Economic science studies the economic activity of people. Economic science. Monetarism: The Basic Ideas of Monetarism
Economic theory can be safely called the most ancient of all sciences, which even in ancient times attracted the attention of scientists and all educated people. It is interesting that scientists have proved the fact that even primitive people had the basics of economic knowledge, had certain ideas about the management of the economy, about the relations that develop between members of the community during and as a result of obtaining and distributing benefits, as well as the exchange of created products. In this article we will talk about how the history of the development of economic theory was built.
The emergence of economic theory
Nevertheless, in primitive society, such ideas were not yet singled out as an independent field of knowledge, but existed only within the framework of an undivided social consciousness, that is, they were a component of the worldview of people as a whole.
The history of economic theory has its origins in the depths of philosophy. After some time, it separated from philosophy in the process of differentiation of sciences and specialization of scientists, which are caused by the continuous accumulation of knowledge and the inability to cover their entire array by individual researchers.
As an independent science, economic theory emerged in the 16th-17th centuries. This time is characterized by the emergence of capitalism, the emergence of manufacture, the deepening of the social division of labor, the expansion of markets, as well as the intensification of money circulation.
In the 19th century, economic theory began to appear in university programs as stand-alone courses in law schools. In the next century, special economic departments began to appear, as well as specialized economic higher and secondary specialized educational organizations. At the same time, the economy was introduced into secondary schools, lyceums, gymnasiums, colleges, and a circle of professional economists was formed.
For example, A.S. Pushkin, to whom Tsar Nicholas I ordered to form the principles of educating young people, first of all called for the abandonment of home education, and called political economy among the obligatory sciences.
And even today, the interest of educated citizens in economic theory is not diminishing. The famous American scientist P. Samuelson said that economics is the "queen of sciences", and the creators of proletarian political economy called it "the anatomy of human society." After all, the truth is, just as there can not be a good doctor without knowledge of anatomy, so there cannot be a good economist, businessman without knowledge of the fundamentals of economic theory.
Many scientists are looking for the beginning of economic science in the teachings of ancient thinkers, mainly from the countries of the Ancient East. For example, in the ancient Indian "Laws of Manu" (IV-III centuries BC) the existence of a social division of labor, relations of domination and subordination is prescribed.
In addition, economic thought was also developed in Ancient Greece... The opinions of the ancient Greek thinkers Plato, Xenophon, Aristotle are today called the starting points of modern economic science. And the economic views of thinkers Ancient Rome are a continuation of the economic thought of the ancient Greeks.
Economics schools
Economics is the science that studies the use of a variety of limited resources in order to satisfy the needs of man and all people.
The economy has two parts:
- scientific. This is an economic theory, that is, the science of how people choose a method of using scarce resources that have a multi-purpose purpose.
- the applied part of economics is studying the possibilities of applying economic laws and theories for the activities of various economic systems.
The first schools of economics appeared around the 16th-17th centuries. There are 8 economic schools in the history of economic theory:
- mercantilism. The very first school of political economy was formed during the fall of feudalism and the emergence of capitalist relations. This happened around the middle of the 16th century. - the middle of the 17th century. At that time, they started talking about economic theory as an independent science, since the first system of economic views was formed, the center of which was the problem of wealth. Mercantilists (T. Man, A. Montchretien) were confident that profit is formed in the sphere of circulation, and the wealth of a nation consists in money - gold and silver. Foreign trade became a source of wealth for them. Mercantilism arose during the period of great geographical discoveries, the capture of colonies, and the growth of the influence of cities. After writing Montchretien's book "A Treatise on Political Economy" (1615), economic theory developed in the mainstream of political economy for over three centuries.
- physiocratism. The next trend in the development of political economy was represented by the physiocrats, who expressed the interests of large landowners. Physiocrats tried to explain the influence of natural phenomena on the economy of society. They were convinced that the source of wealth was exclusively agricultural labor, agricultural production, and they called industry a "barren" sphere that did not create a "pure product". Famous representatives of this school were Francois Quesnay and Robert Turgot
- classical political economy. Further, economic theory was developed in the works of Adam Smith (1723-1790) and David Ricardo (1772-1823). It is Adam Smith who is considered the founder of classical political economy. The main idea in the works of Adam Smith was liberalism, minimal state intervention in the economy, market self-regulation based on free value. Smith formulated the basics of the labor theory of value, showed the importance of the division of labor as a condition for productivity growth. Scientists-economists of Western countries studied at his works. David Ricardo said that the value and price of a product is in direct proportion to the amount of labor spent on its creation. And he characterized profit as the result of the employee's unpaid labor. Based on his work, utopian socialism was formed
- utopian and scientific communism (Marxism). Taking as a basis the highest achievements of the classical school of political economy, Karl Marx (1818-1883) and Friedrich Engels (1820-1895) developed a theoretical concept that was later called Marxism. Also, Marxism was called the theory of scientific socialism (communism). In this school, socialist principles were formed, for example, public ownership of the means of production, the absence of exploitation of human labor, the same pay for the same work, universal and full employment. People tried to build a society in which there would be no private property. A state-type economy was created, in which all economic decisions are made by employees of the central office.
- marginalism. Approximately in the second half of the 19th century, the theory of marginalism was formulated, which arose as a reaction to the economic doctrine of Karl Marx, its critical rethinking. Note that marginalism has become the basis of the modern neoclassical direction of economic thought. Famous representatives of marginalism (the school of limiting analysis) are Menger, Wieser, Walras. The main idea of their work was to use the limiting extreme values or states that characterize the price of any service or product, depending on its marginal utility for the consumer. For example, the theory of marginal utility studies the scope of pricing in relation to the efficiency of product use and talks about how consumer satisfaction will change when adding a unit of the assessed product, as opposed to the cost concept.
- neoclassicism arose on the basis of a synthesis of the ideas of David Ricardo and representatives of the school of Marginalism. Famous representatives include Alfred Marshal and Arthur Pigun. The main idea of their work was to consider the economic economy by representatives of this direction as a set of microeconomic agents who want to achieve maximum utility under the condition of minimum costs
- Keynesianism. Keynesian offshoot of economic theory was founded by John Keynes (1883-1946). This work is an extremely important theoretical substantiation of state regulation of a developed market economy by increasing or decreasing demand by changing the cash and non-cash money supply. With the help of such a regulatory system, it is possible to influence inflation, employment, eliminate uneven demand and supply of goods, and suppress economic crises. Keynes' followers studied the influence of demand on the flow of investment, as well as on the formation of national profits. Later, J. Keynes was called the "savior of capitalism", and his theory was proclaimed "Keynesian revolution in political economy." At the same time, Keynes borrowed some of the theoretical provisions of his work from the classical political economy of A. Smith and D. Ridardo, as well as from the economic theory of Marxism.
- institutionalism is an economic doctrine, in which the main importance is given to the role of institutions in the adoption and direction of economic decisions, their effectiveness and economic activity in general. This school is based on the study of the population, institutions of government and law, society as a whole. The idea of the institutional approach is not to limit ourselves to the analysis of economic categories and processes in a pure form, but to involve institutions in the analysis, to take into account non-economic factors.
- neoconservatism, which is also called monetarism, supply theory, theory of rational expectations, is to defend the ideas of free enterprise and the principle of self-regulation of the market system. According to the teachings of this school, the market is the most effective method of organizing the economy, and the state plays the role of providing conditions for free competition. Founded the school of neoconservatism by Milton Friedman.
The emergence of economic science.
Based on the analysis of numerous domestic and foreign works on economic theory, 3 stages of its development can be distinguished: economy, political economy, economics.
The first step is saving. Economics first arose as a science about economics, skillful housekeeping. Its goal was to educate citizens to rationally manage their household (this term is found in the works of Aristotle in the era of the slave system). In the era of feudalism, economic science was interpreted from the standpoint of Scripture. In the biblical texts, the “fair price” of goods was considered, for example, from the point of view of Christian moral norms, and usury was condemned as an unnatural enrichment and as a phenomenon that “ruins the human soul”.
Economic theory as a science (i.e. systematized knowledge about the essence of economics) arose in the 17th and 18th centuries. during the formation of capitalism.
Mercantilism.
In England, Italy, France and other countries, a theoretical school originally emerged - MERCANTILISM (from Italian Mercante - merchant, merchant). She believed that the wealth of people is gold, money for which everything can be bought. Such representations were not accidental. They corresponded to the initial type of capitalist activity - international trade, which brings large profits. Here the increase in wealth was evident. At that time, goods in one country were bought at lower prices, while in another they were sold at higher prices. Mercantilists advised the state to expand trade and accumulate gold in the country.
The French mercantilist Antoine de Montchretien (1575-1621) gave economic theory the name "political economy" (where the definition "political" is derived from the Greek "politics" - the art of managing the state), which meant: the science of state management of the economy. This emphasized the active participation of the state in economic activity.
Physiocrats.
Another direction economic doctrine, which arose as a reaction to mercantilism, was presented in the works of PHYSIOCRATS (from the Greek physio - nature, and short-power), the founder of this trend - Quesnay. Remarkable for this doctrine was the fact that they transferred the study of the origin of the surplus product from the sphere of circulation to the sphere of production, but limited it only to the sphere of agriculture. They considered industry to be an unproductive industry. Classical political economy.
Mercantilism has historically outlived its usefulness in a new era, when not commercial, but industrial capital began to dominate the economy. It was replaced by CLASSICAL POLITICAL ECONOMY. This direction of economic theory recognized the production of material goods as a real source of wealth. It began to consider economic activity in the form of production, distribution, exchange and consumption of useful things. Classical political economy moved on to the study of the essence of economic phenomena (for example, the exchange of goods for money) and the laws of economic development.
The prominent founder of English classical political economy is Adam Smith (1723-1790). He was the first to systematize scientific knowledge and set it out in the book "Research on the nature and causes of the wealth of nations". After that, economic theory began to be taught in higher educational institutions.
In an era when feudal oppression and tyranny reigned in Europe, A. Smith boldly spoke out for the triumph of a new social order, in which the development of the economy proceeds in accordance with the objective laws of the economy. “The natural order” in the field of economic life, he considered the domination of private property, free competition and free trade, non-interference of the state in economic activity.
Classical political economy created its own doctrine of the wealth of society. She established that nature, figuratively speaking, is the "mother" of wealth. It supplies people with the means of life (fish, fruits, ores, etc.) Labor was proclaimed the "father" of wealth (English economist Petty). He was the pioneer of the labor theory of value.
A. Smith's ideas were later developed by another English economist D. Ricardo (1772-1823). In his work "The Price of Gold" he laid the foundations of the quantitative theory of money, where he from a critical standpoint expounded his judgments on the theory of value, wages, capital, land rent, etc.
Close to the representatives of classical political economy is the English. economist Mill (1806-1876). He believed that the laws of production do not depend on the socio-economic system, while distribution can be regulated. He reduced the cost only to production costs, was a supporter of reforms that restrain population growth.
English political economy created the labor theory of value. It argued that the labor of workers producing goods creates their value. The latter measures goods and money among themselves. Applying the labor concept of value to the study of the capitalist economy, A. Smith founded the theory of surplus value. He believed that factory workers create new value with their labor. The latter only partially goes to them - (salary), the rest - surplus value - is appropriated by the capitalists.
French economist J.B. This (1767-1832) - the main work - "Treatise of Political Economy". In it, he completely departed from the labor theory of value, identifying the latter with the utility of a thing. Three factors are involved in its creation: labor, capital, nature, bringing social income, salary, profit and land rent. It should be noted that this theory is widely used by modern economists in the West. J. Sey interpreted production as a purely technical process, did not recognize the inevitability of economic crises, and was a supporter of free trade.
Marxism.
The teaching of the English classics was continued in a new way by Karl Marx (1818-1883). In his main work "Capital" on which he worked for 40 years, he deeply and comprehensively developed the theory of surplus value and the theory of value, based on factual material about the development of capitalism in England. Marx strove to place political economy at the service of the interests of the working class. This class approach had a negative impact on the scientific objectivity of a number of the propositions he expressed.
At the end of the 19th century, economic life itself demonstrated a certain limitation of the classical direction of political economy.
First, it didn't match historical features England of the period 17-19 centuries. (domination of the sole form of capital, free competition and non-interference of the state in the economy.)
At the turn of the 19th and 20th centuries, the economy changed dramatically (large joint-stock companies began to dominate in it, which sought to suppress competitors, the state began to actively intervene in economic life). Secondly, when developing the theory of the market price, the English classics and Karl Marx deeply revealed its dependence mainly on production, on the supply of goods on the market. However, this view was one-sided. The impact of customer demand on price has not been adequately studied.
The successor of the ideas of K. Marx and his associate F. Engels in the field of economic theory was V. I. Lenin (1870-1924). In numerous works, he concretized the doctrine of Karl Marx in relation to the new historical situation, developed the theory of reproduction, proved that in a capitalist developing country there is a stratification of small owners into rich and poor and other issues.
Neoclassical direction.
In the last third of the 19th century. In Austria, the USA, England, a real revolution in economic theory took place: the NEOCLASSIC appeared (in Greek, neos - new). The basis of the neoclassical theory was the development of 3 scientific schools: Austrian - K. Menger, E. Böhm-Bawerk and F. Wieser; Cambridge - A. Marshall and Lausanne - L. Walras.
Supporters of the neoclassical direction are united by the idea that the market economy will function in the best possible way if each of its subjects is presented with economic freedom. In this sense, neoclassicists are direct followers of A. Smith. They were and remain the defenders of the traditional values of the capitalist economy - that is, private initiative and freedom of private enterprise, the absence of state regulation. These values, from their point of view, are the main conditions for the effectiveness of the entire social system. The focus of neoclassical theory is the individual firm, the individual consumer, the profit swing, and the minimum cost, i.e. microeconomics.
Economics.
Neoclassical theory is one of the 3 currents of modern Western economic theory (economics). Western economic theory, unlike Marxism, is not a whole, but a collection of different currents, schools, sometimes sharply differing in methods of analysis, final conclusions and recommendations in the field of economic policy. The lack of unity of views among Western economists is not a consequence of the weakness of science, but a reflection of the diversity of economic reality, its inconsistency and variability. "Economics" proceeds from the fact that scientific knowledge can comprehend the truth only with a certain degree of approximation and taking into account the changes taking place in economic life, clarifies or discards outdated ideas, comes to new conclusions.
Modern economic theory develops mainly within the framework of three main currents: 1) neoclassical (it was mentioned above), 2) the theory of regulated capitalism, 3) institutionalism.
Modern economic theory.
The formation and development of the theory of REGULATED CAPITALISM began in the 30s of the 20th century. Its main idea is that the state should actively intervene in economic life. This doctrine denies the ability of the market mechanism to self-regulation, i.e. believes that the market economy cannot "heal" itself from such diseases as unemployment, inflation, low economic growth, crises. In the opinion of theorists of this direction, the market mechanism must certainly be preserved (because in the sense of economic efficiency there is no alternative replacement for it), but supplemented by comprehensive state regulation.
The most recognized school, which offered its own recipes for regulating the economy, is associated with the works of English. scientist John Maynard (1883-1946)
A very original trend in "Economics" is the so-called INSTITUTIONALISM. This flow is rather vague, because the views of its representatives differ greatly on a number of issues. However, there are some leading ideas of this trend:
- 1.institutionalists do not confine themselves to the analysis of purely economic relations, but urge to take into account all the conditions affecting economic life - that is, forms of economic organization, norms of behavior, legal laws, customs, traditions.
- 2. they propose to study not so much how it functions, but how capitalist society develops and changes. Moreover, they are generally characterized by a critical attitude towards capitalism and the demand for the expansion of social programs with the help of the state.
- 3. The market is not a neutral or universal mechanism for the allocation of resources. He seeks not to meet the needs of people, but to maintain and enrich large enterprises (monopolies). The basis of the power of large enterprises is technology, not the laws of the market. Joint action by trade unions and the state is needed against the dictatorship of entrepreneurs. In addition, the state needs to take under its wing such vital spheres as ecology, education and health care.
The founder of institutionalism is the American scientist T. Weblen
I. Lukinov, Y. Pakhomov, V. Chernyak, A. Chukhno should be considered among the largest economists of our time, who have developed many areas of economic theory in Ukraine.
Acquaintance with the main milestones in the history of the development of economic theory shows how complex and contradictory this process is, reflecting the complexity and inconsistency of the very object of study - the economic life of society.
None of the numerous theories, schools, trends could explain this process in its entirety, but each of them contributes to the knowledge of economic laws.
In the study of the subsequent topics of the course, we will become more familiar with the main areas of economic theory.
"Economy" - from the Latin word meaning "the art of housekeeping."
Economy - the system of the economy, including all branches of production, providing a variety of social needs.
Economic activity consists of the production, exchange, distribution and consumption of goods and services (economic goods).
Economic benefits - social values that exist in limited quantities and can become an object of exchange or sale.
A service is a commodity that is consumed simultaneously with its production.
Any product has a value (which is determined by how much a manufacturer has invested in its creation) and a consumer value (how much buyers are willing to pay for a given product).
Price is a monetary expression of the value of a product.
Economic science (economics as a science) is a science that studies how people in conditions of limited resources satisfy infinitely growing needs.
The goal of economic science is, as well as the study of economic processes, and the improvement of the economic system. Divided into microeconomics which studies economic activity at the level of individuals or businesses, and macroeconomics studying the economic processes of industries, states and the world as a whole.
Functions of economic science:
cognitive (gives knowledge about economic processes and phenomena);
educational (allows a person to apply the acquired economic knowledge for their effective activities);
methodological (gives methods and research tools applied in disciplines related to economic theory);
practical (applies the acquired knowledge in practice, participates in economic policy);
ideological (sets and justifies the goals of domestic and foreign policy of the state).
2.2 Factors of production and factor income
Production - the implementation of the costs of economic resources (factors of production) to create economic benefits.
Main factors of production:
1 . Land (aggregate natural resources involved in production).
2 . Work (labor force and its qualifications).
3 . Capital (man-made means of production). Capital is subdivided into:
main - funds used in several production cycles. For example, buildings, machines, equipment, etc. The cost of these funds is returned to the entrepreneur in parts, during several turnovers;
negotiable - funds used once in production. For example, raw materials, fuel, utilities etc. The cost of these funds is returned to the manufacturer for one turnover.
Also, the capital is divided into:
real - all artificially created means of production, i.e. capital as a factor of production;
financial - everything cash involved in entrepreneurial activities.
4 ... Entrepreneurial ability (ability to organize, search for promising industries, assess risks, etc.).
In addition, modern economists highlight the factors of production: information, infrastructure, energy resources.
Each factor of production must bring income to its owner - factor income :
1 ... Land - Rent
2 ... Labor - Wages
3 ... Equity - Percentage
4 ... Entrepreneurial ability - Profit Production can be carried out with at least one of the factors of production.
Economics has a long and rich history. Its origins, according to one of the most prominent historians of economic analysis, I. Schumpeter, lie, on the one hand, in philosophy, and on the other, in disputes about pressing problems and difficulties. Everyday life of people.
The emergence of the first trend is due to Greek thinkers, primarily Aristotle and Plato, who considered in their political studies the issues of economic life "from the point of view of an aristocracy opposing the growing class of merchants and linking the prospects of their life with agriculture" (I. Schumpeter). Aristotle was able to penetrate deeply into the issues of economic analysis, it was he who defined economics as the science of wealth and made valuable contributions to the theory of value, price and money.
Even the term "economy" itself comes from the ancient Greek word "economy", which, according to scientists, was invented either by the Greek poet Hesiod, or by his compatriot writer and historian Xenophon. The word "economy" consists of two words: "oikos" (house, household) and "nomos" (know, the law). So in the literal, original sense, "economy" means the science of home economics, the art of housekeeping. This interpretation of the meaning of this term is not accidental, since the economy of that time remained mainly natural, isolated and needed a certain set of rules and regulations.
However, times changed, and with them not only the meaning of words changed, but also new terms appeared. The development of the social division of labor and commodity-money relations led to overcoming isolation subsistence farming and the formation of the economy as a whole on the scale of a particular state. There is a need for knowledge about the national economy of the entire country. In 1615, the French eco-
The nomist Antoine de Montchretien published a Treatise on Political Economy, in which he proposed to the King of France to pursue an economic policy of all-round encouragement of trade and proved that the latter is the main goal of production, because it is not enough to create a commodity (as in the household), it must still be sold. The work of A. Monchretien gave the name to the then emerging science, which has survived to this day.
The word "political" in the name of science also has ancient Greek roots. It comes from the term "polis" (city, state) and contains a broader meaning - the art of managing a public economy.
Since its inception, political economy has tended to focus on the discussion of specific problems, which was the second direction in the development of the economy as a science. In the XYII - XYIII centuries. political economy was an empirical set of prescriptions for government action. Economists analyzed current economic problems and proposed solutions designed to increase the income of the state and the monarch.
During this period, the main direction of economic thought was mercantilism - the concept according to which the basis of national well-being is the accumulation of precious metals (gold and silver), which were considered the main forms of wealth.
The recipes of the mercantilists varied considerably depending on the position and goals of the country in question. So, in Spain and Portugal, the main task was to preserve the precious metals that came to these countries after the opening of mines in America. To this end, the mercantilist economists Olivares and Santis-Ortiz advised to ban the export of precious metals and the import of foreign goods. The result of their activities was the economic strangulation of these countries.
In France, during the Colbertism period, the emphasis was on the state's protectionist policy aimed at stimulating exports and restricting imports and thereby ensuring a positive trade balance.
In Britain, the solution was seen as creating wealth from the profits from shipping and overseas trade. Introduced there in the 16th century. The strictest trade legislation was designed to create a positive gold balance on the basis of the principle of "balance of contracts", that is, the requirement that no contract between British subjects and foreigners should lead to a pure drain of the precious metal.
As a result, all these policies, carried out with more or less persistence, collapsed, since the accumulation of money metal without sufficient development of national production quickly led to inflation.
Therefore, the contribution of the mercantilists to economics is very little * readable. First of all, they sought to propose certain measures of economic policy. Their studies of the national economy of protectionism and currency exchange are quite interesting, however, the weakness of these authors is explained by the fact that the economy seemed to them an artificial mechanism, numerous details of which can be maintained in equilibrium only thanks to a whole set of decrees and decrees.The mercantilists did not have a synthetic, generalizing view of the economy and its functioning, and therefore many authors consider their concept a pre-scientific phase in the development of political economy.
In the formation and development of political economy as a science, an outstanding role was played by such economists as Francois Quesnay, Adam Smith, David Ricardo, Jean Baptiste Say, John Stuart Mill, Karl Marx. Despite the differences in their views, sometimes significant, they all belong to the classics of political economy. The classics were united by the fact that they were looking for the source of the country's wealth not in the amount of its natural resources and not in its active trade balance, but in an effective form of organization public economy... The subject of their analysis was the relationship between people in the process of production, distribution, exchange and consumption of material goods and services. At the same time, the teachings of the classics were distinguished by a certain abstractness, isolation from the concrete demands of economic life. Their studies were largely of an economic and philosophical nature, mainly concerned not with specific economic analysis, but with the justification of state policy.
The origin of classical political economy is usually associated with the publication of two outstanding works: "The Economic Table" by F. Quesnay in 1758 in France, about which one of his contemporaries said that along with the invention of writing and money, it is the third of the main inventions of the human mind ; and "Research on the nature and causes of the wealth of nations" A. Smith in 1776 in England, which made his author "the true creator of modern political economy" 2.
F. Quesnay was the founder of the school of physiocrats, whose representatives believed that only land is productive and that only the labor of agricultural workers can create a clean product, that is, an income that exceeds costs. All other activities (industry, trade) are "sterile" because they only process products without increasing their quantity. Industrialists and merchants receive their income from second hand. However, the physiocrats did not succeed in substantiating the idea of the unproductive nature of "sterile" crafts, as a result of which their prestige gradually began to decline. This is largely
Barr P. Political Economy. S. 32-33.
Zhid Sh., Pucm Sh. The history of economic doctrines. M., 1995.S. 5).
industrial growth in England, which, in contrast to agrarian France, received a significant part of its wealth from the rapid development of manufacturing, contributed to the least.
A. Smith and his followers developed an economic theory based on the concept of labor value. They believed that wealth is created not only by the labor of farmers, but also by all other classes, by the entire nation as a whole. All classes, participating in the production process, cooperate, cooperate, which excludes any distinction between "sterile" and productive types of activity. This cooperation is most effective if it is carried out through market exchange.
In the second half of the XIX century. the center of gravity in economic development is gradually shifting from the state level to the level of factories and enterprises. This is reflected in the general paradigm of economic views.
Qualitative economic analysis is replaced by quantitative, research is increasingly concentrated on the consideration of specific relations of market agents, the development of appropriate practical recommendations. Scientists are increasingly striving to optimize the use of limited resources, widely using the theory of limiting values, differential and integral calculus for these purposes. Pages of economic essays filled in various charts, algebraic formulas and geometric figures that simulate all kinds of market situations. Following this, the name of the science itself changes. The concept of "political economy" (political economy) is supplanted by the new name mentioned above - "economics".
Economics got its new name in the book Principles of Economics by the outstanding English economist, founder of the neoclassical school, head of the Cambridge school, Alfred Marshall, published in 1890. This book, according to J. Keynes, marked the beginning of "the modern era in British economic science." The author of the book believed that economic research should be derived from everyday practice, be a scientific generalization of the rational thinking and behavior of market agents. Therefore, economics began to be understood as a science that studies the behavior of people in the process of production, distribution, exchange and consumption of material goods and services using limited resources.
In the center of attention of representatives of the neoclassical direction (unlike the classics, neoclassicists built their research based not on objective laws, but on the subjective views of market agents, and they believed that the price of a product is not based on costs 1
its production, and on the opportunity cost of output and is determined by the market as a result of "balancing" the costs of producers and the needs of consumers), there was an analysis of the conditions under which consumers and producers maximize their welfare. As A. Marshall showed, such maximization is possible only in conditions of free competition, and precisely when the market comes to a state of balance, equilibrium. Having reached an economic compromise, sellers and buyers are not interested in abandoning it, as this will only worsen their situation.
The tools of analysis created by neoclassicists still constitute the "golden fund" of world economic science. These are the elasticity of demand, utility and marginal utility, the difference between the short-term and long-term periods when taking into account temporary impacts on economic activity, the analysis of internal and external production economies in the theory of the firm, the interdependence of markets for goods and markets for factors of production, etc.
The idealization of the mechanism of free competition (the "invisible hand" of the market is able to direct the development of the economy along the most effective path), underestimation of the role of the state (it should only be a "night watchman"), characteristic of neoclassicists, determined the development of economic theory for several decades, right up to the end 20s of this century. The economic theory of this period was first called the theory of price, then the theory of the firm, and finally received the commonly used name "microeconomics" today.
Already at the turn of two centuries, microeconomic analysis was subjected to sharp criticism from some scholars, but ultimately opposition speeches, as often happens, only contributed to the development and strengthening of the authority of the neoclassical school. During this period, the names of such outstanding scientists as A. Pigou, K. Menger, E. Boehm-Bawerk, F. Wieser, L. Walras, V. Pareto and others became known to science.
However, it should be noted that the neoclassical theory, which placed at the forefront of its research the activities and behavior of individual market actors, their achievement of partial market equilibrium, experienced increasing difficulties when it was necessary to move from theoretical constructions and models to explaining reality. Relying on J. B. Say's law of markets, according to which the supply of a product always creates demand for it ("goods are exchanged for goods"), neoclassicists substantiated the self-regulating nature of the market economy, the ability of the free competition mechanism to restore the disturbed equilibrium and thereby ensure dynamic crisis-free development. Meanwhile, life spoke of something else: crisis phenomena that intensified in Western countries throughout all the 20s (according to the neoclassical transportations, they were about to dissolve), poured into
the global economic crisis (Great Depression) of 1929 -1933, grandiose in scale and depth. Along with the crisis of the economy, there comes a crisis in microeconomic theory, in particular in the neoclassical direction as its core.
A new direction of scientific analysis rises to the forefront of economic thought - Keynesianism, which has placed the problems of macroeconomics in the center of attention. Published in 1936, the book by the outstanding English economist J. M. Keynes "The General Theory of Employment, Interest and Money" made a real revolution in economic theory and provided answers to many questions that could not be obtained in the framework of microeconomic analysis. Keynes abandoned the main postulate of neoclassical teaching - Say's law of markets - and the formula that follows from it of the market mechanism as an ideal self-regulating system. The engine of economic development, according to Keynes, is not supply, but demand, and it is he who acts as a decisive factor in the development of production and supply. But the market mechanism just cannot provide a sufficient level of aggregate demand, since the latter is determined by the expectations of entrepreneurs for the coming period. These expectations help determine the volume of investments. The decisions to make investments depending on the forecasted demand depend on the ratio of the interest rate (the cost of cash needed to finance investments) and the marginal efficiency of capital, which is determined by the entrepreneur. The ratio of these two indicators determines the volume of investments.
As for savings, they represent the balance obtained after the allocation of part of the income to consumer spending.
Thus, as Keynes showed, in a modern market economy there are a number of factors that determine the persistence of a deficit in aggregate demand, and, consequently, insufficient production and underemployment. Therefore, in order to increase aggregate demand, Keynes recommended using the appropriate budgetary and monetary policy of the state. Such a policy should stimulate not only private investment and the growth of consumer spending, but above all public investment, designed to play a regulatory role in the national economy and be the driving force behind economic development. Subsequently, a significant contribution to the development theoretical system Keynes was introduced by A. Hansen, P. Samuelson, A. Lerner, p. Musgrave, G. Ackley, W. Heller, J. Peckman (USA), J. Hicks (England).
Keynesians (neo-Keynesians) believe that the state, using instruments of stimulating policy, is able to achieve full employment. Moreover, by reducing aggregate demand, it can ease inflationary pressures. To increase aggregate demand, it was proposed to
expand government spending or cut taxes, while fighting inflation required exactly the opposite measures: reducing the purchasing power of the population by cutting government spending or raising taxes.
The Keynesian approach to the mechanism of the functioning of the economy had great success from the late 40s to the 60s, when monetarists began to criticize it first, and in last years and representatives of the new classical macroeconomic theory.
Monetarism is a stream of economic thought that puts money at the center of macroeconomic policy, assigning it a decisive role in the cyclical movement of the national economy. Monetarist concepts served as the basis for monetary policy used as the most important instrument of state regulation of the economy. The task of the state in the field of economic management comes down, from the point of view of modern monetarists, to control over the money supply, the emission of money in circulation and in reserves, to achieve a balanced state budget, and to establish a high bank interest on loans.
The rudiments of the ideas of monetarism can be seen even in the economic teachings of antiquity and are explicitly present among the mercantilists. Certain elements of the monetarist approach can also be traced in the works of the English classics. The quantitative theory of money formulated by the Scottish philosopher David Hume (171] -1776), linking the price level with the volume of the money supply in the country, received support, in particular, from D. Ricardo. But the modern version of the concept of monetarism is most clearly expressed in the works of the 1976 Nobel Prize in Economics Professor at the University of Chicago
Milton Friedman (born 1912).
Friedman's achievements in the field of monetarism are somehow connected with
analysis of the theory of Keynes and his followers, proceeding from the position
the insignificant influence of money on general expenses, consumption and prices, and
from the inability of the market economy to automatically provide full
employment and price stability. In criticizing these provisions, Friedman as a whole
a number of his works, including on the monetary history of the United States, showed that 4 ths
all major changes in economic life are primarily associated with C ДЄ
gentle impulses, emission of money. The farm dances to the J dollar, repeats its dance "- this is how Friedman figuratively formulated the main conclusion of his research.
The volume of money supply affects the amount of expenditures of households and firms: an increase in the amount of money in the economy leads to an increase in production, and after full capacity utilization - to an increase in yen. pure inflation. Therefore, Friedman proposes to abandon short-term
monetary policy, which Keynesians insisted on, since
Money supply changes do not affect the development of the economy immediately, but with some delay, and this can lead to unpredictable results. It should be replaced by a long-term policy designed to achieve a match between the growth rate of money in circulation and the growth rate of the gross national product (GNP). This is the so-called Friedman's monetary rule, the observance of which, in the author's opinion, makes it possible to ensure the stability of prices and the stability of economic development.
The conclusions of monetarists regarding the ineffectiveness of monetary policy in the short run have been criticized by supporters of neoclassical macroeconomic theory. This scientific school was formed in the 70s as a result of the application of the principles of microeconomic analysis to the field of macroeconomics. The neoclassicists put forward a very productive hypothesis of rational expectations, for which its author Robert Lucas, professor at the University of Chicago, was awarded the Nobel Prize in Economics for 1995. According to this hypothesis, expectations are extremely important motives of behavior for all who make economic decisions: companies, organizations and even individual families. Before that, such calculations were often built on an arbitrary or even static basis. Thus, the expected price level was considered to be practically unchanged. The rational expectations hypothesis allowed us to constantly look ahead and correlate these expectations with changing data.
From the neoclassical point of view, even in the long run, any measures to stimulate economic growth are fully expected by the population and firms, which will adjust their behavior in such a way that economic indicators do not change in real terms. In particular, if the government increases government spending to create additional jobs, taxpayers, realizing that they will have to pay higher taxes in the future, will reduce their current spending by appropriate amounts in order to save money on future tax bills.
At the same time, additional funds invested in the economy will raise prices and cause inflation.
Another important area of modern economic analysis is the theory of supply economics, which gained popularity in the 70-80s. Its appearance was caused by a serious crisis of state regulation of the market economy based on Keynesian prescriptions, which manifested itself in full force in the early 70s. Western economic thought moved to an active search for new methods of economic recovery, which, as it became clear later, relied mainly on monetarist views and neoclassical approaches.
In the very name of the theory - "supply economy" - the authors oppose it to Keynesianism, which focuses on demand regulation. From their point of view, the decisive factor of economic development is not demand, but supply. Among the most prominent representatives of the theory of supply economics are R. Hod, G. Talon, J. Brouzon, M. Rotbot, A. Laffer (USA). The latter was one of the main participants in the implementation of the theory, along with P. Roberts, Deputy and Assistant Secretary of the Treasury in the Administration of US President R. Reagan.
One of the main tenets of the theory of supply economics was the weakening of state interference in economic processes and the stimulation of private initiative and entrepreneurship. At the same time, a special role was assigned to public finance: tax cuts, cuts in public spending, and a decrease in the amount of money in circulation with the help of an appropriate policy in the field of public credit.
In substantiating practical recommendations in the field of economic policy, the authors of the theory of supply economics give the central place to the tax system. They argue that changes in the tax system can greatly increase the potential output and therefore have a strong beneficial effect on the economy. One of their main arguments is that high income taxes reduce incentives to work and, accordingly, reduce the amount of labor offered at each level of wages paid by firms.
The school also believes that tax increases increase costs and prices, which is ultimately passed on to consumers. Tax increases generate impulses that create cost inflation. In addition, high taxes hinder the investment process, investment in new technologies, in the restructuring and improvement of production.
Based on these considerations, the supporters of the new tax theory formulated two "moral" conclusions. The first conclusion was that the more the tax increases, the less commodity labor decreases, that is, the more the individual's desire to invest labor in areas of activity that are not subject to taxes. The second conclusion established the relationship between taxes and savings: the tax burden reduces the amount of savings. The "moral" conclusions of supply-side economics have clearly demonstrated that one of the main ways to ensure economic recovery is to reduce taxes.
In their arguments about the dangers of high tax policies, representatives of the theory of supply economics rely on the Lafffer tax curve (Fig. 1-1), named after the American economist A. Laffer, who substantiated the dependence of budget revenues on tax rates.
Fig. 1-1. A. Laffer curve
According to Laffer's reasoning, excessive tax increases on firms' income discourage firms from investing and re-equipment of production, slows down economic growth, which ultimately negatively affects government budget revenues. At the tax rate Τ λ (the optimal rate), the maximum revenues to the budget are provided. A further increase in taxes reduces incentives to work and entrepreneurship, and with 100% taxation, the state income is zero, since no one will work for free.
The propositions and conclusions of supply economics theorists became one of the important elements of the "Reaganomics" policy in the United States in the 1980s, during which there was a sharp decrease in income tax. The increase in income caused by increased incentives to work, according to the supporters of the supply theory, should have more than compensated for the decrease in income due to the decrease in the tax rate. But in reality, things turned out differently: total tax revenues decreased and the US budget deficit increased significantly. However, this circumstance did not question the concept of the Laffer curve. In fact, many economists believe the mistake was in the assumption that the tax rate in the American economy was higher than γ before the tax cuts in the early 1980s.
A special place in modern economic theory is occupied by the institutional-sociological direction, the representatives of which are T. Veblen, J. Commons, W. Mitchell, J. Galbraith. Own name
this trend was named after the book by J. Commons “Institutional Economics”, published in 1924 in New York. However, the founder of the institutional sociological direction is considered T. Veblen (1857-1929), Doctor of Philosophy at Yale University, who published in 1899 the book Theory of the Leisure Class. Literally, the term “institutionalized. LG” comes from the concepts of “institution” (custom, routine) and “gshe77SHI7u /? 7” (an order enshrined in the form of a law or institution).
Representatives of institutionalism approached the study of economic problems from non-traditional positions. In essence, their method was a reaction to the method of the classical and neoclassical schools, the starting point of which was an economic man (consisting of the smallest psychological elements, brought together into a single whole). Institutionalists proposed to study a person "not in isolation, but taking into account his environment." Therefore, they replace the "economic man" with a "sociological man" who is at the center of social relations, or "a man in a specific situation."
From a methodological point of view, institutionalists are very close to adherents of the historical school (a well-known direction of economic analysis founded by German economists in the middle of the 19th century (Roscher, Hildebrand and Knies) and developed in the period after 1870 by Schmoller, Wagner, Brentano, Bücheromidr. ). These economists proposed studying economic phenomena in terms of place, time and environment. Institutionalists believe that the human environment consists mainly of institutions in the broadest sense of the word, that is, of the totality of written and unwritten laws and attitudes that economic entities of a community adhere to, as well as of a totality of bodies, institutions, sociological and the administrative groups that form the structure of this environment. The range of institutions includes such concepts as the state, family, moral and legal norms, corporations, trade unions, various economic phenomena and mechanisms. This can also include public opinion, fashion, higher education, free enterprise, private property, credit, etc.
The method of the institutional-sociological school simultaneously takes into account the evolution of institutions, which changes the conditions of economic life. and the impact of the economy on these institutions themselves.
The representatives of this school were characterized by a practical orientation, the development of recommendations regarding the mechanism of intervention in the market economy. Their practical recommendations were very diverse: to put at the head of the economy a "council of technicians" (T. Veblen), to plan a market economy (W. Mitchell); to create a government representative of all social strata, capable of reconciling opposing interests (J. Commons); to nationalize large corporations, expand the public sector in the economy and create a system of national planning (J. Galbraith).
An important place in the research of institutionalists is occupied by many social problems market organization of production: unemployment, strong social differentiation, poverty of a significant part of the population, etc.
In the postwar period, the popularity of "pure" institutionalism began to decline. According to some researchers, from a separate movement, which it wanted to be, institutionalism has turned, on the one hand, into an integral part of economic theory, on the other, into a method general analysis processes and shifts in real economic system 1 An example of the second case can be considered modern neoinstitutionalism, within which the economic theory of property rights (R. Coase, USA), the theory of economic organization (R. Coase, O. Williamson, USA; B. Hansen, Sweden), the theory of public choice (D Buchanan> USA), etc. Neoinstitutionalism is characterized by a departure from the absolutization of technical factors and emphasizes the role of transaction costs (costs of market coordination of production). On the basis of the concept of transaction costs, a new role of property rights in the mechanism of functioning and development of a market economy was substantiated, an answer was given to the question of why a firm is needed if there is a market, and a number of other interesting problems of economic life were developed. Public choice theory examines the relationship between political and economic phenomena. The peculiarity of this theory lies in the fact that private interest is considered the main incentive for the activity of not only an individual and a firm found in the market, but also public life of people. In public life, people behave on the basis of
solely from private interests, which ultimately does not always meet the interests of society as a whole.
In general, it can be noted that the interdisciplinary approach to the analysis of economic processes, which is characteristic of institutionalism, with the involvement of data from sociology, law, political science, ethnography and other sciences, the evolutionary principle in the analysis of economic phenomena, the study of them in development, in contrast to the traditional for neoclassical economic theory of staticity , the empirical method of research using extensive statistical and factual material, as opposed to the abstract theoretical, prove that Western economic science reveals new hidden reserves of development, is capable of
to give answers to new questions arising in the process of functioning of social production.
TOPIC 2. History of the development of the economy as a science
Economics as a science has gone a long way in its development from scattered economic concepts to modern harmonious concepts that explain the regularities of the functioning and development of both individual economic entities and the country's economy as a whole.
The main questions of the topic:
Question 1. The origin and development of economic science.
Question 2. Modern economic theories.
As a systematized knowledge, as a science, the economy began to form in the XVI-XVI centuries. The main question that was then interested in economists - why some countries are rich and others are poor, where does the wealth come from? And economics becomes the science of wealth.
The first economists to develop a coherent concept of wealth were the mercantilists (from the Italian mercante - merchant). Mercantilists believed that the wealth of a nation was gold and that the source of wealth was trade. Hence the practical recommendations for the country: to import less goods into the country and export more, and in order to export goods, it is necessary to encourage the development of their production.
The next step in the development of the economy is associated with the physiocratic school (Greek physics - nature, kratos - power, i.e. the power of nature). The physiocrats believed that the source of the nation's wealth was not trade, but agriculture. It is in agriculture that that additional product is created (the excess of the product produced over the product consumed), due to which the wealth of the nation is formed. Hence: only labor in agriculture is productive, all other sectors only use the fruits of agriculture.
The ideas of the physiocrats were developed and deepened by representatives of the English classical political economy (W. Petty, A. Smith, D. Ricardo), who regarded labor in the sphere of material production as a source of the nation's wealth. W. Petty owns the catch phrase: "Nature is the mother, and labor is the father of all wealth." A. Smith made a huge contribution to the development of the economy, whose place and role in the economy can be compared with the place and role of I. Newton in physics. In his work "Research on the causes and nature of the wealth of peoples" (1776) A. Smith developed the labor theory of value, created the theory of the market, competition, showed that in the market conditions people are guided by their own interests, pursue their personal goals, but, guided by the "invisible hand", contribute to the realization of the interests of other people and society as a whole. Under " invisible hand"A. Smith understood the spontaneous action of objective economic laws.
The next step in the development of economic science is associated with the names of K. Marx and F. Engels. The economic theory they constructed - Marxism - developing the ideas of the labor theory of value, proved that every product is created only by the labor of a hired worker, and is appropriated by the owner of capital. This phenomenon constitutes exploitation and social injustice. The working class can get rid of exploitation only as a result of the socialist revolution and the elimination of private property. This theory was put into practice in many countries, but, as practice has shown, the real economic reality turned out to be divorced from the theoretical concepts and ideas of Marxism. Nevertheless, it cannot be denied that K. Marx made a great contribution to the development of economic theory.
In parallel with Marxism in the 19th century. the neoclassical direction is developing, the representatives of which focus their attention on the problem of meeting the needs of people. Relying on the accumulated theoretical wealth, neoclassicists put forward and develop new theories and concepts
In particular, Austrian economists (Karl Menger, Eugen von Boehm-Bawerk, Friedrich von Wieser) create a theory of marginalism ("marginal" - extreme, limiting), which analyzes economic phenomena from the point of view of the behavior of individual entities involved in economic relations. The principle of rational human behavior is proclaimed, i.e. a person who is guided in his activities primarily by his own, subjective assessments of the benefits and costs arising in the process of economic activity.
The founders of the marginal direction in economics, attaching special importance to subjectivity, introduced into the practice of economic analysis a psychological component, the principle of rational human behavior in a market economy.
According to the views of marginalists, the value of goods is determined not by labor costs, but by subjective assessments of the buyer and seller, and the basis of the price of a good is marginal utility - "the subjective utility of a particular instance of a particular good, with the help of which the least urgent need for goods of this type is satisfied."
Marginalists have introduced the concept of limiting values into the practice of economic analysis, which has created an opportunity for mathematical interpretation of many economic situations.
Supporters of the Austrian school were staunch opponents of widespread government intervention in the economy.
A. Marshall made a huge contribution to the development of the neoclassical direction. In his work "Principles of Political Economy" (1890), he developed a modern theory of the market: he analyzed the mechanism of market pricing, the formation of a market equilibrium price, the interaction of supply and demand, the influence of various factors on them, considered the types of market equilibrium, etc. Marshall is that he was able to bring together disparate positions and approaches of the neoclassical direction. A. Marshall believed that the main task of economics is to help solve social problems.
The development and dissemination of the methodology and theoretical provisions of the neoclassical direction led to a change in the subject of economics. Since the end of the 19th century. economics turns into a social science about the ways of using limited economic resources for the maximum possible satisfaction of the unlimited needs of people and gets the name "economics". Unlike political economy, economics deals with the study of economic processes in their "pure" form, abstracted from social and political problems.
Today the economy occupies a leading position all over the world.
Self-test questions
- What is the essence of the views of the mercantilists? How did the views of the physiocrats differ from the views of the mercantilists?
- What ideas were put forward by the representatives of the English classical political economy?
- What is the essence of the economic doctrine of K. Marx?
- When, and by the representatives of which school, the focus of economic science was placed on man and his needs?
- Who is the founder of modern market theory?
- What is the essence of the teachings of J. Keynes?
- What are the ideas behind the theory of monetarism?
- What is the main idea put forward by the supporters of modern neoliberalism?
- What is the theory of rational expectations?
- What is the essence of the institutional sociological direction in economics?
- Economics as a science has come a long way of development. Along with the change in the economic conditions of the life of society, the subject of economics also changed. For centuries, the subject of economics has been wealth. Initially, economic schools and directions differed precisely in what they understood by the wealth and the source of the nation's wealth (from gold to the entire mass of products created by human labor). The main schools and directions of the XVI-XIX centuries: mercantilism, physiocratic school, classical political economy, Marxism. In the second half of the XIX century. with the emergence of the marginal direction, the subject of economics changes. It becomes the science of rational economic management in conditions of limited (scarcity) resources and unlimited needs. Today this understanding of the subject of economics is dominant.
- Modern economic theories are theories that were formed in the twentieth century. They are characterized by a wide variety of positions, views, concepts. Keynesianism, an economic trend that substantiates the need for broad intervention in the economy of the state, was the dominant trend in the 30s-60s of the XX century. In the 70s of the XX century. a neoclassical trend is being formed, the supporters of which are in favor of non-interference or very limited state intervention in the economy and the provision of full economic independence to entrepreneurs. Monetarism is a theory based on the idea of the decisive influence of the money supply on the course of economic processes and limiting the functions of the state by regulating the country's monetary circulation. Representatives of West German neoliberalism, proving the absolute advantage of the free market, completely deny the need for government intervention (central planning) in the economy. The theory of rational expectations is a theory that proceeds from the fact that certain economic processes are a consequence of the behavior of a rational economic agent striving to maximize utility under certain constraints. Supporters of the institutional-sociological direction in economics believe that under the influence of scientific and technological progress, the evolution of society from industrial to post-industrial, focused on the development of the human personality, takes place. Under these conditions, the role of the market is shrinking, and planning becomes necessary condition economic development of the country.
Modern economic theories
The twentieth century has made a huge contribution to the development of economic science. A number of theories were created and substantiated, the provisions of which are used today by economic practice, and on the basis of which modern economic policy is built.
In 1936, the English economist J. Keynes published his work "The General Theory of Employment, Interest and Money", founding a new direction in economics - Keynesianism. Analyzing the operation of the market mechanism, J. Keynes came to the conclusion that the market is not able to cope with such negative, inherent phenomena as crises, inflation, unemployment, monopolization, the losses of society from which are so great that state intervention is necessary. Keynes substantiated the necessity, forms, methods of state regulation of the economy, thereby creating the theory of a mixed economy.
Keynesianism, which for several decades remained the dominant doctrine, in the 70s of the twentieth century. was subjected to massive criticism from representatives of the neoclassical direction, whose supporters believe that state intervention in the economy should be minimal, because only the market and free enterprise can ensure effective economic development.
Among modern economic theories, the following can be distinguished.
Monetarism is a theoretical direction associated with the name of the Nobel Prize laureate M. Friedman. Monetarists, proceeding from the fact that there is a certain relationship between the state of the economy as a whole (rates of economic growth, unemployment, inflation rates, etc.) and the amount of money in circulation, argue that it is possible to regulate the course of economic processes by changing the mass of money, the release of which is the prerogative of the state. Thus, monetarists reduce the role of the state in the economy to regulating the mass of money in circulation. State regulation in many countries of the world is based on the provisions of the theory of monetarism. It was the ideas of the monetarists that formed the basis of the economic policy pursued in the 1980s. in the USA (Reaganomics) and in England (Thatcherism).
West German neoliberalism is a direction of economic thought, the supporters of which do not allow any state intervention in the economy. They develop the thesis that only free enterprise can ensure the effective development of the economy, while centralized planning in any form cannot be effective in principle, since it violates the principle of free pricing - a condition and prerequisite for rational management. The nationalization of the economy undermines market competition, which ultimately leads to the establishment of a totalitarian system.
In the 70s of the XX century. formed a neoclassical direction in economics, substantiating the necessity and possibility of applying the principles of microeconomic analysis to the field of macroeconomics. Within the framework of this direction, the theory of rational expectations was put forward, according to which all subjects of economic relations understand how the economy functions, and therefore can assess the consequences of upcoming political or other changes. Supporters of the theory of rational expectations proceed from the fact that economic agents build their line of behavior rationally, always making the most beneficial decisions for themselves. Hence, it follows that all economic processes are a consequence of the behavior of a rational economic agent striving to maximize utility under certain constraints.
Today, the institutional and sociological direction is very widespread, the supporters of which consider the economy as a system where relations between economic entities are formed under the influence of not only economic, but also non-economic factors (legal, social, political, psychological, etc.), among which institutions play a decisive role. ... The theory under consideration understands institutions as firms, trade unions, and the state. According to institutionalism, technical and economic factors play a primary role in the development of society, which lead to overcoming social contradictions and to the evolution of society from industrial to post-industrial (neo-industrial or informational), the development goal of which is a person and his needs.
Self-test questions
Basic concepts and terms
Mercantilism, physiocratic school, classical political economy, Marxism, neoclassical direction, marginalism, Keynesianism, monetarism, theory of rational expectations, neoliberalism, institutional sociological direction.
