Adam Smith: Many consider Adam Smith to be the founder of modern economics.  In his book published in 1776, An Inquiry into the Nature and Causes of the Wealth of Nations, Smith destroyed the mercantilist argument that a nation’s wealth comes from amassing gold and silver from a favorable balance of trade.  Rather, Smith thought that the wealth of nations comes from the productivity of its resources, productivity that is increased through specialization.  He also came up with the famous radical principle that an individual pursuing his or her self-interest provides opportunities for others, and that in pursuing self-interest individuals act as if guided by an “invisible hand” to promote the well-being of society.  When Ronald Reagan was elected president, many of his supporters wore Adam Smith neckties to inaugural festivities.

David Ricardo: After David Ricardo made his fortune in the financial markets of mid-19^th century England, he turned to economics.  His most important contribution was the principle of comparative advantage.  This powerful and not obvious principle is that everyone has a comparative advantage in some activity, the activity they are “least worst at.”  According to Ricardo, if everyone specializes in the activity in which they have a comparative advantage, and then trades with others, all will be made better off.  The principle of comparative advantage is often invoked by economists when they note the benefits of free and open markets within a country and across borders as well.  Comparative advantage also explains why Babe Ruth, the best pitcher in the American League in the late 1920s, specialized in hitting home runs after Boston traded him to the New York Yankees.

Alfred Marshall: Alfred Marshall taught at Cambridge University in England in the first part of the 20^th century.  He was one many economists at that time who contributed to the “marginalist revolution” in economics, which was about the idea that economic decisions involved weighing the benefits and costs of incremental moves.  His textbook was the standard in economics for about a century, and was used by Dr. Erwin Graue at the UI into the 1960s.  In your economics courses at the UI, you will soon become very aware of the fact that economists consider the word “marginal” the most important one in the dictionary.

John Maynard Keynes: If you walk down a street in Nampa or Caldwell and shout out the name John Maynard Keynes, someone will likely throw a tomato out the window at you.  Conservative people of Idaho would object to both his lifestyle and his economics. Many would argue that Keynes was the most influential economist of the 20^th century.  If not the most influential, he was surely the most colorful.  He was a member of the famous bohemian and anti-Victorian intellectual circle called the Bloomsbury group, which included such characters as Virginia Woolf, Lytton Strachey, and E.M. Forster.  In his book The General Theory of Employment, Interest, and Money, published during the Great Depression, Keynes argued for active action by the government to increase spending of money they didn’t have.  His legacy is something called Keynesian Economics, which advocates the use of government spending and taxation to stabilize the economy.  Liberals love Keynes.  Conservatives have trouble saying the word Keynes without a sneer on the face, even though Keynesian policy is almost irresistible to a politician of any political flavor.

Kenneth Arrow: Modern economics is firmly entrenched in the Western individualist tradition.  Market economies are an outgrowth of this.  But how should we make collective, social decisions?  What rules should we follow?  Economists before Arrow had done a good job of explaining the rules for rational individual choice, but had not done much in the area of collective choice.  Arrow, a Nobel Prize winner in economics, developed the theory that is often called the Arrow Impossibility Theorem.  All sciences have impossibility theorems.  You can’t destroy matter.  The entropy of a closed system is always increasing, etc.  But until Arrow, economics didn’t have an impossibility theorem.  Arrow proved that NO method of social or collective choice existed that could satisfy reasonable axioms of individual choice.  His efforts have stimulated enormous research into the theory of social choice.