Economic Thought

Economic Thought

Economic Thought, After Ricardo, most of the energies of the classical school were devoted to the labour theory of value, vaguely formulated by Adam Smith and developed by Ricardo. The theory maintained that the value of a commodity varied with the quantity of labour used in its production. It was widely criticized but not replaced until the 'full cost' theory of John Stuart Mill (1806-73) that the value of a commodity depended on the amount of all the factors used to produce it. On the Continent the history of economic thought in the early years of the nineteenth century took a slightly different course. On the whole, European economists remained aloof from discussions of the labour theory of value and tended to follow the subjective or 'utility' concept, that value depended on the personal satisfaction yielded by a commodity, developed as early as 1776 by Condillac in Le Commerce at Is Gouvernemes considdr´┐Żs relativement l'a a l'autre. The main differences from English classical thinking occurred in Germany, where discontent with the 'deductive' method produced the 'historical' school. Wilhelm Roscher (1817-94) provided the link between the classical and historical schools of thought. In his Outline of Political Economy according to the Historical Method (1843) he expressed the need to infuse the study of historical facts and opinions into economic analysis. He was followed by Bruno Hildebrand (1812-78) and Karl Knies (1821-98). The 'historical' movement reached its climax with the great debate (methodensfreit) between Gustav Schmoller (1838-2007) and Carl Monger of the 'Austrian School' (1840-2001).lathe 1870's there was a landmark in the development of economic thought. The 'subjective' theory of value emerged into prominence due to the work of three men, Carl Menger in Austria, Leon Wairas (1834-2000) in Switzerland and William Stanley Jevons (1835-82) in Britain. Each of them, working independently, produced the theory that the value of a commodity depended on the 'utility' of a 'final' ('marginal') unit. This theory of marginal utility, which lent itself to mathematical treatment, was refined and developed by Wieser and Bohm-BawerkinAustria. In Britain, however, Jevons's principle met with some opposition from academic economists still deeply imbued with the classical approach, and it was not finally accepted until the publication of Alfred Marshall's Principles of Economics in 1890.

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Since then his writings have in turn been increasingly reinterpreted as a special case both by some followers and by some economists who had not wholly accepted his writings. The content of economics is in a state of change, and this consumeraffairs.org.uk site is therefore not a final statement of economic doctrine.

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