A new book from the Institute of Economic Affairs argues that economics education has become a “sterile and lifeless endeavour” that has forgotten its intellectual heritage, leaving students with mathematical formulas but no real understanding of the fundamental debates that shape economic thinking.
An Introduction to Schools of Economic Thought, published today and authored by Eamonn Butler, traces the evolution of economic ideas from Ancient Greece to modern Behavioural Economics.
The book demonstrates how different schools of thought, including the Classical School, Austrian School, Chicago School, and Keynesian approaches, offer radically different explanations for how economies work and what governments should do about economic problems.
Butler argues that the mathematical, model-based approach that dominates university economics courses “crowds out many other things” and has created a generation of economics graduates who know formulas but understand little about the intellectual battles that created modern economic policy.
The book shows how these different approaches led to vastly different policy prescriptions, from Adam Smith’s “invisible hand” of free markets to John Maynard Keynes’s call for government intervention.
The primer reveals how Austrian School economists like Ludwig von Mises and Friedrich Hayek warned as early as 1920 that central planning would fail because governments lack the price signals needed to allocate resources efficiently. These predictions proved accurate when Soviet-style economies collapsed decades later.
Meanwhile, it shows how Keynesian economics became dominant after the Great Depression, despite what Public Choice School economists later demonstrated were systematic flaws in how governments actually implement economic policies.
The book explains how the Chicago School’s Milton Friedman used extensive empirical data to show that the Great Depression was caused not by market failures, as Keynesians claimed, but by government monetary authorities allowing the money supply to shrink by over a third. This research helped shift global economic policy away from activist government intervention toward more market-oriented approaches in the 1980s and 1990s.
Economics students should learn about the various different schools of thought.
Eamonn Butler, Director of the Adam Smith Institute and author of An Introduction to Schools of Economic Thought, said, “No one view of economics, nor of any part of human life, explains everything.
“But by understanding past economists’ viewpoints, we can enhance our own understanding of how economics works—and how what our students get from their teachers is so often very flawed.
“I hope this book will be of value to lay readers who want to learn about how modern economics has evolved. But even more, I hope that students will read it and bring their own new ideas to bear on our economic problems.”
