Economics is not a static field. While the laws of physics, chemistry or biology may be concrete, economic models and accompanying theories continue to evolve. This is because economics is a social science, and so there can never be any concrete answer as to which economic model or theory is the best, or the most approximate estimate, to how individuals really behave.
The amount of change that economics, both as a taught subject as well as a system of exchange, is clear when you take a step back and look at how much the field has altered over the past few hundred, or even the past few thousand years.
Below are just a few eras within economic history that are marked by their time. If you’d like to learn about any of these areas in greater detail, from the Great Depression to the economy of ancient Rome, remember that you can always turn to a Superprof economics or history teacher for help.
The Roman Economy and Ancient Economics
You’d be forgiven for thinking that ancient Rome, or any one of the great ancient societies, had an economic system as grand as its place in history.
Unfortunately, this is not the case, and the economy of ancient Rome and the Roman Empire was actually fairly basic in comparison to the economic systems we have in place today.
The Roman Empire’s economy was agricultural and mainly focussed on items such as crop growing and trade, and there was a heavy reliance on slave labour for both skilled and unskilled work.
Although agriculture was the cornerstone of the ancient Roman economy, that’s not to say that you can't examine other features of the economy.
For instance, the Roman Empire had a single currency in place, although in stark contrast to today the supply of money was not very heavily regulated. What’s more, there were also a variety of trade routes, both via land and sea, which connected the empire to lands as diverse as:
- China; and
Of course, there were some features of the ancient Roman economy that we would not readily recognise today. One such example would be the existence of bartering, which was a common practice in ancient economies.
Indeed, rather than pay taxes with coins, bartering could also be used as an option to settle any tax debt.
Given that bartering has all but disappeared from many global economies today, it’s easy to see how economic systems have changed over the past few thousand years.
The Growing Importance of Economics during the Industrial Revolution
Another major turning point in economic history is the Industrial Revolution. This period, which historians generally agree began between the 1760s and 1780s, had an enormous impact on life in Britain, from:
- The way the land was farmed;
- The living and working conditions of those who moved to the cities; to
- The rise of the middle class and the advent of more disposable income.
One of the main changes to come out of the Industrial Revolution was the introduction of steam power and steam engines. The steam engine, widely accredited to James Watt and Matthew Boulton, paved the way for an improved railway network, which allowed more goods to be transported across the country.
Steam power also led to changes in the textile industry, with greater production now possible in the mills, which are considered by some to be the precursor to factory conditions that became so commonplace throughout this age.
In fact, many of the changes that occurred during the Industrial Revolution can still be seen today. In Manchester and its surrounding areas, for example, you can still see remnants of the once-prominent cotton industry that was in place during the time, while Liverpool also retains its importance as a port.
Economics During the Turbulent Interwar Period
Fast forward a few hundred years from the Industrial Revolution, and you could find yourself in a lecture or seminar studying the events of the interwar period and how it came to impact each country differently.
Although this period of history was characterised by immense loss and the desire to rebuild, it was also a time of great struggle for many European nations.
Germany, for example, had difficulty getting back on its feet following defeat during World War One, as its economy was all but crippled by reparations payments to the Allied Nations, combined with periods of economic crisis, including hyperinflation during the 1920s.
Other countries fared slightly better during this time, but any period of relative stability was often cut short. America, for instance, found itself in a relatively stable time, economically-speaking, after World War One, but its fortunes changed for the worse when the Wall Street Crash occurred in 1929, which then sent the world plunging into a global recession with the Great Depression.
Ultimately, this background of economic downturn and crisis paved the background for the advent of Hitler, who became the Chancellor of Germany in 1933, which led to the outbreak of World War Two in 1939, following Germany’s occupation of Poland.
Post War Economy Up To The 2008 Financial Crisis
Following World War Two economic prosperity was the keyword of the day. This period of economic growth, known as the golden age of capitalism was marked by increased economic wealth as well as high employment rates in areas as diverse as the Soviet Union to Western Europe.
However, nothing lasts forever, and this period of relative economic stability and growth ended during the early 1970s with the oil crisis.
This period also saw the rise of one particular economist, with a corresponding decline in the popularity of another economist’s ideas. John Maynard Keynes' ideas had been immensely popular during the beginning of the 21st century, and essentially this intellectual argued that economic growth could be achieved in times of downturn through increased government spending.
However, Keynes' ideas were pushed aside in favour of figures such as Milton Friedman, who was intricately linked with concepts such as:
- Monetarism and monetary policy; and
- Free market capitalism
The ideas espoused by Friedman remain popular, even to this day, although there’s still place for post-Keynesian economists today. However, with the onset of the 2008 financial crisis, Friedman's ideas, and the neoclassical school of economics more broadly have begun to be questioned by some, as those ideas did not predict the onset of the global economic crisis and its consequences.
The Rise Of Behavioural Economics In The 21st Century
Although the 2008 financial crisis had a huge impact, not only on the global economy but also on how some people now perceive the neoclassical school of economic thought and its economic analysis, there has also been a growing change in economic theory over the past few decades.
Neoclassical economics remains one of the most popular and widely taught, economic schools of thought in the U.K., although there has also been continued emphasis on the core areas of economics, including macroeconomics, microeconomics, econometrics, and mathematical or quantitative models.
Despite this institutional tendency towards teaching micro- and macroeconomic principles, there has been an increased interest in the field of behavioural economics and behavioural finance, which in many ways stands in opposition to the principles taught by neoclassical economists.
Behavioural economics, as a field, generally argues that:
- Individuals are not, in fact, rational economic agents, which the neoclassical school believes;
- Individuals are not always able to adjust their decisions to account for new information; and
- Individuals are not always objective.
Behavioural economics and behavioural finance, in particular, tries to account for particular market phenomena, such as the interaction between human behaviour and stock market bubbles and crashes through concepts such as the herd instinct and loss aversion.
The discipline, although relatively new compared to some schools, has gained a large amount of popular attention, helped in part by the fact that several leading economists in this area, such as psychologist Daniel Kahneman and economist Richard Thaler, have received the Nobel Prize in economics.
Although behavioural economics is not without its detractors, it is a growing field of economic development that illustrates how economics, as an academic subject, continues to evolve in our quest to truly understand what makes individuals and companies tick, and how we best interact and exchange goods and services with each other.
Regardless of whether you're a graduate student, undergraduate or A-Level student, if you would like to learn more about introductory behavioural economics, or indeed, the development of the history of economic thought, then you could reach out to a tutor for further guidance.
Superprof has a range of economics tutors, each with their own specialisms and areas of interest, from basic economics lessons all the way to statistical probability. You should be able to find a tutor in your local area that can help you, whether that's out of general interest, or to help prepare you for your next essay or seminar.