Economic theory - What is it? characteristics, examples, and more

Economic theory - What is it? characteristics, examples, and more
Posted on 14-03-2022

Economic theory

Set of principles that seek to interpret economic reality.

What is an economic theory?

An economic theory is a set of principles or general statements that seek to interpret economic reality. Its objective is to develop lines of thought with the intention of explaining an economic problem at a given historical moment.

It distinguishes 2 approaches: microeconomics, which studies a specific production unit and individual consumer behavior, and macroeconomics, which analyzes the economic variables of a region, a country, or the world.

Characteristics of an economic theory

An economic theory is characterized by the following:

  • Provides explanations about the behavior of economic variables, such as inflation, interest rate, exchange rate, in relation to various economic agents such as family, company, or State.
  • It allows the analysis of economic situations that can manifest at a global level (macroeconomics) or at a more reduced level (microeconomics).
  • It presents various fields of study that accompany the current historical economic moment. This is how economic psychology or experimental economics, among others, have been developed.
  • It gives rise to measurement, statistical and econometric tools, which allow a deeper understanding of economic variables, facilitating decision-making.

Examples of economic theories

classical theory

This theory bases its positions on the empirical study of reality, formulating conceptual models through which natural laws are enunciated.

Its main exponents were Adam Smith, considered "the father of economics", David Ricardo, and Jean-Baptiste Say.

The areas of interest of this theory were the groups or classes of individuals, the study of the wages received by workers, and the wealth of nations through the generation of value not paid to the worker, which was received by the employer or capitalist. ( capital gain ).

The different schools of this theory considered frequent types of problems, developing lines of thought to explain them.

Marxist theory

Created by the philosopher, sociologist, and economist Karl Marx, this theory is based on the search for equality of social classes, where the proletariat should have the same benefits and rights as the rest of society.

In addition to eliminating social classes, the theory proposed that the proletariats govern a state under the socialist system so that the necessary changes can be made that lead to a more just and egalitarian society.

Keynesian theory

Developed by John Maynard Keynes. This economist and his school argued that government intervention could stabilize the economy by increasing employment and production levels, by increasing public spending in periods of unemployment.

neoclassical theory

It emerged in the mid-nineteenth century as a reaction to the classical school. His main contribution was the marginal theory of the value of a good, which exposes the increase in the total utility of a good when consuming an additional unit of it.

Its field of action is the individual economic units (people, companies, etc.), that is, microeconomics.

 

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