ECONOMIC THEORIES Andrew Simler

Mercantilism Mineral resources are wealth Zero-sum game Balance of trade  Exports are good, imports are bad  Tariffs

Classical Economics Value derived from labor Laissez-faire  Free trade  Competition “Invisible Hand”  Self-interest

Marxist Economics Value derived solely from labor (cf. Classical)  Labor itself also valued on this basis  Labor creates surplus value Inevitable fall in profits  Increased use of machinery  Exploitation of workers Eventual revolution by oppressed working class

Neoclassical Economics Value derived from subjective scarcity Mathematical modeling  Marginalism Three assumptions  Rational behavior  Maximum utility  Full information

Keynesian Economics Markets are not perfectly efficient  Recessions and depressions  Government intervention Supply can exceed demand  Downward spiral in price Liquidity trap

Monetarism Reaction against Keynesian thought Money supply is key  Great Depression was fault of Federal Reserve  Money supply should grow steadily to match growth of economy The market will then sort out all economic problems Natural level of unemployment

Dependency Theory Persistent poverty in underdeveloped countries  Pattern of international interactions Dominant industrialized powers, poor dependent states  Echoes of imperial/colonial relationship Self-reinforcing  Supported by elites of dependent states Consequence of capitalism or power imbalance

References