From the history of economic thought(grades 6/7)

Economics as a science has its roots in the early Greece and Rome.First it was considered as a branch of domestic science (home economics) dealing with such matters as the management of slaves and the allocation of manure.

Economics was not considered a separate discipline until the 19th century, and it is the Scottish philosopher Adam Smith who is often cited as the father of modern economics. In 1776 Adam Smith published his work «Inquiry into the Nature and Causes of the Wealth of Nations». Adam Smith and his followers Robert Malthus and David Ricardo represent the first school of economic thought - The Classical School. The main idea of the Classical school was that markets work best when they are left alone, without interference of government.Laissez fair could and should replace government regulation in economics. The economic system is a self-regulating mechanism, and the price mechanism acts as a powerful 'invisible hand' to allocate resources towhere they are best employed.

The classical doctrine dominated economic thinking for the next 150 years. It was first seriously challenged by the great English economist Lord John Maynard Keynes. Keynes and his followers argued that the economic system was not self-adjusting.Without continued government intervention the economic system couldn’t achieve full employment of labour and other resources. That’s why Keynes advocated government’s use of fiscal and monetary policies to stimulate economic demand and growth andmitigate the negative effects of recessions and depressions.

Changes in economic thought have always accompanied changes in the economy. Contemporary economic thought deals largely with the issues of globalization and the emergence of a global economy. Building on new discoveries, economic thought may be on the road to achieving a new level of understanding.