The most striking thing about the Great Economists, starting with the father of economics, Adam Smith, is that they tackled the biggest challenges of the day and did not limit themselves to narrow questions that could be answered neatly. Adam Smith, for instance, weighed in on the American War of Independence when he timed the publication of his seminal work, The Wealth of Nations, to come out in 1776. In it, he urged the British government to stop fighting a ruinous war and instead trade with the former colony as equals.
His disciple, David Ricardo, similarly led efforts to promote international trade and openness through repealing the protectionist Corn Laws in the mid-19th century. Ricardo actually never met Adam Smith, but he learned his economics from The Wealth of Nations. After making a fortune as a stockbroker, Ricardo became bored and happened to pick up Smith's seminal book while on vacation and taught himself economics!
Both Smith and Ricardo were also actively engaged in making policy. All of the Great Economists were. Smith became the Commissioner of Customs for Scotland while Ricardo became a Member of the British Parliament.
When there’s a breakdown in consensus about the economy, globalization, and income inequality, that provides an opportunity for a battle of ideas to take place.
This tradition of the great thinkers playing an active role in policymaking continued with the later Great Economists of the 20th century who argued against the rise of communism and socialism. Joseph Schumpeter may be best known for coming up with the idea of 'creative destruction.' Schumpeter's concept helps us to understand how the biggest mobile phone maker just ten years ago was Nokia, which has since been out-competed by Samsung, Apple, and others. Arguably, his most influential book was Capitalism, Socialism and Democracy, which was part of the debate in the post-war period about the best system of economic organization.
Another example is the introduction of Social Security and other programs. They provided more of a social safety net, which changed the capitalism of Adam Smith's day to address the problems that were revealed by the Long Depression of the late 19th century and the 1930s Great Depression as well as the high levels of income inequality seen in the Gilded Age. The opening of markets, particularly in the 1980s under Ronald Reagan, was also influenced by Great Economists such as Milton Friedman and Friedrich Hayek, who were advocates of the free market.
All of this means that the capitalist system has undergone significant change during the past 250 years. And today, the system needs to be looked at again to make it suit the needs and challenges of the 21st century.
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