The Glade 4.0

Recently, my interest in economics has been on the rise. I just finished reading Economics in One Lesson, by Henry Hazlitt, which seems to be primarily a condemnation of Keynesian economics. One thing that struck me was the very last chapter. The book was originally written around 1946, and a later edition of the book, circa 1978, added a chapter called "The Lesson After 30 years". In this chapter, Hazlitt mentions the recent, at the time, backlash against Keynesian beliefs. I thought this rather strange, since looking at current times, the economy is rife with talk of stimulus, bailouts, quantitative easing, and other government interventions in the economy.

Since I'm obviously missing things that happened between 1978 and 2010+, I did what I usually do, I went to Wikipedia. I found an article http://en.wikipedia.org/wiki/2008%E2%80 ... resurgence, which talks about the Asian market crashes in the late 90s, and the US recession starting in 2007, leading to a rejection of Austrian economics.

I'm looking for a broader understanding of the schools of thought in Economics. I am aware of two schools of economics: Austrian and Keynesian. Are there just these two? How does these schools relate to the basic rules of economics I learned about in school, ie the law of supply and law of demand? Are they just more advanced applications of these rules, or do they alter or supplant the rules in any ways?

I know we have proponents of both schools here; what are your opinions on the history of economics related to your favored philosophy? In the last century, economists seem to go back and forth between them, with every bad event being blamed on whichever school was popular at the time, and causing a resurgence in the opposite school. How do you feel about that? If your school fell out of popularity during a certain period, what do you think were the results of that? If people had continued along the same lines and not switched policies, do you think that the results would have been different?

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I have to disagree with Wikipedia that Keynesian policies were resurrected only in 2007 and 2008, the Fed has always gone with that by having a target inflationary rate for the economy and injecting liquidity when it felt it wouldn't meet those goals.

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"...but there exists also in the human heart a depraved taste for equality, which impels the weak to attempt to lower the powerful to their own level and reduces men to prefer equality in slavery to inequality with freedom." - De Tocqueville

There is Economics, and then there is Economics. The field is wide, extraordinarily fluid, and complex. At this point, it is extremely difficult to separate Political Economy from Economics; you might as well consider the terms synonymous, even if one has its origins in moral philosophy and the other its origins in the realities of trade and commerce. And, to be honest, the 20th Century doesn't really help.

Wikipedia is actually a very good place to start; particularly, you want to mine the bibliographies on the following entries for books and journal material to read on the matter.

Mainstream Economics

Heterodox Economics

Microeconomics

Macroeconomics

Real Business Cycle Theory

By and large, beyond any primer on Keynes and Keynesianism and von Mises and the Austrian school, the above topics and their bibliographies will get you headed in the right direction; that is, towards a broad understanding and knowledge pool about Economics as a discipline. A lot of the material on any of these topics is going to be balderdash. Quite simply, as a discipline, economics makes American politics look simple.

Microeconomics and Macroeconomics will most closely align with any classes you had in high school or in college for non-Economics majors; most business majors get the crap surveys of Economics that don't really explain why all of this is so complex. And it's a soft science, which means feelings and instinct matter to a lot of authors.

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Whenever there's a crisis, current policies fall out of favor and the people demand change. It is unsurprising to me that economic policy swings as well. Same reason power swings back and forth between political parties.

I think part of the problem is that the very basic economic principles are so very easy to understand. The result is the masses "understand economics" and thus policy makers can sell them on an approach using very basic arguments. If it felt far more complicated, folks would, I think, defer to experts rather than form opinions based on what they think makes sense.

Then there's the other side, where you have policy makers who think they get it making decisions.