---
title: "History of economic thought"
chunk: 10/18
source: "https://en.wikipedia.org/wiki/History_of_economic_thought"
category: "reference"
tags: "science, encyclopedia"
date_saved: "2026-05-05T03:59:30.681827+00:00"
instance: "kb-cron"
---

In the early 19th century German-born English astronomer Sir William Herschel (1738–1822) noted a connection between 11-year sunspot cycles and wheat prices. In 1860 French economist Clément Juglar (1819–1905) posited business cycles seven to eleven years long.  In 1925 the Soviet economist Nikolai Kondratiev (1892–1938) proposed the existence of Kondratiev waves in Western capitalist economies fifty to sixty years long.

=== German historical school of economics ===

In the mid-1840s German economist Wilhelm Roscher (1817–1894) founded the German historical school of economics, which promoted the cyclical theory of nations—economies passing through youth, manhood, and senility—and spread through academia in Britain and the U.S., dominating it for the rest of the 19th century.

=== Thorstein Veblen and the American Way ===

Thorstein Veblen (1857–1929), who came from rural midwestern America and worked at the University of Chicago is one of the best-known early critics of the "American Way". In The Theory of the Leisure Class (1899) he scorned materialistic culture and wealthy people who conspicuously consumed their riches as a way of demonstrating success. In The Theory of Business Enterprise (1904) Veblen distinguished production for people to use things and production for pure profit, arguing that the former is often hindered because businesses pursue the latter. Output and technological advance are restricted by business practices and the creation of monopolies. Businesses protect their existing capital investments and employ excessive credit, leading to depressions and increasing military expenditure and war through business control of political power. These two books, focusing on criticism of consumerism and profiteering did not advocate change. However, in 1918 he moved to New York to begin work as an editor of a magazine called The Dial, and then in 1919, along with Charles A. Beard, James Harvey Robinson, and John Dewey he helped found the New School for Social Research (known today as The New School). He was also part of the Technical Alliance, created in 1919 by Howard Scott. From 1919 through 1926 Veblen continued to write and to be involved in various activities at The New School. During this period he wrote The Engineers and the Price System (1921).

== The World Wars, Russian and German Revolutions, and Great Depression (early to mid 20th century) ==
At the outbreak of World War I (1914 –1918), Alfred Marshall was still working on his last revisions of his Principles of Economics. The 20th century's initial climate of optimism was soon violently dismembered in the trenches of the Western Front. During the war, production in Britain, Germany, and France was switched to the military.  In 1917 Russia crumbled into revolution led by Vladimir Lenin who promoted Marxist theory and collectivized the means of production.  Also in 1917, the United States of America entered the war on the side of the Allies (France and Britain), with President Woodrow Wilson claiming to be "making the world safe for democracy", devising a peace plan of Fourteen Points.  In 1918 Germany launched a spring offensive which failed, and as the allies counterattacked and more millions were slaughtered, Germany slid into the German Revolution, its interim government suing for peace on the basis of Wilson's Fourteen Points.  After the war, Europe lay in ruins, financially, physically, psychologically, and its future was dependent on the dictates of the Versailles Conference in 1919.
After World War I, Europe and the Soviet Union lay in ruins, and the British Empire was nearing its end, leaving the United States as the preeminent global economic power.
Before World War II, American economists had played a minor role. During this time institutional economists had been largely critical of the "American Way" of life, especially the conspicuous consumption of the Roaring Twenties before the Wall Street crash of 1929. The most important development in economic thought during the Great Depression was the Keynesian revolution, including the publication in 1936 of The General Theory of Employment, Interest, and Money by John Maynard Keynes. (See the discussion of Keynesianism below.) Subsequently, a more orthodox body of thought took root, reacting against the lucid debating style of Keynes, and remathematizing the profession. The orthodox center was also challenged by a more radical group of scholars based at the University of Chicago, who advocated "liberty" and "freedom", looking back to 19th century-style non-interventionist governments.

=== Econometrics ===

In the 1930s Norwegian economist Ragnar Frisch (1895–1973) and Dutch economist Jan Tinbergen (1903–1994) pioneered Econometrics, receiving the first-ever Nobel Prize in Economics in 1969. In 1936 Russian-American economist Wassily Leontief (1905–1999) proposed the Input-Output Model of economics, which uses linear algebra and is ideally suited to computers, receiving the 1973 Nobel Economics Prize.  After World War II, Lawrence Klein (1920–2013) pioneered the use of computers in econometric modeling, receiving the 1980 Nobel Economics Prize. In 1963–1964 as John Tukey of Princeton University was developing the revolutionary fast Fourier transform, which greatly speed up the calculation of Fourier Transforms, his British assistant Sir Clive Granger (1934–2009) pioneered the use of Fourier Transforms in economics, receiving the 2003 Nobel Economics Prize. Ragnar Frisch's assistant Trygve Haavelmo (1911–1999) received the 1989 Nobel Economics Prize for clarifying the probability foundations of econometrics and for analysis of simultaneous economic structures.

=== Means and corporate governance ===