Question

"History of Economic Thought" short answer question

Explain a major strength and a major weakness of each of the Classical, Marginalist (Neoclassical), Institutional, and Keynesian schools of economic thought.

Answer 1

In classical theory, it was an affirmative self regulatory system governed by the free market economy principles. The idea of commin good was recognised which should be provided by the state. The drawback was the assumption of always reaching full emploment in the long run.

In neoclassical theory, it combined both classical and keynesian theories which means features from both models had been used to stipulate the economic conditions whie drawback was that it concentrated on microeconomics nd macroeconomic theory was not given enough attention.

In institutional theory, there are four concepts which are combined; rational choice, historical, socialistic and discursive institutionalism. Its strength is to merge more than one phenomenon to explain an economic situation rather than relate to one concept only. Its drawback is that it explains only domestically inclined issues and not international interactions are given importance.

In keynesian theory, its strength was the role of government to stimulate the economy and importance of demand side of the market while weakness is that most of the concepts are only applicable for short run and not long run analysis.