As I relaunch this blog, I thought it would be both fun and insightful to begin with an exploration of the different schools of economic thought. Economics, as a science and a system for predicting and explaining behavior, has evolved over centuries. Since the 1970s, the United States—and much of the world influenced by its economic dominance—has largely standardized around a theory known as Neoclassical Economics. This framework can be characterized as “bottom-up,” starting with the individual and their transactions. It seeks to analyze the psychological and social foundations of these transactions, treating macroeconomics as an aggregation of all microeconomic activity. Money, within this framework, is often treated as property or a commodity, aligning economic analysis closely with accounting and quantitative models focused on financial resources.
In contrast, I tend to align with Modern Monetary Theory (MMT), which takes a “statist” or top-down perspective. MMT starts with the idea of the nation-state as a collective entity, analyzing how aggregate actions drive individual transactions in a capital-based economy. It frames money as a public resource rather than private property and emphasizes “Functional Finance,” which studies how nations mobilize resources through both private markets and public processes to provision goods and services for society.
MMT could also be characterized as approaching economics more from a social science perspective. While Neoclassical Economics often emphasizes mathematical modeling and quantifiable data, MMT incorporates broader sociopolitical dynamics into its framework. For example, it examines how public spending influences social structures, employment, and equity within a society. This social science perspective means viewing the economy not as a neutral system of transactions but as a set of relationships deeply embedded in political and cultural contexts. By integrating these human and institutional factors, MMT offers a lens to evaluate economic policy not just in terms of efficiency or growth but also in terms of its impact on societal well-being and collective outcomes.
Examining these two contrasting approaches, along with other systems that have evolved over time, offers an opportunity to challenge the mainstream narrative and explore alternatives to the economic frameworks we may have been exposed to in school, political debates, or even at university. My hope is that this discussion illuminates the diversity of economic thought and expands our understanding of the possibilities for how we approach economics.
Further Reading
- Neoclassical Economics: Mankiw NG. Principles of Economics. 9th ed. Boston: Cengage Learning; 2020.
- Modern Monetary Theory (MMT): Kelton S. The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy. New York: PublicAffairs; 2020.
- Behavioral Economics: Thaler RH, Sunstein CR. Nudge: Improving Decisions About Health, Wealth, and Happiness. New York: Penguin Books; 2009.
- Classical Economics: Smith A. An Inquiry into the Nature and Causes of the Wealth of Nations. London: W. Strahan and T. Cadell; 1776.
- Marxist Economics: Marx K. Capital: Critique of Political Economy. Vol. 1. Moscow: Progress Publishers; 1867.
- Austrian Economics: Mises Lv. Human Action: A Treatise on Economics. New Haven: Yale University Press; 1949.
- Ecological Economics: Daly HE. Steady-State Economics: Second Edition with New Essays. Washington, DC: Island Press; 1991.
- Feminist Economics: Nelson JA. Economics for Humans. 2nd ed. Chicago: University of Chicago Press; 2018.
Scroll the Table to the right to see other theories
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