HET - I Unit 1 - Edited

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1. Introduction
Defining history of Economic thought
The interaction between Economic
history and History of economic
thought
Scope and Significance of History of
thought
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2. Methodological Issues of Economic
Methodological Controversies in Economic
and Evolution of Various Methodologies
Economics as an Art and as a Science
The importance of Empirical Verification
and
The Rise of Logical positivism
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3. Ancient Ideas of Economic Thought or Pre
Classical Economics
Hebrewa, Greeck, Plato, Aristotle, Xeno Phone
 Synicism, Stoicism, Epicurism, The Romance
 Medieval Economics and Feudalism–St. Thomas
Acquinas, Nicholas Oresme, Grasham
Mercantilism
The Physiocratic school of Economic thought
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4. The Classical School
Over view of the classical school
Factors for the Emergence of the Classical school
The forerunners: William petty , R. Cantillon ,
Dudly North , David Hume
Adam smith: Adam Smith and Industrial
revolution, Decision of labor, the measure and
values of labor, Cost of production theory, supply-
determined prices etc
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Thomas Robert Malthus's population theory, The
theory of general Gults, The LDR, differential Rent,
The alternative cost of land, Land as a factor of
production
David Ricardo's system's : The labor theory value,
Capital costs and Labor values, The Ricardo effect, the
Invariable Measure of value, the fundamental
theorem of value, the effect of capital accumulation,
the trend of relative shares, the theory of
Comparative costs etc
Jean Baptist Say: Say; Say’s Law and classical monetary
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theory, say's identity
5. The rise of Socialist thought
Pre-Marxian Socialist thinkers: Robert Owen,
Sismonde de Sismondi, Pierre Joseph Proudhon,
Proudhan, Lassale, Louis Bllance, Max Webber etc
Marxian Economics: Marx's Methodology, Value
and Surplus Value, The transformation Problem,
Solutions of the Transformation Problem,
Historical transformation, Profits as Unearned
income, etc.
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6. The Marginal Revolution:
 Overview of the Marginalist School, The
Maximization Principle
Forerunners of Marginalism: Antoine Augustin
Cournot and Herman Heinrich Gossen,
First - Generation Marginalists: Jevons,
Walras, and The Austrian School
Second - Generation Marginalists: Edgeworth,
Wicksteed, Clark, Wicksell, 7
Chapter 1
Introduction
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1.1. Defining History of Economic Thought
Prof. Haney: defined History of Economic Thought

as a critical account of the development of economic
ideas, searching into their origins, interrelations, and,
in some cases, their results ( manifestations).
• The history of economic thought concerns thinkers
and theories in the field of political economy and
economics from the ancient world right up to the
present day.
• Economic thought is a body of economic ideas and
generalizations which can be seen to ‘belong’ to
each other. 9
• Economic ideas collectively become economic thought.
• According to H.L. Bhatia: history of economic
thought includes:
 The doctrines and generalizations of various thinkers
which deal with the economic phenomena of our life.
 It went through a lot of evolution with specific
contributions from various thinkers that had great
impact upon the future of economic thought.
Prof. Bell: says the history of economics thought is the
study of the heritage(legacy) left by the writers on
economic subject. 10
Prof. Schumpeter holds that “economic thought is the sum
total of all the opinions and desires concerning economic
subjects: especially concerning with public policies of
different times and places”.
 He stated further that the history of economic thought

traces the historical change of attitudes.
 It also speaks about economic problems and various

approaches to those problems.
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The History and development of economic ideas can

be studied under three (3) periods, namely;
1. Ancient Period
Ancient Greek writers such as the philosopher
Aristotle examined ideas about the art of wealth
acquisition, and questioned whether property is best left
in private or public hands.
2. Medieval ( middle) periods: is the period in the
history of Europe , the middle Age period from the 5th to
the 15th (500 to 1500) century. 12
• It started with the fall of the great Western Roman
Empire and merged into the Renaissance and the Age
of discovery.
• That is after the “rebirth” of culture that we call
Renaissance.
• Example: Scholastics such as Thomas Aquinas argued
that it was a moral obligation of businesses to sell
goods at a just price.
• Economic thought evolved through feudalism in the
Middle Ages to mercantilist theory during the
Renaissance (when people were concerned to orient
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trade policy to further the national interest).
3. The Modern Period:

 The modern political economy of Adam Smith
appeared during the industrial revolution,
 when technological advancement, global
exploration, and material opulence(wealth) that had
previously been unimaginable was becoming a
reality.
• All these and further developments are subject matter
of history of economic thought.
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 Thus, the history of economic thought-”Traces out the historical
changes of attitudes, mentioning analytical performances in
passed events.
• The growth of economic science can be traced along with the

growing complexity of the world economies.
 The history of economic thought can further be broadly divided

into two parts;
1. The Origin and the development of economic ideas before the
development of economics as a science.
2. The second part deals with economic ideas after the
development of economics as a Science. 15
1.2.The Interaction between Economic
history and History of economic thought
• Economic history is different from the history of economic
thought.
• Economic history is the study of the economic aspects of

societies in the past; the history of the economic use of
resources:- land, labour and capital; or the examination of
the past performance of economies.
o It is concerned with how people lived most of their lives, how

many were born and died, how they earned and spent, worked
and played, etc. 16
 While History of Economic thought deals with the development
of economic ideas;
 Economic History is the study of the economic development of a

nation or country.
 On the other hand, History of economics deals with the science

of economics.
 Even though Economic History and History of Economic

Thought constitute separate branches of study they are closely
related.
 b/c Economic ideas are directly or indirectly motivated by

economic conditions and environment of a country. 17
• Economic history asks economic questions - about the demand
and supply of goods and services, about costs of production,
levels of income, the distribution of wealth, the volume and
direction of investment, or the structure of overseas trade:
• Thus, it inevitably deals with large numbers, with aggregates.
 The history of economics studies the origin and growth of

commerce, manufacture, trade, banking, transportation and other
economic phenomena and institutions.
 In short it is a study of the material or industrial development of

the people in the past.
 Though these are separate branches but there is close relationship
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between them.
1.3. Significance of History of Economic
Thought
• Every science grows and evolves overtime and during the
process of its refinements and expansion attracts numerous
debates and controversies relating to the subject matter and its
applicability in real life.
1) The study of history of economic thought clearly shows that
there is a certain unity in economic thought and this unity
connects us with ancient times.
2) The study helps us to avoid committing the same mistakes of
the earlier economic thinkers.
3) It is an important tool of Knowledge. 19
Thought
4) The study will help students realize that economics is different
from economists.
5) It helps students to know that economic ideas are conditioned by

time, place and circumstances.
6) The study enables us to know the economic thinker responsible

for the formulation of certain important economic principles and
concepts.
7) It will help us to understand the origin of economics as a

discipline.
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Thought
8) The study will help students to know that economic ideas have
been instrumental to the shaping of economic and political policies
of different countries of the world.
9) A study of the History of economic thought will help to provide

a broad basis for comparison of different economic ideas.
 It will enable a person to have a well-balanced and reasonable

judgment.
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1.4. The five major questions that we need to beat
in mind in considering the various schools of
thought include the following.
1) What was the historical background of the school? Or the
pushing factors behind?
2) What were the basic tenets of the school? Who were the
forerunners?
3) Whom did the school benefit? Or seek to benefit?
4) How was the school valid, useful, or correct in its time?
5) Which tenet of the school becomes long lasting contribution?
1.5.What was the historical situation in Ethiopia when these
ideas were developed elsewhere? 22
THANK YOU !
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Prof. Haney: defined History of Economic Thought

 He stated further that the history of economic thought

 It also speaks about economic problems and various

The History and development of economic ideas can

3. The Modern Period:

• The growth of economic science can be traced along with the

 The history of economic thought can further be broadly divided

• Economic history is the study of the economic aspects of

o It is concerned with how people lived most of their lives, how

 Economic History is the study of the economic development of a

 On the other hand, History of economics deals with the science

 Even though Economic History and History of Economic

 b/c Economic ideas are directly or indirectly motivated by

• Thus, it inevitably deals with large numbers, with aggregates.

 The history of economics studies the origin and growth of

 In short it is a study of the material or industrial development of

5) It helps students to know that economic ideas are conditioned by

6) The study enables us to know the economic thinker responsible

7) It will help us to understand the origin of economics as a

9) A study of the History of economic thought will help to provide

 It will enable a person to have a well-balanced and reasonable

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