Introduction and the Scope of the Field
The syllabus, the rise of economics as a discipline, and the core concepts and debates of the history of economic thought — from oikonomia to Popper, Kuhn and Lakatos.
- Summarise the course, its weekly plan and its assessment.
- Trace how economics moved from oikonomia and political economy to a professional discipline.
- Define the history of economic thought and separate it from economic history.
- Contrast the cumulative and competitive views on studying economic ideas.
- Use the standard terms and dichotomies of the field correctly.
Week 1 introduced the course; Week 2 gave the conceptual map. This page follows both slide decks in order: what the course covers and how it is assessed, how economics became a discipline, and the concepts, debates and vocabulary that every later week builds on.
1. The course: lecturer, content and assessment
The lecturer. Dr. Yasin Arslantaş holds a BA in economics (TOBB ETÜ), an MA in history (Bilkent) and a PhD in economic history (London School of Economics). His research interests include the social and economic history of institutions in the Ottoman Empire, institutional economics, applied microhistory, the philosophy and history of history, and literature.
The course. It covers the evolution of economic thinking — together with its political, social, methodological and ethical aspects — from ancient times to the present day. The objective is to give you the analytical perspective needed to understand the relations and continuities behind the history of economic ideas. The approach is interdisciplinary, somewhat chronological but clustered around themes, and interactive.
Classes. Tuesdays 13:00–15:30. Lecture part I runs 13:00–14:00; lecture part II runs 14:15–15:30.
Weekly content — the road map of the term:
- Introduction
- The scope and context of the history of economic thought
- Pre-modern economic thought
- Early modern economic thought
- Smith and the onset of modern economics
- Classical political economy
- Marx and the rise of socialist economic thought
- Marginalism, Marshall and the rise of neoclassical economics
- Keynes and the formation of modern macroeconomics
- The age of fragmentation (I): contemporary developments
- The age of fragmentation (II): discordant and dissident currents
- The crisis and future of economics
Textbooks. There is no definite textbook, but students are highly recommended to read: Arslantaş et al. (2022), History of Economic Thought; Alessandro Roncaglia, The Wealth of Ideas; Agnar Sandmo, Economics Evolving; Ernesto Screpanti and Stefano Zamagni, An Outline of the History of Economic Thought; Roger Backhouse, The Penguin History of Economics; Robert L. Heilbroner, The Worldly Philosophers; Niall Kishtainy, A Little History of Economics. An extensive list of online resources is available on Mergen.
Assessment and exams. Attendance is 15%, the midterm exam 35% and the final exam 50%; participating in class discussions earns bonus credits. Exams are held in person at the announced times: the midterm lasts 45 minutes and the final 60 minutes. A typical exam has about 10 multiple-choice questions testing general knowledge, a few open-ended questions testing analytical reasoning, and bonus questions testing your attention.
2. Economics as an evolving discipline
Economics is a young discipline — only about two centuries old — but economic thinking has a long history. The slides contrast the two eras directly:
- Modern economic thought: systematic, complex analyses, formal modelling and empirical testing.
- Pre-modern economic thinking: normative judgments based on faith and good management.
Economics is a social science: like the other social sciences it studies how societies work, and it does so by focusing on the oldest and most fundamental topics — production, consumption, price formation, money and trade. As social life became more complicated, economic thinkers grew interested in a wide variety of topics such as education, health, sports and politics. The discipline created its distinctive methodology through contact with statistics, mathematics and physics. Others, however, criticize mainstream economic methodology, arguing that economic laws cannot be universal.
3. How modern economics took shape
A brief history of modern economics runs through three broad periods:
| Period | When | Key figures | Core idea |
|---|---|---|---|
| Classical political economy | 1776 to the 1870s | Adam Smith (1723–1790), Ricardo, Malthus | Begins with the Wealth of Nations (1776); the first systematic body of economic analysis. |
| Neoclassical economics | Late 19th and early 20th centuries | The course later covers marginalism and Marshall | Economics becomes a professional discipline. |
| A period of fragmentation | After World War II | Numerous confronting views | No single approach dominates the field. |
The word ‘political economy’. Economics was commonly referred to as political economy in the 18th and 19th centuries. In the early modern era the political and the economic spheres were seen as inseparable. This new discipline emerged partly as a reaction to mercantilism, whose main motivation for producing economic knowledge was to help governments develop better policies.
Professionalization. To Adam Smith, political economy was just a branch of moral philosophy — yet another section of social theory. University chairs followed: the first was established in Naples in 1754 for Antonio Genovesi; in England, Thomas Malthus received a chair in 1805. The process of professionalization gained momentum from the late 19th century. Especially the 1873 crisis and the Great Depression of 1929 showed that laissez faire was not enough.
4. What is the history of economic thought?
Where does HET lie? From one perspective it is just a branch of economics, like international economics or public finance — and most HET specialists are trained economists. But HET is losing ground at US universities, and many contemporary economists do not care about it. Nor has it been a traditional subject of the historical discipline. It is a kind of marginal field of inquiry, and its specialists cluster around their own journals and organizations.
| Field | What it studies |
|---|---|
| History of economic thought (HET) | The intellectual history of economic ideas. |
| Economic history (EH) | Economic phenomena in the past. |
The two fields have a close relationship, but they are different.
Why study HET? The slides give several reasons:
- It helps you better understand contemporary economic theories. Smith adopts the idea of a natural order, and his invisible hand theorem is rejected by Keynes.
- It reminds us that modern economic theory has a past and a future.
- It introduces a variety of worldviews: people change their views even within their lifetime, and even great minds make mistakes.
- It is a source of inspiration for developing new ideas: only after the 1930s did Marx’s critique of capitalism gain currency.
- It is interesting and fun: it also tells the personal stories of great economists.
5. Do we need to study HET? The cumulative view and positivism
Not all economists agree that HET is useful.
The cumulative view. Contemporary theory is already constructed on all previous contributions and thus incorporates them all. Arthur Cecil Pigou (1877–1959) put the conclusion bluntly: “history of economics is the wrong opinions of dead men.” The cumulative view is closely related to the positivist science tradition and to modernization theory.
The positivist tradition. Any scientific knowledge can be verified or falsified using logical analysis and empirical material. If not, it has no scientific validity (like metaphysical knowledge). Positive scientists apply logical analysis to empirical evidence: they either falsify or verify their hypotheses by considering certain objective criteria. Statements with no objective criteria are outside the scientific zone.
Logical positivism. Its argument: only scientific knowledge is knowledge that can be verified through logical or empirical analysis. It emerged from a group of early 20th century scholars known as the Vienna Circle, mostly active in the 1920s and 1930s. Its implications for economics were much more long-lasting than for other social sciences. It helped crystallize the distinction between positive and normative economics (first made by Nassau Senior): economics was identified as a positive science, while normative economics, based on untestable views and values, was regarded as unscientific.
In parallel with the rise of neoclassical economics, economics turned into a positive science in the late 19th century and especially after World War II. The old question returns: is HET part of economics (social sciences) or of history (humanities)? For proponents of the cumulative view, HET is not part of economics. The answer depends on who you ask.
6. The competitive view: Popper, Kuhn and Lakatos
The competitive view. HET should be an indispensable part of economics, because the development of economic thought is not a mono-dimensional process. This view is based on advances in the philosophy of science in the 20th century.
| Thinker | Dates | Central idea | Key vocabulary |
|---|---|---|---|
| Karl Popper | 1902–1994 | Observations can never verify a general statement; theories are tested by attempts to falsify them. | problem of induction; falsifiability |
| Thomas Kuhn | 1922–1996 | Science is critical only at times of scientific revolution; it does not follow a linear line. | paradigm; normal science; revolution |
| Imre Lakatos | 1922–1974 | Theories come in research programmes with a stable hard core defended by flexible auxiliary hypotheses. | scientific research programme; protective belt |
Karl Popper (1902–1994). Empirical observations can never verify a scientific generalization. By testing, we just increase confidence in a theory, not verify it — this is the problem of induction. The statement “all swans are white” would be valid until we find out there are black swans in Australia; the same question applies to “the sun rises every morning”. What is needed, then, is to falsify theories, not verify them: scientific statements are those that are falsifiable, and a scientist should therefore be critical.
Thomas Kuhn (1922–1996). Science is critical only at times of scientific revolution. A paradigm is a concept that comprises the approaches (beliefs, values and methods) taken for granted by a certain scientific community. Science does not follow a linear line. The phases of scientific development are: (1) the pre-paradigmatic phase, (2) normal science, (3) crisis, and (4) scientific revolution. Every science begins in the pre-paradigmatic phase. In the normal science phase a paradigm is adopted, and a discipline never returns to the first phase after it reaches this phase; scientists share a theoretical system that gets ever more complex while its explanatory power increases. Anomalies accumulate and result in a scientific revolution. A scientific achievement must meet two criteria to create such a change: it must be unique enough to attract the attention of a group of followers, and it must leave some open-ended questions worth answering.
Imre Lakatos (1922–1974). Lakatos is renowned for his scientific research programmes (SRP) approach. An SRP is a sequence of theories that share a hard core containing unfalsifiable theses used in the construction of a theoretical system. The hard core resists anomalies with the support of several auxiliary hypotheses called the protective belt. The protective belt is flexible, while the hard core hardly changes. An SRP is successful if its theories can discover and predict new facts; it loses validity when a better programme emerges.
What do they tell us about HET? Both Kuhn’s and Lakatos’s theories were developed in relation to the natural sciences. For HET they help us grasp the strengths and weaknesses of competing approaches. There can be either progress within each approach or at the time of transition from one paradigm or research programme to another. Paradigm change occurs through analytical tools; SRPs change as a result of notable differences between two subsequent approaches.
7. Does context matter? Relativism, absolutism and universal laws
Class question: should we consider social, economic and political context when studying the history of economic ideas? The slides present two answers.
| View | Claim |
|---|---|
| Relativist | Economic thought is the product of the world surrounding it: an idea valid in a certain place and time may not be valid in another context. |
| Absolutist | To judge the validity of a theory, it is enough to know whether it is internally consistent and whether it can explain objective reality. |
The relativist view was dominant before the 1950s. Its favourite illustrations: would Marx have written Das Kapital if he had not observed the negative impact of capitalist development? Can we discuss Keynes without considering the role of the Great Depression?
Can we talk of universal economic laws? In other words, can these laws be applied to all times and contexts? This is the formalist–substantivist debate.
| View | Claim |
|---|---|
| Substantivist (Karl Polanyi, 1886–1964) | Capitalism emerged around 1500; land, labour and capital gradually turned into private property, and resources are allocated through markets. But pre-industrial economies largely relied on social mechanisms such as tradition, religion and the state to govern economic life. So homo economicus is not valid for pre-capitalist societies. |
| Formalist | Economic theory has universal validity. Despite the absence of price-determining markets and the incompleteness of information, ancient people were no different. |
| German Historical School | Economic theorems have no universal validity — its criticism of classical economics. There might be laws, but they are not like the laws of nature, not like Newton’s theory of universal gravitation. |
The debate has now faded to a great extent. The homo economicus assumption still dominates mainstream economics, yet behavioural economists have effectively shown its limitations.
8. HET and other disciplines
HET is in close contact with many disciplines — economics, philosophy, mathematics, sociology, psychology and theology:
- Philosophy: conceptual and methodological differences among economic thinkers.
- Mathematics: starting with William Petty’s (1623–1687) Political Arithmetic, mathematics is everywhere in economics and thus in HET.
- Sociology: linked with the relativist views — social context matters.
- Psychology: economics is ultimately about how human beings behave. Daniel Kahneman, a trained psychologist, won the Nobel Prize in economics in 2002.
- Theology: medieval thinkers, for example, were influenced by their faith.
9. Terms and dichotomies in HET
This is the working vocabulary of the rest of the course. Exam questions often turn on telling the pairs apart.
Theory versus model
Theory: a scientifically valid principle, or a set of principles, used to explain a fact or phenomenon. Unlike laws, theories can be verified or falsified. Model: a simplified form of economic reality, often using logical or quantitative relationships between variables.
Thesis, antithesis, synthesis
Derived from Hegel’s dialectical method. First stage: a concept is introduced as a thesis. Second stage: somebody comes with an antithesis opposing the thesis. Third stage: somebody unifies the first two, which is called the synthesis.
School of thought
An intellectual tradition maintained by a group of scholars who share a common characteristic view about how economies work — like institutional economics, Marxist economics, post-Keynesian economics. Some people, like Polanyi, are too unorthodox to be classified.
Methodology
Methodology is the study of the research methods employed by economists to explain economic phenomena.
| Methodology | Starting point |
|---|---|
| Deductive | Starts with developing a theory, followed by an examination of the facts to see whether they are consistent with the theory. |
| Inductive | Begins with particular observations and develops a theory that fits the facts. |
The German Historical School advocates inductive methodology instead of abstract theories and cherry-picked observations. Related positions:
- Methodological individualism: the analysis of social phenomena should start with the motivation of individuals.
- Methodological holism: emphasis on complex systems.
- Methodological pluralism: emphasis on different methodologies.
Joseph Schumpeter: scientific economists use techniques such as history, statistics and theory.
Positive versus normative economics
The distinction goes back to Nassau Senior and John Stuart Mill in the 19th century.
- Positive economics: based on testing certain objective and verifiable propositions.
- Normative economics: derives from an idea or perspective. “Minimum wage should be raised” — untestable.
Even positive economists often resort to normative judgments. There is indeed a synthesis of positive and normative economics called the art of economics: employ the methods of positive economics to come up with policy recommendations.
Microeconomics versus macroeconomics
| Field | Focus | Main school |
|---|---|---|
| Microeconomics | Decisions of individuals and firms to allocate resources; research on market forms such as monopoly and oligopoly. | Neoclassical economics |
| Macroeconomics | The economy as a whole, most at the national level: growth, inflation and unemployment. | Keynesians |
Theoretical versus applied economics. Theoretical economics constructs models to explain economic phenomena; applied economics applies those theories to real situations with evidence.
Orthodox versus heterodox economics. Similar usage: mainstream and non-mainstream economics. What is orthodox at one period may not necessarily be so at another. Some heterodox schools today: Austrian economics, post-Keynesian economics, Marxist economics, feminist economics. Today’s orthodoxy: neoclassical economics? Still too many variations — and behavioural economists outright reject the assumption of perfect rationality.
Economics and policy. Class question: to what extent can economic research affect policy making? Policies are made by governments, firms and other organizations; think of the climate change problem. Economic research is useful perhaps in the long run, and when things get unbearable for policy makers.
Exam practice
Summary and review
- Economics comes from oikonomia (oikos + nemein, household management). The discipline is young — about two centuries — while economic thinking is old.
- Modern economics means systematic complex analysis, formal modelling and empirical testing; pre-modern thinking was normative, based on faith and good management.
- Three periods: classical political economy (1776 to the 1870s; Smith, Ricardo, Malthus), neoclassical economics (late 19th to early 20th century; professionalization), and fragmentation (post-World War II).
- Professionalization markers: Smith treated political economy as a branch of moral philosophy; first chair in Naples in 1754 for Antonio Genovesi, first English chair for Thomas Malthus in 1805; momentum from the late 19th century; the 1873 crisis and the 1929 Great Depression showed laissez faire was not enough.
- HET studies past theoretical, methodological and analytical accounts of economic behaviours, policies, organizations and institutions; economic history studies economic phenomena in the past; HET is a marginal field sitting between economics and intellectual history.
- Why HET: to understand current theory (Smith’s invisible hand rejected by Keynes), to remember theory has a past and a future, to see varied worldviews and great minds’ mistakes, and for inspiration — Marx’s critique gained currency only after the 1930s.
- Cumulative view: contemporary theory incorporates all past contributions; Pigou’s “wrong opinions of dead men”; tied to positivism and modernization theory. Competitive view: economic thought does not develop along a single dimension.
- Positivism: knowledge is verified or falsified by logical analysis and empirical material; logical positivism (Vienna Circle, 1920s–1930s) crystallized the positive/normative distinction (first made by Nassau Senior); economics became a positive science especially after World War II.
- Popper: observations never verify a generalization (problem of induction); science proceeds by falsification. Kuhn: paradigms, four phases, two criteria for revolutionary achievements. Lakatos: hard core plus protective belt; success means predicting new facts.
- Context: relativist view (dominant before the 1950s) versus absolutist; the formalist–substantivist debate — Polanyi’s substantivism versus universal validity; the German Historical School’s rejection of laws like Newton’s; the debate has faded, homo economicus still dominates, and behavioural economics shows its limits.
- Other disciplines: philosophy, mathematics (Petty’s Political Arithmetic), sociology, psychology (Kahneman, Nobel 2002) and theology.
- Vocabulary: theory versus model; thesis–antithesis–synthesis (Hegel); school of thought; deductive versus inductive methodology; methodological individualism, holism and pluralism; Schumpeter’s history + statistics + theory; positive versus normative and the art of economics; micro (neoclassical) versus macro (Keynesian); theoretical versus applied; orthodox versus heterodox (Austrian, post-Keynesian, Marxist, feminist).
- Concluding remarks from the slides: economics is a dynamic discipline; neither current events nor professionalization alone explains its development; individual economists mattered; new ideas seldom lead to the total abandonment of the existing heritage; economics has become increasingly specialized and has incorporated mathematics and statistics into its methodology; both positive and normative economics have been important; future developments are difficult to predict.
- The course’s method questions: how and why we periodize history, how and why we use context, how and why we use an interdisciplinary approach, and what universals mean and why we focus on what we focus on.
Step-by-step examples
This ladder climbs in three stages: Easy fixes the vocabulary, Medium makes you compare the big views, and Exam level shows how to build short-essay answers. Each worked example reveals one step at a time — predict the next move yourself before you press the button.