---
title: "History of economic thought"
chunk: 11/18
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"
---

The Great Depression was a time of significant upheaval in the world economy. One of the most original contributions to understanding what went wrong came from Harvard University lawyer Adolf Berle (1895–1971), who like John Maynard Keynes had resigned from his diplomatic job at the Paris Peace Conference, 1919 and was deeply disillusioned by the Versailles Treaty. In his book with American economist Gardiner C. Means (1896–1988) The Modern Corporation and Private Property (1932) he detailed the evolution in the contemporary economy of big business and argued that those who controlled big firms should be better held to account. Directors of companies are held to account to the shareholders of companies, or not, by the rules found in company law statutes. This might include rights to elect and fire the management, requirements to hold regular general meetings, satisfy accounting standards, and so on. In 1930s America the typical company laws (e.g. in Delaware) did not clearly mandate such rights. Berle argued that the unaccountable directors of companies were therefore apt to funnel the fruits of enterprise profits into their own pockets, as well as manage in their own interests. The ability to do this was supported by the fact that the majority of shareholders in big public companies were single individuals, with scant means of communication, in short, divided and conquered. Berle served in President Franklin Delano Roosevelt's administration through the Great Depression as a key member of his Brain Trust, developing many New Deal policies.
In 1967 Berle and Means issued a revised edition of their work, in which the preface added a new dimension. It was not only the separation of controllers of companies from the owners as shareholders at stake. They posed the question of what the corporate structure was really meant to achieve:

"Stockholders toil not, neither do they spin, to earn [dividends and share price increases]. They are beneficiaries by position only. Justification for their inheritance... can be founded only upon social grounds... that justification turns on the distribution as well as the existence of wealth. Its force exists only in direct ratio to the number of individuals who hold such wealth. Justification for the stockholder's existence thus depends on increasing distribution within the American population. Ideally, the stockholder's position will be impregnable only when every American family has its fragment of that position and of the wealth by which the opportunity to develop individuality becomes fully actualized."

=== Industrial organization economics ===

In 1933 American economist Edward Chamberlin (1899–1967) published The Theory of Monopolistic Competition. The same year British economist Joan Robinson (1903–1983) published The Economics of Imperfect Competition. Together they founded Industrial Organization Economics. Chamberlin also founded Experimental Economics.

=== Linear programming ===

In 1939 Russian economist Leonid Kantorovich (1912–1986) developed Linear Programming for the optimal allocation of resources, receiving the 1975 Nobel Economics Prize.

=== Ecology and energy ===
By the twentieth century, the Industrial Revolution had led to an exponential increase in the human consumption of resources.  The increase in health, wealth and population was perceived as a simple path of progress. However, in the 1930s economists began developing models of non-renewable resource management (see Hotelling's rule) and the sustainability of welfare in an economy that uses non-renewable resources.
Concerns about the environmental and social impacts of industry had been expressed by some Enlightenment political economists and in the Romantic movement of the 1800s. Overpopulation had been discussed in an essay by Thomas Malthus (see Malthusian catastrophe), while John Stuart Mill foresaw the desirability of a stationary state economy, thus anticipating concerns of the modern discipline of ecological economics.

==== Ecological economics ====
Ecological economics was founded in the works of Kenneth E. Boulding, Nicholas Georgescu-Roegen, Herman Daly and others.  The disciplinary field of ecological economics also bears some similarity to the topic of green economics.
According to ecological economist Malte Faber, ecological economics is defined by its focus on nature, justice, and time. Issues of intergenerational equity, irreversibility of human impact on the environment, uncertainty of long-term outcomes, thermodynamics limits to growth, and sustainable development guide ecological economic analysis and valuation.

==== Energy accounting ====
Energy accounting was proposed in the early 1930s as a scientific alternative to a price system, or money method of regulating society. Joseph Tainter suggests that a diminishing ratio of energy returned on energy invested is a chief cause of the collapse of complex societies.  Falling EROEI due to the depletion of non-renewable resources also poses a difficult challenge for industrial economies. Sustainability becomes an issue as survival is threatened due to climate change.

=== Institutional economics ===

In 1919 Yale economist Walton H. Hamilton coined the term "Institutional economics".
In 1934 John R. Commons (1862–1945), another economist from midwestern America published Institutional Economics (1934), based on the concept that the economy is a web of relationships between people with diverging interests, including monopolies, large corporations, labor disputes, and fluctuating business cycles.  They do however have an interest in resolving these disputes.  Government, thought Commons, ought to be the mediator between the conflicting groups.  Commons himself devoted much of his time to advisory and mediation work on government boards and industrial commissions.

=== Arthur Cecil Pigou ===