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Economics

Global Organization And Orientation

Between the two world wars, two important phenomena affected the organization and orientation of economics in the world. The first was the Bolshevik Revolution of 1917 and the exceptionally rapid industrialization of the Soviet Union. The second was the Great Depression of the 1930s. The former led to the development of the Marxist-Stalinist economic system and state-directed development, collectivization, and the establishment of a command economy. The Great Depression led to a declining faith in the classical (laissez-faire) self-regulating free market capitalism, and the emergence of government interventionism, following the publication, by John Maynard Keynes in 1936, of The General Theory of Money, Interest, and Employment.

The new field of development economics was born in the 1940s and 1950s with W. Arthur Lewis providing the impetus for and being a prime mover in creating the subdiscipline. The new Keynesian macroeconomics and development economics advocated widespread government intervention in the economic process. Likewise, the powerful and far-reaching movements of the developing countries in Africa, Asia, and Latin America in the 1940s gave rise to the rejection of free-market capitalism in those regions. In the 1940s and 1950s, economists advocated for a dominant role of the state and comprehensive national development planning was recommended as a way to eliminate the "vicious circle of poverty" and underdevelopment. The advocacy for dirigisme was founded on the notion of market segmentation and failures as well as on information asymmetries and resource constraints. Disappointing results after World War II forced a serious questioning and tempering of this development dirigisme.

As a social science, economics is subject to ideological manipulation. Aside from the orthodox (mainstream) and heterodox spheres, in the neoclassical intellectual tradition, there has been a split since the late nineteenth century as can be seen in the case of its liberal and conservative wings. Led by Paul Samuelson, liberal thinking is associated with advocacy for government intervention to correct market imperfections and market failures while conservatism or neoclassicism led by Milton Friedman is associated with a more pronounced advocacy for laissez-faire.

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Science EncyclopediaScience & Philosophy: Dysprosium to Electrophoresis - Electrophoretic TheoryEconomics - Historical Development, Major Theories, Themes, Global Organization And Orientation, Impact Of Influential Economic Ideas