Economics: Today and Tomorrow © 2012

"Model Economists"

Introduction
Students have read that there are different schools of economic theory upon which modern economists base their ideas. In this lesson they will learn about some of the economists of the 17th, 18th, 19th, and 20th centuries and the history of economic schools of thought. They will also learn that economic theory is a reaction to problems of the times.

Lesson Description
Students will use information from the Federal Reserve Bank of San Francisco's Great Economists Web site to learn about the different schools of economic theory and the historical figures in economics. They can browse the site to collect information from the Ten Great Economists and the Timeline categories. Students will answer four questions and then use what they have learned to write speeches nominating early economists for the Nobel Prize.

Applied Content Standards (from the Council for Economic Education)
Standard 3: Different methods can be used to allocate goods and services. People, acting individually or collectively through government, must choose which methods to use to allocate different kinds of goods and services.
Standard 4: People respond predictably to positive and negative incentives.
Standard 18: A nation's overall levels of income, employment, and prices are determined by the interaction of spending and production decisions made by all households, firms, government agencies, and others in the economy.

1. Students will learn about historical economists and the different schools of economic thought.
2. Students will use what they have learned to write speeches nominating early economists for the Nobel Prize.

1. Mercantilism, the economic theory that a nation's wealth came primarily from the accumulation of gold and silver, inspired leaders of nations to intervene extensively in the market. Because nations without gold and silver deposits could only obtain wealth by selling more goods than they bought from abroad, rulers restricted import trade and granted subsidies to improve export prospects.
2. Adam Smith, known as the father of modern economics, viewed the ideal economy as a self-regulating market system that automatically meets the economic needs of the people. His book The Wealth of Nations described the basic principles of economics for the first time. Competition, he wrote, acts as an "invisible hand" that guides resources to their most productive use. Additionally, he believed that individuals acting in their own best interest, and with a minimum of government intervention, bring the greatest good for society as a whole.
3. Directly opposite of the Classical view, the Marxist school believed that capitalism was an evil economic system that would eventually destroy itself. All production belongs to labor because workers produce all value within society, Marx wrote. Marx also believed that competition would create dire conditions for workers as capitalists tried to cut back on labor costs. This school advocated a world without private property, as opposed to the Classical view that self-interest promotes the greatest good for society.
4. The Classical view proposed that during a recession, declining wages and prices would restore full employment. In contrast, Keynes contended that falling prices and wages depress people's incomes and prevent renewed spending. Unlike Classical economists, Keynes supported direct government intervention to restore economic balance, and his views profoundly revolutionized government's role in monitoring the economy. Worldwide economic depression inspired Keynes' arguments.
5. Students' speeches will vary.