Schools of Economic Thought the Essay

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There are variations on these four schools but, in essence, these four schools dominate the field. These four schools are: Marxist, Kenyesian, Monetarist, and neoclassic.

The Marxist school is built upon the theories and writings of Karl Marx and Friedrich Engels. These gentlemen believed that all economic societies go through a period of development wherein different economy systems are used beginning with a form of primitive communism through feudalism, capitalism, and then eventually ending in pure communism. The economy of the Soviet Union was based on the theories of Marx and Engels and, as a result of the failure of that government it has fallen out of favor among modern day economists.

The decline of Marxism seemed to served as an impetus for the remaining major economic schools to re-examine their positions. In the last two decades of the twentieth century the schools began to build a consensus. This consensus has become to be known as the new Keynesian economics.

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This new school of thought incorporates elements of Keynesian, monetarist and the neoclassical ideas and has been adopted by a large majority of modern day economists. In its simplest form, new Keynesian economics stresses the stickiness of prices and the need for an active stabilization policy that manipulates the aggregate demand in order to keep the general economy operating close to its potential output. It also incorporates the monetary policy of the monetarist school and stresses the importance of aggregate supply as professed by the neoclassical school. This blending of economic thought occurs after fifty years of bitter dispute caused by the introduction of Keynesian economics in the 1930's. Although there remain proponents of all the major schools of thought, the new Keynesian economics currently dominate the field of macroeconomics.

Combining competing schools of economic thought.....

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