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A Short History

Summary:
William Petty began classical political economy in the 17th century. Classical economics was developed through the work of the physiocrats and such writers as Adam Smith, David Ricardo, and Karl Marx. Marx was also a critic. About a century and a half ago, economists mistakenly accepted the marginal revolution. Jevons, Menger, and Walras had precursors, but they were regarded as cranks. Marx, however, posed a political problem. Some might mention Henry George here, or maybe even Silvio Gesell. Better have an imitation of physics than talk about the ideas of those opposed to capitalists. Lionel Robbins made clear in the 1930s, when the theory plainly did not apply, that marginalist economics is about the allocation of scarce resources. Land and labor can be taken as given at a moment

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William Petty began classical political economy in the 17th century. Classical economics was developed through the work of the physiocrats and such writers as Adam Smith, David Ricardo, and Karl Marx. Marx was also a critic.

About a century and a half ago, economists mistakenly accepted the marginal revolution. Jevons, Menger, and Walras had precursors, but they were regarded as cranks. Marx, however, posed a political problem. Some might mention Henry George here, or maybe even Silvio Gesell. Better have an imitation of physics than talk about the ideas of those opposed to capitalists.

Lionel Robbins made clear in the 1930s, when the theory plainly did not apply, that marginalist economics is about the allocation of scarce resources. Land and labor can be taken as given at a moment in time, but capital cannot.

About half a century ago, economists came to recognize that they were mistaken. By the way, this mistake was also noted in the Heckscher–Ohlin-Samuelson (HOS) model of international trade. The demonstration that marginalism is fundamentally wrong was pushed by Joan Robinson and Piero Sraffa.

So some economists returned to elaborating classical economics. Even in the marginal interregnum, some, such as Leontief and Von Neumann, elaborated classical themes.

But most economists have been spinning in a widening gyre, ignoring the incoherence of their teaching. If a sufficient political movement developments outside of academic economics, maybe more economists will return to serious work. If so, they may even find elements to repurpose in this half century of dissolution and confusion.

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