3/4/22, 2:20 PM CHRONOLOGICAL ORDER OF ECONOMIC THEORIES

DR. Meenal Shah May 29, 2021 7 min read

CHRONOLOGICAL ORDER OF ECONOMIC

THEORIES
Updated: Jun 2, 2021

Micro Economics

Theories of Consumer Behaviour

1. Marginal Utility Analysis –Marshall – 1890
2. Revealed Preference Theory – Samuelson – 1938
3. Indifference Curve Theory – Hicks and Allen – 1934
4. Neumann – Morgenstern Approach – 1944
5. Friedman – Savage Hypothesis – Friedman and Savage- 1948

Market
1. Cournot Duopoly Model – Cournot – 1838
2. Edgeworth Oligopoly Model – Edgeworth – 1881
3. Bertrand’s Duopoly Model – Bertrand – 1883
4. Imperfect Competition – Joan Robinson - 1933
5. Monopolistic Competition – Chamberlin – 1933
6. Stackelberg’s Duopoly Model – Heinrich Von Stackelberg – 1934
7. Kinked Demand Curve – Paul M Sweezy - 1939
8. Game Theory – Neumann and Morgenstern – 1944

Welfare Criterion
1. Social Welfare Function – Bergson, Samuelson - 1938
2. Impossibility Theorem – Arrow– 1951
3. Theory of Second Best – Richard Lipsey and Kelvin Lancaster-1956
4. Coase Theorem – Ronald Coase - 1959
5. Asymmetric Information - George Akerlof, Michael Spence, and Joseph E. Stiglitz – 2001

Rent
1. Ricardian Theory of Rent – Ricardo – 1810
2. Modern Theory of Rent – Joan Robinson -
3. Quasi- Rent – Marshall-

Profit
1. Dynamic Theory of Profit – J.B.Clark – 1900
2. Rent Theory of Profit – F.A. Walker –
3. Risk Theory of Profit – H.B. Hawley – 1907
4. Innovation Theory of Profit – Joseph A Schumpeter – 1934

Macro Economics

Consumption Function
1. Absolute Income Hypothesis – Keynes – 1936
2. Relative Income Hypothesis – Duesenberry – 1949
3. Life Cycle Hypothesis – Ando, Modigliani – 1950
4. Permanent Income Hypothesis – Friedman – 1957

Effect
1. Keynes Effect – Keynes – 1936
2. Pigou Effect – A. C. Pigou – 1943
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3. Real Balance Effect - Patinkin- 1956

Multiplier and Acceleration

1. Accelerator – J.M. Clark -1917
2. Multiplier – R.F. Khan – 1931

Demand for Money

1. Classical Theory – 1911
2. Keynesian Theory – Keynes - 1936
3. Inventory Approach – Baumol -1950
4. Restatement of Quantity Theory – Friedman – 1956
5. Port-folio Approach – Tobin – 1969

Quantity Theory of Money

1. Cash Transaction Approach – Fisher – 1911
2. Cash Balance Approach- Cambridge economists –
A.C.Pigou (1917), Alfred Marshall (1923), D.H. Robertson (1922), John Maynard Keynes (1923), R.G. Hawtrey
and Frederick Lavington (1921, 1922).
3. Reformulated Quantity Theory of Money – Keynes – 1930s
4. Real Balance Effect – Don Patinkin – 1956

Other
1. IS-LM model – Hicks - 1937
2. Monetary Approach to BOP- Hahn - 1959
3. Philips Curve –A. W. H. Phillips - 1958
4. Mundell Fleming Model – Robert Mundell and Marcus Fleming 1960
5. Optimum Currency Area – Robert Mundell – 1960

Development Economics
1. Marxian Theory of Economic Development – Marx – 1867
2. Lorenz Curve – 1905
3. Schumpeterian Theory – Schumpeter – 1911
4. Harrod Model – R.F. Harrod – 1939
5. Big Push Theory – Rosenstein Rodan – 1943
6. Domar Model – 1946
7. Dependency Theory – 1949
8. Balanced Growth – Rosenstein Rodan, Ragnar Nurkse, Arthur Lewis, Scitovsky, and Leibenstein – 1950
9. Unbalanced Growth – Hirschman -1950
10. Vicious Circle of Poverty – Nurkse – 1953
11. Theory of Unlimited Supplies of Labor – W.A. Lewis - 1954
12. Inverted U-hypothesis – 1955
13. Wage –Good Model- Brahmananda and Vakil - 1956
14. The Long-run Growth Model – R.M. Solow- 1956
15. Low Level Equilibrium trap – Nelson – 1956
16. Capital Accumulation Model- Joan Robinson- 1956
17. Critical Minimum Effort Thesis – Leibenstein – 1957
18. Kaldor model – Kaldor – 1957
19. Technical Progress of Kaldor – 1960
20. Kaldor-Mirrles Model – 1962
21. Fei – Rani’s Theory of Developmnet –John Fei and Gustav Rani- 1964
22. Two Gap Model –Hollis Chenery –1966
23. Learning by Doing – Arrow -1980
24. Endogenous Growth Model - 1980
25. Romer Model – 1986

Investment Criterion
1. The Capital Turn Over Criterion – J.J. Polak and N.S. Buchanan – 1943
2. Social Marginal Productivity Criterion –A.E. Khan and Hollis Chenery – 1951
3. The Reinvestment Criterion – Galenson & Leibenstein – 1955
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4. Marginal Per Capita Reinvest Criterion - 1955

5. The Time Series Criterion – A.K.Sen - 1957
6. Reinvestment Surplus Coefficient Criterion - 1960

Technical Change
1. Disembodied Technical Change – Abramkovitz – 1956
2. Embodied Technical Change – Solow – 1960

Measurement of Economic Development

1. Per Capita Income Approach – late 1950’s
2. Basic Need Approach by World Bank – 1970’s
3. PQLI – 1979
4. HDI – 1990’s

International Economics
1. Absolute Cost Advantage Theory – Adam Smith – 1776
2. Comparative Cost Advantage theory –Ricardo – 1817
3. Modern Theory of International Trade – Hecksher and Ohlin – 1919
4. Purchasing Power Parity Theory – Gustav Cassel - 1920
5. Opportunity Cost Theory – Gottfried Haberler – 1933
6. Stopler–Samuelson Theory–Wolfgang Stopler & Paul Samuelson -1941
7. Factor Price Equalization Theorem – 1948
8. Metzler Paradox–Lloyd A. Metzler – 1949
9. Secular Deterioration Theorem- Prebisch & Singer - 1950
10. Leontief Paradox–Leontief – 1950
11. Absorption Approach – Sidney Alexander – 1952
12. Rybczynski Theorem- Tadeusz Rybcznski -1955
13. Immiserizing Growth- Jagadish Bhagawati- 1958
14. Reciprocal Dumping Model –Brander & Krugman - 1981

Schools

Physiocrats
1710 - 1765
Physiocrats are a group of economists who believed that the wealth of nations was derived solely from the
value of "land agriculture" or "land development." And Physiocracy is an economic theory developed by
Physiocrats. Their theories originated in France and were most popular during the second half of the 18th
century. Physiocracy is perhaps the first well-developed theory of economics.

Classical School
1735 - 1860
Classical economics is widely regarded as the first modern school of economic thought. Its major developers
include Adam Smith, Jean-Baptiste Say, David Ricardo, Thomas Malthus and John Stuart Mill. Classical
economists claimed that free markets regulate themselves, when free of any intervention. Adam Smith
referred to a so-called invisible hand, which will move markets towards their natural equilibrium, without
requiring any outside intervention.

Pre-runner:
Adam Smith
Ricardo
Malthus
Mill, James

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Mill, John Stuart

Say

Pre-Marginalists
1800 - 1850
The pre - marginalist did, as the marginalists, focus upon maximization and individual behaviour, either on the
production or the demand side of the economy. However, contrary to the marginalist, they did not achieve
much publication and fame in the scientific environment.
Von Thunen
Dupuit
Cournot

Neoclassical Economist

1850 - 1970
Irving Fisher introduced the term neoclassical economy in 1900, but it was later used to include the works of
also earlier writers. The term is a umbrella term for several different schools including marginalism. However,
excluding institutional economics and Marxism.

As expressed by E. Roy Weintraub, neoclassical economics rests on three assumptions, although certain
branches of neoclassical theory may have different approaches:

- People have rational preferences among outcomes that can be identified and associated with a value.

- Individuals maximize utility and firms maximize profits.

- People act independently on the basis of full and relevant information.

Jevons

Menger

Walras

Von Weiser

Von Bohm-Bawerk

Marshall

Wicksell

Fisher

Slutsky

Pareto

Hicks

The Marginalists

1850 - 1900
The Marginalists includes Jevons, Menger and Walras, who were the most important contributors to the
Marginal Revolution. They worked on the decisions made by individuals in the economy and developed the

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demand and supply curves.

The three of the began the process of making economics a profession.

Jevons

Walras

Menger

Austrian School

1865 - 1920
The Austrian School of economics is a school of economic thought which bases its study of economic
phenomena on the interpretation and analysis of the purposeful actions of individuals It derives its name from
its origin in late-19th and early-20th century Vienna with the work of Carl Menger, Eugen Von Bohm-Bawerk,
Friedrich von Wieser, and others.

Menger

Von Bohm-Bawerk

Von Weiser

American Institutionalist

1918 - 1950
The ‘institutional approach’ to economics goes back to a conference paper in 1918 by Walton Hamilton titled
‘The Institutional Approach to Economic Theory’. The paper was a call for the profession at large to adopt the
‘institutional approach’ and a conception of economic theory that was:

(i) capable of giving unity to economic investigations of many different areas;

(ii) relevant to the problem of social control;

(iii) relate to institutions as both the ‘changeable elements of economic life and the agencies through which
they are to be directed’;

(iv) concerned with ‘process’ in the form of institutional change and development; and

(v) based on an acceptable theory of human behaviour, in harmony with the ‘conclusions of modern social
psychology’.

At its inception, then, institutionalism could be seen as a very promising program – modern, scientific,
pointing to a critical investigation and analysis of the existing economic system and its performance.

Institutionalism was critical of marginal utility theory as a basis for a theory of consumption and emphasized
the social nature of the formation of consumption values.

Institutionalism had a strong position in American economics in the interwar period, but declined in prestige
after WWII from mainstream of American economics to a heterodox tradition on the margins of the discipline.

Keynesian Economists

1945 - 1980
Neo-Keynesian economics is a school of macroeconomic thought that was developed in the post-war period
from the writings of John Maynard Keynes. A group of economists (notably John Hicks, Franco Modigliani, and
Paul Samuelson), attempted to interpret and formalize Keynes' writings, and to synthesize it with the neo-
classical models of economics. Their work has become known as the neo-classical synthesis, and created the
models that formed the core ideas of neo-Keynesian economics. These ideas dominated mainstream

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economics in the post-war period, and formed the mainstream of macroeconomic thought in the 1950s, 60s
and 70s.

Pre-runner:

- John Maynard Keynes

Hicks

Modigliani

Samuelson

New Classical Economists

1970 - Present
New classical macroeconomics, sometimes simply called new classical economics, or monetarists, is a school
of thought in macroeconomics that builds its analysis entirely on a neoclassical framework. Specifically, it
emphasizes the importance of rigorous foundations based on microeconomics, especially rational
expectations.

New classical macroeconomics strives to provide neoclassical microeconomic foundations for macroeconomic
analysis. This is in contrast with its rival new Keynesian school that uses micro foundations such as price
stickiness and imperfect competition to generate macroeconomic models similar to earlier, Keynesian ones.

One of the most famous new classical models is the real business cycle model, developed by Edward C.
Prescott and Finn E. Kydland.

New-Keynesian Economist

1991 - Present
New Keynesian economics is a school of contemporary macroeconomics that strives to provide
microeconomic foundations for Keynesian economics. It developed partly as a response to criticisms of
Keynesian macroeconomics by adherents of New Classical macroeconomics.

Two main assumptions define the New Keynesian approach to macroeconomics. Like the New Classical
approach, New Keynesian macroeconomic analysis usually assumes that households and firms have rational
expectations. But the two schools differ in that New Keynesian analysis usually assumes a variety of market
failures. In particular, New Keynesians assume that there is imperfect competition[1] in price and wage setting
to help explain why prices and wages can become "sticky", which means they do not adjust instantaneously to
changes in economic conditions.

Wage and price stickiness, and the other market failures present in New Keynesian models, imply that the
economy may fail to attain full employment. Therefore, New Keynesians argue that macroeconomic
stabilization by the government (using fiscal policy) or by the central bank (using monetary policy) can lead to
a more efficient macroeconomic outcome than a laissez faire policy would.

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