Chang – Kinds of economics

Ha-Joon Chang describes nine different kinds, or schools, of economics in Chapter 4 of his book, Chang, H.-J. (2014). Economics: the user’s guide. London: Pelican (here on Amazon, including reviews and access to the Kindle version).

He shows that mainstream economics, which stresses neoclassical economics, is just one of many alternative ways of viewing and attempting to understand the economy. Each description begins with a one sentence summary. These are reproduced here. Of course, you can read more by getting hold of the book and going to Chapter 4:

Contrary to what most economists would have you believe, there isn’t just one kind of economics – Neoclassical economics. In this chapter, I introduce no less than nine different kinds, or schools, as they are often known.

These schools are not irreconcilable enemies, however; the boundaries between schools are actually fuzzy. But it is important to recognize that there are distinctive ways of conceptualizing and explaining the economy, or ‘doing’ economics, if you like. And none of these schools can claim superiority over others and still less a monopoly over truth.

One reason is the nature of theory itself. All theories, including natural sciences like physics, necessarily involve abstraction and thus cannot capture every aspect of the complexity of the real world.

The nine schools described in the chapter are:

The Classical School: The market keeps all producers alert through competition, so leave it alone.

The Neoclassical School: Individuals know what they are doing, so leave them alone – except when markets malfunction.

The Marxist School: Capitalism is a powerful vehicle for economic progress, but it will collapse, as private property ownership becomes an obstacle to further progress.

The Developmentalist Tradition: Backward economies can’t develop if they leave things entirely to the market.

The Austrian School: No one knows enough, so leave everyone alone.

The (Neo-) Schumpeterian School: Capitalism is a powerful vehicle of economic progress, but it will atrophy, as firms become larger and more bureaucratic.

The Keynesian School: What is good for individuals may not be good for the whole economy.

The Institutionalist School – Old and New?: Individuals are products of their society, even though they may change its rules.

The Behaviouralist School: We are not smart enough, so we need to deliberately constrain our own freedom of choice through rules.

Commentary added, 20th October 2014