The Key Breakthroughs in the History of Economic Thought
We’re just going to review seven major breakthroughs in economic thinking over the past few centuries to give you an idea of how we got to where we are and to guide us in what needs to be done in the future. There were other key insights in economic thought developed during this time, but these breakthroughs basically shaped the structure of economic thought today.
Breakthrough #1: Free Markets
We begin with Adam Smith and the concept of free market competition. His support of free markets and opposition to business monopolies set up by the monarchy was a foundation for modern economic thought. Much of the power of Smith’s work is due to his focus on some aspects of property rights (the rights of monarchs to establish a monopoly in a market) and how they are an important part of economics. By focusing on certain aspects of property rights he vaulted economic thought forward. The definition of property rights we use is simply “the way in which society determines who gets what resources.”
Smith’s most important written work, The Wealth of Nations, was first written in 1776, an auspicious time for questioning the wisdom of monarchical rule in the British Empire. He was effectively one of the democratic revolutionaries who helped others to question the value of the monarchy in general and more specifically, in their interference with free markets. To a large degree Adam Smith’s work is the start of modern economic thought. He ...