Overview of Various Economic Schools of Thought

The history of the various schools of thought in economics can be loosely categorised as follows:

For an overview of macroeconomic schools, see macroeconomics. In brief, this includes mainly,


Neo-Classical Economics

However, the Classical Traditionalists had one major, glaring flaw in their work. They believed that market prices were determined in the long run by the amount of labor time embodied in the products. This simply did not square with reality. Why for instance did gold command a higher price than iron and its products, when the latter not only required more labor time to produce but also seemed more useful as well? Their answer was highly unsatisfactory.

Then in the 1870s three economists, working independently, “revolutionized” economic science by discovering the subjective theory of value as the basis for market prices and phenomena. Carl Menger at the University of Vienna, William Jevons at Cambridge University and Leon Walras at the University of Lausanne perceived that it is the acting, preferring, valuing individual that is the source of value and prices, not labor time! The result was the birth of the Neo-Classical Tradition.