An Examination of Critical Theories of Finance from Adam Smith to the Present Day
Chapter 12: A Brief Digression on Later Developments in Economics and Finance
It is useful to pause at this stage and summarily survey the directions in which economics, and its junior academic discipline of finance, were to move after the 1930s. This is a convenient point at which to view these later developments because, as will be apparent, the essential ideas around which economics and finance were to develop after the Second World War were more or less all known and argued about by the time of that war. They all derive from a period when finance had been sidelined by the débâcle of 1929, and government spending, through a greatly enhanced public sector, stabilised the economy. The leading ideas in economics and finance came to be the ideas of economists who worked in or advised governments and government agencies when governments used the far-reaching influence on the economy of the public sector to manage the economy, albeit with increasingly mixed results as finance re-emerged. However, those ideas are increasingly inadequate for a proper understanding of the operation of an economy dominated by finance, such as the main capitalist economies today. That understanding was contained in the literature to which the rest of this book is devoted. Finance, as an academic discipline, owes its main ideas to the monetary economics of Anne-Robert-Jacques Turgot, David Ricardo, John Stuart Mill, Alfred Marshall and Dennis Robertson, the French/Swiss economic theorist Léon Walras, and John Maynard Keynes. From Turgot, Ricardo, Mill and Robertson, the finance discipline obtained the idea that there exists in...
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