassical tradition (Hodgson 2003: 463). Despite this, the Old Institutionalist school had impressive and considerable accomplishments: for example, the early work on administered prices/cost-based prices was done by Gardiner Means, an Old Institutionalist.

Old Institutionalism was a large and influential school in the United States, though not so much in Europe. However, the leading European Old Institutionalists were as follows:

(1) K. William Kapp (1910–1976);

(2) Gunnar Myrdal (1898–1987) and

(3) Karl Polanyi (1886–1964).

A further offshoot of Old Institutionalism was the primitivist/substantivist tradition in ancient economics, the leading figures of which were Karl Polanyi (1886–1964) and Moses I. Finley (1912–1986). Moses Finley wrote a highly influential book on the economies of ancient Greece and Rome called The Ancient Economy (1973; rev. edn. 1999), which rejects many aspects of modern neoclassical economics and is firmly in the Old Institutionalist tradition (although some of Finley’s more extreme views are no longer held even by modern Institutionalists).

Today modern non-neoclassical Institutionalist economics continues to be an alternative to the mainstream neoclassical tradition, but it is the Post Keynesian school that arguably has done most to advance economics in the non-neoclassical tradition of John Maynard Keynes.

Further Reading
“Neoclassical Synthesis Keynesianism, New Keynesianism and Post Keynesianism: A Review,” July 7, 2010.

“Non-Neoclassical Institutionalism: A List of Economists,” March 13, 2014.

BIBLIOGRAPHY
Davidson, P. 2005. “The Post Keynesian School,” in B. Snowdon and H. R. Vane (eds.), Modern Macroeconomics: Its Origins, Development and Current State. Edward Elgar, Cheltenham. 451–473.

Finley, Moses I. 1973. The Ancient Economy (updated edn.). University of California Press, Berkeley.

Finley, Moses I. 1999. The Ancient Economy (updated edn.). University of California Press, Berkeley.

Hodgson, Geoffrey M. 2000. “What is the Essence of Institutional Economics?,” Journal of Economic Issues 34.2: 317–329.

Hodgson, Geoffrey M. 2001. How Economics Forgot History: The Problem of Historical Specificity in Social Science. Routledge, London and New York.

Hodgson, Geoffrey M. 2003. “Postwar Heterodox Economics: Institutional Economics,” in Warren J. Samuels, (ed.). A Companion to the History of Economic Thought. Blackwell, Malden, MA. 462–470.

Samuels, Warren J. (ed.). 2003. A Companion to the History of Economic Thought. Blackwell, Malden, MA.

Early Christian Communism?

Libertarianism and conservative/fundamentalist Christianity make strange bedfellows.

Why? Let us look at a passage in The Acts of the Apostles which purports to be a history of the earliest Christian community. First, the New Testament Greek (the Koine text) and then an English translation:

Τοῦ δὲ πλήθους τῶν πιστευσάντων ἦν καρδία καὶ ψυχὴ μία, καὶ οὐδὲ εἷς τι τῶν ὑπαρχόντων αὐτῷ ἔλεγεν ἴδιον εἶναι, ἀλλ᾽ ἦν αὐτοῖς πάντα κοινά. ….

οὐδὲ γὰρ ἐνδεής τις ἦν ἐν αὐτοῖς• ὅσοι γὰρ κτήτορες χωρίων ἢ οἰκιῶν ὑπῆρχον, πωλοῦντες ἔφερον τὰς τιμὰς τῶν πιπρασκομένων καὶ ἐτίθουν παρὰ τοὺς πόδας τῶν ἀποστόλων• διεδίδετο δὲ ἑκάστῳ καθότι ἄν τις χρείαν εἶχεν. Ἰωσὴφ δὲ ὁ ἐπικληθεὶς Βαρναβᾶς ἀπὸ τῶν ἀποστόλων, ὅ ἐστιν μεθερμηνευόμενον υἱὸς παρακλήσεως, Λευίτης, Κύπριος τῷ γένει, ὑπάρχοντος αὐτῷ ἀγροῦ πωλήσας ἤνεγκεν τὸ χρῆμα καὶ ἔθηκεν παρὰ τοὺς πόδας τῶν ἀποστόλων.

Ἀνὴρ δέ τις Ἁνανίας ὀνόματι σὺν Σαπφείρῃ τῇ γυναικὶ αὐτοῦ ἐπώλησεν κτῆμα καὶ ἐνοσφίσατο ἀπὸ τῆς τιμῆς, συνειδυίης καὶ τῆς γυναικός, καὶ ἐνέγκας μέρος τι παρὰ τοὺς πόδας τῶν ἀποστόλων ἔθηκεν. εἶπεν δὲ ὁ Πέτρος, Ἁνανία, διὰ τί ἐπλήρωσεν ὁ Σατανᾶς τὴν καρδίαν σου ψεύσασθαί σε τὸ πνεῦμα τὸ ἅγιον καὶ νοσφίσασθαι ἀπὸ τῆς τιμῆς τοῦ χωρίου; 5.4 οὐχὶ μένον σοὶ ἔμενεν καὶ πραθὲν ἐν τῇ σῇ ἐξουσίᾳ ὑπῆρχεν; τί ὅτι ἔθου ἐν τῇ καρδίᾳ σου τὸ πρᾶγμα τοῦτο; οὐκ ἐψεύσω ἀνθρώποις ἀλλὰ τῷ θεῷ. ἀκούων δὲ ὁ Ἁνανίας τοὺς λόγους τούτους πεσὼν ἐξέψυξεν• καὶ ἐγένετο φόβος μέγας ἐπὶ πάντας τοὺς ἀκούοντας. ἀναστάντες δὲ οἱ νεώτεροι συνέστειλαν αὐτὸν καὶ ἐξενέγκαντες ἔθαψαν.

Ἐγένετο δὲ ὡς ὡρῶν τριῶν διάστημα καὶ ἡ γυνὴ αὐτοῦ μὴ εἰδυῖα τὸ γεγονὸς εἰσῆλθεν. ἀπεκρίθη δὲ πρὸς αὐτὴν Πέτρος, Εἰπέ μοι, εἰ τοσούτου τὸ χωρίον ἀπέδοσθε; ἡ δὲ εἶπεν, Ναί, τοσούτου. ὁ δὲ Πέτρος πρὸς αὐτήν, Τί ὅτι συνεφωνήθη ὑμῖν πειράσαι τὸ πνεῦμα κυρίου; ἰδοὺ οἱ πόδες τῶν θαψάντων τὸν ἄνδρα σου ἐπὶ τῇ θύρᾳ καὶ ἐξοίσουσίν σε. ἔπεσεν δὲ παραχρῆμα πρὸς τοὺς πόδας αὐτοῦ καὶ ἐξέψυξεν• εἰσελθόντες δὲ οἱ νεανίσκοι εὗρον αὐτὴν νεκράν, καὶ ἐξενέγκαντες ἔθαψαν πρὸς τὸν ἄνδρα αὐτῆς. καὶ ἐγένετο φόβος μέγας ἐφ᾽ ὅλην τὴν ἐκκλησίαν καὶ ἐπὶ πάντας τοὺς ἀκούοντας ταῦτα.

“Now the group of those who believed was of one heart and soul, and no one claimed private ownership of any possessions, but everything they owned was held in common. ….

No person among them was needy, for as many as the owners of lands or houses were who sold them, they in turn brought the proceeds of what was sold and placed them at the apostles’ feet, and they distributed to each as anyone had need.

And there was the Levite Joseph, the one named Barnabas by the apostles (which means “son of encouragement”), a Cypriote by nationality, who owned a field and sold it and brought the money and laid it at the feet of the apostles.

But a certain man called Ananias, with his wife Sapphira, sold some property and withheld some of the money, with his wife aware of this. He brought a certain part of the money to the feet of the apostles and laid it there.

But Peter said to him: “Ananias, why has Satan filled your heart so that you lie to the Holy Spirit and withheld a part of the proceeds of the land? While it remained unsold, did it not remain your own? And after it was sold, were not the proceeds at your disposal? How is it that you have contrived this deed in your heart? You did not lie to us but to God!”

Now when Ananias heard these words, he fell down and died. And great fear seized all who heard of it. The young men came and wrapped up his body, then carried him out and buried him.

After an interval of about three hours his wife came in, not knowing what had happened. Peter said to her, “Tell me whether you and your husband sold the land for such and such a price.” And she said, “Yes, that was the price.” Then Peter said to her, “How is it that you have agreed together to put the Spirit of the Lord to the test? Look, the feet of those who have buried your husband are at the door, and they will carry you out.” Immediately she fell down at his feet and died. When the young men came in they found her dead, so they carried her out and buried her beside her husband. And great fear seized the whole church and all who heard of these things. (Acts 4.32–37 to 5.1–11).

Now being secular myself, I place no value in the passage as having anything to teach us about modern social or economic organisation.

But this story if taken seriously – and any conservative or fundamentalist Christian who believes in Biblical inerrancy or inspiration is forced to do so – attests to an early Christian communism and collectivism: common ownership or pooling of resources and redistribution of wealth.

In fact, the principle that the apostles “distributed to each one just as anyone had need” (in Greek διεδίδετο δὲ ἑκάστῳ καθότι ἄν τις χρείαν εἶχεν) reads like something out of Karl Marx: “from each according to his ability, to each according to his need.”

Not only this, but a selfish individualism in which Ananias and his wife withhold some portion of their wealth from the community leads to them being struck dead!

Paradoxically, it is the liberal Christian who can easily evade the communist implications of this passage by dismissing it as something not divinely inspired and not to be taken seriously.

But conservative or fundamentalist Christians who support libertarianism have some real explaining to do, and
this is just another instance of why libertarian Conservative Christians are a contradiction in terms.