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Economic Affairs
13 June 2025
Labour Market
14 July 2025
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Studying economics especially at university can be a sterile and lifeless endeavour. In four out of five classes, you will essentially just go from one mathematical model, which attempts to represent some aspect of economic life, to the next mathematical model, which attempts to represent a different aspect of economic life. The mathematical, model-based approach is by no means without merits. The problem is that it comes with high opportunity costs: it crowds out many other things.
One of its casualties is the fact that economics, as a discipline, has forgotten its own history. I studied eco-nomics for six years but learned virtually nothing about why we were doing things the way we did. Where did this approach come from? Had economics always been this way? Are there now, or were there ever, any alternative approaches? The names of prominent economic thinkers sometimes made cameo appearances, but only when a formula or a graph was named after them.
That is why Mark Skousen’s book The Making of Modern Economics, which is about the lives and contributions of the great economists from Adam Smith to Milton Fried-man, was such a revelation to me at the time. (It was first published in 2001; I must have discovered it four or five years later.) It managed to bring economics to life, presenting it as a battle of ideas rather than a succession of formulas.
Eamonn Butler’s book An Introduction to Schools of Economic Thought can fulfil a similar role today. Butler’s approach is somewhat different from Skousen’s: rather than focusing on individual economists, Butler groups them together into major schools of economic thought.
A school of thought, in this context, is not simply a bunch of people who share common research interests, or who favour similar economic policies (although they may do that as well). They often differ on a more fundamental level. They differ on questions such as the following:
In short, to say that X and Y subscribe to different schools of economic thought does not just mean that they dis agree on whether the additional rate of income tax should be abolished, or on whether Britain should rejoin the European Economic Area. (Members of different schools. of thought may well agree on those issues – if for different reasons.) What it means is that they differ on a more general level, in how they think about economics.
Some schools of thought are complementary: a member of the Public Choice School or Virginia School, for ex-ample, can also be a member of the Chicago School. Others are mutually exclusive: a member of the Austrian School, for example, cannot also be a Marxist. In other cases, it is possible to straddle a divide, but it would involve some tension. Some are rivals, some are allies, some are friendly. rivals, some are orthogonal to each other.
Eamonn Butler is, of course, not a detached, impartial observer in all this. But while the reader will prob-ably be able to guess where Butler’s sympathies lie, he nonetheless represents each school of thought accurately and fairly. His aim is to provide a meta-level overview of these schools, not to recruit the reader into any one of them.
The IEA is not a detached, impartial observer either, The list of IEA authors over the years contains many of the leading lights of the Austrian School (Friedrich Hayek, Israel Kirzner), the Chicago School (Milton Friedman, George Stigler, Ronald Coase, Gary Becker) and the Public Choice School (James Buchanan, Gordon Tullock). None-theless, while individual IEA staff members or authors may well identify with one particular school of econom-ic thought or other, the IEA as such has never been ‘an Austrian Economics think tank’, ‘a Chicago School think tank’ or ‘a Public Choice School think tank’. It is a broad church in the parish of Classical Liberalism, which people can reach via Chicago, Vienna, Virginia, or indeed from plenty of other directions.
KRISTIAN NIEMIETZ
Editorial Director, Institute of Economic Affairs
Eamonn Butler is Director of the Adam Smith Institute, one of the world’s leading policy think tanks. He holds degrees in economics and psychology, a PhD in philosophy and an honorary DLitt. In the 1970s he worked in Washington, DC, for the US House of Representatives, and taught philosophy at Hillsdale College, Michigan, before returning to the UK to co-found the Adam Smith Institute. He has won the Freedom Medal of Freedoms Foundation at Valley Forge, the UK National Free Enterprise Award and the Hayek Institute Lifetime Achievement Award; his film Secrets of the Magna Carta won an award at the Anthem Film Festival; and his book Foundations of a Free Society won the Fisher Prize.
Eamonn’s other books include introductions to the pioneering economists Adam Smith, Milton Friedman, F. A. Hayek and Ludwig von Mises, and primers on a wide range of topics, including capitalism, classical liberalism, democracy, economic inequality, public choice, taxation, trade, the Austrian School of Economics and great liberal thinkers. He has also published The Condensed Wealth of Nations and The Best Book on the Market, and is co-author of Forty Centuries of Wage and Price Controls and a series of books on IQ. He is a frequent contributor to print, broadcast and online media.
Contents
Foreword
Studying economics especially at university can be a sterile and lifeless endeavour. In four out of five classes, you will essentially just go from one mathematical model, which attempts to represent some aspect of economic life, to the next mathematical model, which attempts to represent a different aspect of economic life. The mathematical, model-based approach is by no means without merits. The problem is that it comes with high opportunity costs: it crowds out many other things.
One of its casualties is the fact that economics, as a discipline, has forgotten its own history. I studied eco-nomics for six years but learned virtually nothing about why we were doing things the way we did. Where did this approach come from? Had economics always been this way? Are there now, or were there ever, any alternative approaches? The names of prominent economic thinkers sometimes made cameo appearances, but only when a formula or a graph was named after them.
That is why Mark Skousen’s book The Making of Modern Economics, which is about the lives and contributions of the great economists from Adam Smith to Milton Fried-man, was such a revelation to me at the time. (It was first published in 2001; I must have discovered it four or five years later.) It managed to bring economics to life, presenting it as a battle of ideas rather than a succession of formulas.
Eamonn Butler’s book An Introduction to Schools of Economic Thought can fulfil a similar role today. Butler’s approach is somewhat different from Skousen’s: rather than focusing on individual economists, Butler groups them together into major schools of economic thought.
A school of thought, in this context, is not simply a bunch of people who share common research interests, or who favour similar economic policies (although they may do that as well). They often differ on a more fundamental level. They differ on questions such as the following:
- What is economics?
- Is economics more like a natural science, such as physics or chemistry? Or is it more like a social science, such as political science or history?
- Should economics aim to be value-neutral? Or should economists concern themselves with questions of ethics and morality?
- What is the appropriate unit of economic analysis? Is that the individual, presumed to be an autonomous agent? Or is it a collective, such as a social class or power structure?
- To what extent should economics be a self-contained discipline, and to what extent should it borrow from others, such as psychology? Should economists narrowly focus on their bread-and-butter topics, such as GDP growth, employment, inflation and productivity? Or can economic logic be usefully applied to social phenomena, such as crime and family structure, which we do not usually think of as ‘economics’?
- If I want to be an expert in the British economy of the 2020s, do I need to know much about British culture, politics, history and institutions? Or can an outside observer attain the same level of expertise, just by studying the relevant economic data?
In short, to say that X and Y subscribe to different schools of economic thought does not just mean that they dis agree on whether the additional rate of income tax should be abolished, or on whether Britain should rejoin the European Economic Area. (Members of different schools. of thought may well agree on those issues – if for different reasons.) What it means is that they differ on a more general level, in how they think about economics.
Some schools of thought are complementary: a member of the Public Choice School or Virginia School, for ex-ample, can also be a member of the Chicago School. Others are mutually exclusive: a member of the Austrian School, for example, cannot also be a Marxist. In other cases, it is possible to straddle a divide, but it would involve some tension. Some are rivals, some are allies, some are friendly. rivals, some are orthogonal to each other.
Eamonn Butler is, of course, not a detached, impartial observer in all this. But while the reader will prob-ably be able to guess where Butler’s sympathies lie, he nonetheless represents each school of thought accurately and fairly. His aim is to provide a meta-level overview of these schools, not to recruit the reader into any one of them.
The IEA is not a detached, impartial observer either, The list of IEA authors over the years contains many of the leading lights of the Austrian School (Friedrich Hayek, Israel Kirzner), the Chicago School (Milton Friedman, George Stigler, Ronald Coase, Gary Becker) and the Public Choice School (James Buchanan, Gordon Tullock). None-theless, while individual IEA staff members or authors may well identify with one particular school of econom-ic thought or other, the IEA as such has never been ‘an Austrian Economics think tank’, ‘a Chicago School think tank’ or ‘a Public Choice School think tank’. It is a broad church in the parish of Classical Liberalism, which people can reach via Chicago, Vienna, Virginia, or indeed from plenty of other directions.
KRISTIAN NIEMIETZ
Editorial Director, Institute of Economic Affairs
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About the Author
Eamonn Butler is Director of the Adam Smith Institute, one of the world’s leading policy think tanks. He holds degrees in economics and psychology, a PhD in philosophy and an honorary DLitt. In the 1970s he worked in Washington, DC, for the US House of Representatives, and taught philosophy at Hillsdale College, Michigan, before returning to the UK to co-found the Adam Smith Institute. He has won the Freedom Medal of Freedoms Foundation at Valley Forge, the UK National Free Enterprise Award and the Hayek Institute Lifetime Achievement Award; his film Secrets of the Magna Carta won an award at the Anthem Film Festival; and his book Foundations of a Free Society won the Fisher Prize.
Eamonn’s other books include introductions to the pioneering economists Adam Smith, Milton Friedman, F. A. Hayek and Ludwig von Mises, and primers on a wide range of topics, including capitalism, classical liberalism, democracy, economic inequality, public choice, taxation, trade, the Austrian School of Economics and great liberal thinkers. He has also published The Condensed Wealth of Nations and The Best Book on the Market, and is co-author of Forty Centuries of Wage and Price Controls and a series of books on IQ. He is a frequent contributor to print, broadcast and online media.
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