From the history of economic thought(grades 8/10)

The history of economic thoughtconcerns thinkers and theories in the field of political economy and economics from the ancient world up to the present day. It has its roots in the early Greece and Rome.First it was considered as a branch of domestic science (home economics) dealing with such matters as the management of slaves and the allocation of manure. Greek writers such as the philosopher Aristotle examined the problems of wealth acquisition, private or public property. In medieval times, scholars such as Thomas Aquinas argued that it was a moral obligation of businesses to sell goods at a just price.

But economics was not considered a separate discipline until the 19th century, and it is the Scottish philosopher Adam Smith who is often cited as the father of modern economics. In 1776 Adam Smith published the first edition of his work «Inquiry into the Nature and Causes of the Wealth of Nations». Adam Smith and his followers Robert Malthus and David Ricardo represent the first school of economic thought - The Classical School. The main idea of the Classical school was that markets work best when they are left alone, without interference of government.Laissez fair could and should replace government direction and regulation in economics, because the price mechanism acts as a powerful 'invisible hand' to allocate resources towhere they are best employed. The economic system is a self-regulating mechanism that, like the human body, tends naturally toward a state of equilibrium if left to itself.

The classical doctrine dominated economic thinking for the next 150 years. It was first seriously challenged by the great English statesman and economist Lord John Maynard Keynes, who claimed to see in the Great Depression of the 1930s the evidence that the economic system was not self-adjusting. Keynes and his followers argued that without continued government intervention the economic system couldn’t operate at the level of activity that is required to achieve full employment of labour and other resources.What’s why Keynes advocated government’s use of fiscal and monetary policies to stimulate economic demand, growth and prosperityandmitigate the negative effects of economic recessions and depressions.

Changes in economic thought have always accompanied changes in the economy. Contemporary economic thought deals largely with the issues of globalization and the emergence of a global economy. Building on new discoveries, economic thought may be on the road to achieving a new level of understanding.