Macroeconomics Theories

Описание: Below is a chronological timeline of major macroeconomic theories, arranged historically from earliest to latest, with key economists and core ideas.
This order is very useful for UGC-NET, UPSC, State PSC, and also for YouTube explanation videos 📊

⸻

1️⃣ Classical Theory (1776–1870s)

Founder: Adam Smith
Key Economists: Adam Smith, David Ricardo, J.B. Say, Thomas Malthus

Core Ideas:
• Say’s Law: Supply creates its own demand
• Full employment is the natural state
• Free market, laissez-faire
• Price flexibility ensures equilibrium

📘 Important Concepts:
• Invisible Hand
• Wage–price flexibility
• Quantity Theory of Money (early form)

⸻

2️⃣ Malthusian Population Theory (1798)

Economist: Thomas Malthus

Core Idea:
• Population grows geometrically
• Food supply grows arithmetically
• Leads to poverty and stagnation

⸻

3️⃣ Ricardian Theory of Distribution (1817)

Economist: David Ricardo

Core Idea:
• Distribution among rent, wages, and profits
• Law of diminishing returns in agriculture

⸻

4️⃣ Marxian Theory (1867)

Economist: Karl Marx

Core Ideas:
• Capitalism is unstable and exploitative
• Surplus value → class conflict
• Leads to eventual collapse of capitalism

📘 Important Concept:
• Falling rate of profit

⸻

5️⃣ Neoclassical Theory (1870s–1930s)

Economists: Alfred Marshall, Leon Walras, Pigou

Core Ideas:
• Micro foundations of macro
• Rational individuals
• Market clears through price mechanism

📘 Important Concepts:
• General equilibrium
• Marginal productivity theory
• Flexible wages and prices

⸻

6️⃣ Quantity Theory of Money – Classical Version (1911)

Economist: Irving Fisher

Equation:

MV = PT

Core Idea:
• Money affects only prices, not real output
• Neutrality of money

⸻

7️⃣ Keynesian Economics (1936) ⭐

Economist: John Maynard Keynes
Book: The General Theory of Employment, Interest and Money

Why it emerged:
• Failure of classical theory during Great Depression

Core Ideas:
• Demand determines output and employment
• Possibility of underemployment equilibrium
• Government intervention is necessary

📘 Important Concepts:
• Effective Demand
• Multiplier
• Liquidity Preference
• Sticky wages

⸻

8️⃣ Post-Keynesian Economics (1940s)

Economists: Joan Robinson, Nicholas Kaldor

Core Ideas:
• Uncertainty matters
• Rejection of full rationality
• Importance of income distribution

⸻

9️⃣ Neoclassical Synthesis (1950s–1960s)

Economists: Paul Samuelson, Solow

Core Idea:
• Keynesian short run + Classical long run
• Markets fail in short run, self-correct in long run

📘 Famous Model:
• IS-LM Model

⸻

🔟 Monetarism (1950s–1970s)

Economist: Milton Friedman

Core Ideas:
• Inflation is always a monetary phenomenon
• Money supply should grow at a fixed rate
• Limited role of fiscal policy

📘 Concepts:
• Permanent Income Hypothesis
• Natural Rate of Unemployment

⸻

1️⃣1️⃣ New Classical Economics (1970s)

Economists: Robert Lucas, Thomas Sargent

Core Ideas:
• Rational Expectations
• Markets clear instantly
• Policy ineffectiveness theorem

📘 Result:
• Government policy is ineffective

⸻

1️⃣2️⃣ Real Business Cycle Theory (1980s)

Economists: Kydland, Prescott

Core Ideas:
• Business cycles caused by technology shocks
• No need for government intervention

⸻

1️⃣3️⃣ New Keynesian Economics (1980s–1990s)

Economists: Gregory Mankiw, Joseph Stiglitz

Core Ideas:
• Micro foundations with price & wage rigidity
• Justifies government intervention

📘 Concepts:
• Menu costs
• Efficiency wages
• Sticky prices

⸻

1️⃣4️⃣ Endogenous Growth Theory (1980s)

Economists: Paul Romer, Robert Lucas

Core Ideas:
• Growth comes from human capital, innovation
• Technology is endogenous

⸻

1️⃣5️⃣ Modern Monetary Theory (MMT) (2000s)

Economists: Stephanie Kelton

Core Ideas:
• Sovereign governments can print money
• Taxes control inflation, not fund spending

⚠️ Highly debated theory

⸻

1️⃣6️⃣ New Institutional Macroeconomics (2000s–Present)

Economists: Douglass North, Acemoglu

Core Ideas:
• Institutions matter for growth
• Political economy + macroeconomics

#econlife #economiccrash #economicproblems