Neoclassical Economics
The dominant mainstream paradigm since the 1870s marginalist revolution. Rational agents, equilibrium, marginal analysis, and mathematical formalization define its approach.
Sub-topics
The 1870s revolution that replaced labor-based value with subjective marginal utility. Jevons, Menger, and Walras independently published in 1871-1874, founding neoclassical economics.
Principles of Economics (1890) synthesized classical and marginalist thought. Introduced supply-and-demand diagrams, partial equilibrium, consumer surplus, and elasticity.
Elements of Pure Economics (1874) formalized general equilibrium — all markets clearing simultaneously through a system of equations. The mathematical foundation of neoclassical theory.
Introduced Pareto optimality — a state where no one can be made better off without making someone worse off. Also discovered the 80/20 power-law distribution of wealth.
Walras's vision formalized by Arrow and Debreu (1954): all markets reach simultaneous equilibrium. Mathematically elegant but criticized for unrealistic assumptions about perfect information and rationality.
The theory of rational individual choice: consumers maximize utility, firms maximize profit, markets clear at equilibrium prices. The core of mainstream economics textbooks.
The study of how to evaluate social well-being. Pareto efficiency, the two welfare theorems, and cost-benefit analysis form its core — but questions of equity remain contentious.
Milton Friedman's counter-revolution (1960s-1980s). Inflation is always and everywhere a monetary phenomenon. Central banks should target money supply growth, not fine-tune with fiscal policy.
The University of Chicago tradition: Friedman, Stigler, Becker, Lucas. Known for price theory, rational expectations, efficient markets, and skepticism of government intervention.