Economic Schools of Thought: Crash Course Economics #14

Economic Schools of Thought: Crash Course Economics #14


Welcome to Crash Course Economics. I’m Adriene Hill.
And I’m Jacob Clifford. Now, believe it or not, we actually read
many of your comments on YouTube! First!
Some are productive, and others, not so much. This guy looks like Mark Cuban,
but not as attractive or rich. We’ve noticed that some people are disappointed we haven’t covered the different economic ideologies. You’re ignoring the Austrian School! What is this Keynesian trash? Well guess what, today we’re gonna talk about other schools of economic thought. [Theme Music] To understand these economic theories, we’re gonna have to jump into a little bit of history. In 1798, a British economist named Thomas Malthus argued that population growth would outpace food production, so, eventually, humans
will run out of food and starve. You wonder why some people call economics the “dismal science…” Well, Malthus was wrong. Dismally wrong. The world population has grown from one billion in his time to over seven billion today. And it turns out that the famines we have seen are largely manmade disasters that have very little to do with
our ability to produce food. But Malthus was writing at the beginning of the Industrial Revolution; he didn’t factor in advancements in technology, agriculture production, or transportation. So with the information he had, he was kinda right.
But he was still wrong. Economic theories are constantly being proven, disproven, and revised. The problem is, when these theories are wrong, millions of people can be adversely affected. Take Malthus. Some scholars combine his ideas with those of Charles Darwin and concluded that giving assistance to poor people and social programs like welfare are actually immoral. This is called Social Darwinism, and it’s completely wrong. Now, economics is not an exact science.
It aims to draw conclusions about human behavior without the benefits of labs or perfect control groups. Economic theories reflect different attitudes about human nature and those are likely to change over time.
Let’s go to the Thought Bubble. The founder of modern economics was
a Scottish philosopher named Adam Smith. In 1776, his book, The Wealth of Nations, was published. It was an organized discussion about production, markets, and economic theory. And it was tremendously influential.
Smith introduced the idea that a person following their own self-interest could end
up serving the common good. He also advocated free trade.
Many countries at the time had heavy tariffs which protected their domestic manufacturers at the expense of trade. A generation later, British economist David Ricardo
expanded on Smith’s ideas by introducing the theory of comparative advantage: the idea that two people or countries can both benefit from trade, even if one of them can produce more of everything. When both focus on what they’re best at and then trade, everyone benefits. Anyway, the field of economics grew, advancing
ideas like private property and free markets and then along comes the Communist Manifesto
in 1848. Rather than examining individual behavior, German philosophers Karl Marx and Friedrich Engels
looked at economic classes and argued that history was explained by the conflict
between workers and property owners. This process would inevitably lead workers
to overthrow their bosses, ushering in a new stateless and classless system called communism.
Marx followed this up with Das Kapital. Political movements spawned by Marxist
economics challenged Adam Smith’s view that individual self-interest serves the common good. The end result was two main camps:
free market capitalism supporting private property, and communism, advocating collective
ownership of the means of production. Thanks, Thought Bubble. Despite Marx’s challenge,
market-based economic theory continued to dominate through the end of the 19th century with contributions from French, British, and American economists. This body of thought is called classical economics,
and it was embodied in a book called Principles of Economics, published in 1890
by English economist Alfred Marshall. Marshall organized into fine concepts we still use today, like supply and demand and marginal utility, which we’re gonna get to soon, but as capitalism was expanding around=
the world, Marxist movements were, too. By the early 20th century, this battle for hearts and minds, along with political and social unrest in Europe, led to the establishment of the Soviet Union in 1922. As communism was maturing in the Soviet Union,
the Great Depression crushed the market economies of the world’s richest countries. It also dealt a devastating blow to classical economics.
The theories of Smith and Marshall didn’t have much to say about how something
like this could happen or how to fix it. The British economist John Maynard Keynes
proposed new answers in his 1936 book, A General Theory of Money, Interest, and Employment,
which basically launched the field of macroeconomics. Along with John Hicks, Keynes argued that
market economies don’t self-correct quickly because prices and wages take time to adjust. They claimed that during recessions it is necessary for the government to get involved using monetary and fiscal policy to increase output and decrease unemployment. Keynes wasn’t supporting communism, but his
views directly challenged classical economists, who saw government intervention as universally harmful for the economy. Now, eventually, Keynesian economics became
part of mainstream economic theory. See, I told you, economic theory changes over time! And all it took in this case was a catastrophic global depression. Keynes’ ideas, combined with the ever-present Marxist critique, opened the door to more and more government involvement. Since the Great Depression, many nations have pursued a political and economic ideology called socialism, although socialist ideas and policies have been around since the 19th century. In most cases, these economies allow for private property and markets, but also have government ownership of industry, significant regulation, and big public programs like universal health care. The Scandinavian countries, like Norway and
Sweden, they love these socialist policies. Now, the US has rejected many of these socialist ideas, but the US government, or at least the economists that advise politicians, are clearly in favor of using Keynesian economic
policies when the economy is in trouble. But as socialism and Keynesian economics expanded,
other groups continued to forcefully push for private property and free markets. The most
vocal was often the Austrian School of economics. They also have a very vocal fan base in our comments section. Friedrich Hayek and Ludwig von Mises, who were, unsurprisingly, from Austria,
argued that heavy state involvement has never produced the results it promised,
and that regulation and government tinkering is actually a problem, not a solution. Rejecting nearly all forms of fiscal and monetary policy, the Austrian School today argues the economy’s
just too complicated to manipulate. This backlash against government intervention
was carried forward in the US by Milton Friedman. Like the Austrians, Friedman advocated privatization of many functions that have been assumed by government, famously proposing school vouchers and deregulation of the economy. He also concluded that the Great Depression could be blamed on botched monetary policy, rather than some inherent fault of capitalism. The theories of Friedman and his followers
at the University of Chicago came to be called the Chicago school of economics. Friedman’s views got a huge boost in the 1970s.
At that time, inflation soared while output stagnated. Remember stagflation? A combination that Keynesian economics had trouble reconciling. Some macroeconomists drew on the insights of the Chicago school to claim that these events disprove Keynesian economics. Building on the ideas of Friedman, another theory of economics gained traction: monetarism. Whew, Stan! So many -isms! Monetarists focused on price stability and argue the money supply should be increased slowly and predictably to allow for steady growth. At about the same time, another theory called supply-side economics, or sometimes called trickle-down economics, entered the mainstream. Supply-side economists advocated deregulation and cutting taxes, especially corporate taxes. Mainstream economics today takes ideas from both classical economics, including monetarism, and Keynesian economics. This unified theory is sometimes called the new neoclassical synthesis, and, yeah, economists are bad at naming things, too. But debates about how and when to implement policies continue, and, remember, these are more than just intellectual classroom spats. These policies affect millions of people. The different reactions to the global recession in 2008 are a good example of this. Some economists suggested using Keynesian policies, namely deficit spending. Other economists suggested the more classical approach of reining in excess spending to reduce budget deficits, something called austerity. Believe it or not, economists are still fighting about which of these policies is the right approach and when to use them. We can all agree that Keynes was right
about at least one thing: when he said, “Ideas shape the course of history.” So, where are all these economic ideologies and theories gonna take us in the future? Most countries that once supported strict communism
like China and Cuba have moved toward capitalism. The only country that’s really sticking with it is North Korea, but they’re too isolated to be a real test case for an economic system. But this doesn’t mean that Marxism is dead. Many capitalist countries have adopted socialist looking programs. It appears the world’s economies are converging towards the middle. But in the end, it turns out it’s just
really hard to predict the future, especially when we’re talking about something
as complex as the world economy. Remember Malthus’ belief that we’re all gonna starve? Well, like Malthus, we don’t know what kind of
changes humanity’s gonna face in the future. If history has proven anything about economic thought, it’s that we should expect surprises that will upset our current economic models. Just like Malthus
couldn’t imagine that we’d all be alive today. Thanks for watching.
We’ll see ya next week. Crash Course Economics is made with
the help of these nice people. Feel free to comment on how great they are, too! Crash Course is made possible by your support at Patreon. You can help keep Crash Course free for everyone forever and get great rewards at patreon.com. Thanks for watching. We’re glad Malthus
was wrong and that you’re alive!

100 thoughts on “Economic Schools of Thought: Crash Course Economics #14

  1. "communism was maturing in the Soviet Union"? haha nice joke. Tyranny of Stalin and his gang is not a communism but more like state capitalism (+fascist dictatorship on top) calling itself a socialism… Guys, I love most of your videos, please correct this mistake. better say – "while Stalin was assassinating communists around the world and suppressing socialists movements…" 😉

  2. >A: Any socialism is bad
    >B: Scandinavia has some successful socialist policies
    >A: Nah, those just appear socialist, they're actually free market capitalist
    >B: Fine, let's implement them
    >A: But that's socialism

    The problem with labels

  3. As a famous man once said.. it all depends what you mean by Socialism. I think a more accurate description of the Nordic Block would be Social Democratic.

  4. 3:00 You forgot the part where communism killed over 100 million Russians and Chinese, and capitalism lifted billions out of abject poverty and starvation. It's an easy mistake to make, it's only historical fact, but you're right communism and capitalism are both equally valid economic systems.*

    *(eyes roll so far back into my head I can see my brain)

  5. Good to see all the communist apologists are here in force with the classic, "Communist country X wasn't really communist." argument, to bad personal interpretation doesn't bring back over 100 million dead Russians and Chinese.

    It's also nice to see this video be completely impartial by skipping the fact that communism has NEVER worked, and that capitalism has lifted billions out of poverty, but hey let's dwell on the fact that there was Great Depression in the 1930's brought on by "mean ole capitalism", while in Russia communism was just "maturing". I guess "maturing" is code for the extermination and murder of anyone who didn't want all of their property and life's savings seized by the government and redistributed to everyone else.

  6. You know, kudos to them to actually treat each aspect equally unfairly.
    Especially since it is so condensed I can appreciate it.

  7. Scandinavian countries have free market capitalist economies with social welfare programs. They aren't socialist nor do they have a socialist economy.

  8. the videos should focus on a little more in depth knowledge of the topics. otherwise, this is a great channel

  9. Trickle-down economics does not exist. This term has never been used and people who invented has never said things like "tax the rich less and the money will remain to the poor". It's wrong.

  10. They (Scandinavian Govs)are backing away from socialist systems but not the capitalist systems. Socialism and capitalism always lead to mass debt and welfare.

  11. Sorry, had to stop when you called Scandinavia socialist. I'm trying to be more informed on economics, not get confused

  12. As science and humans evolved economic theories change. There must have been hundreds of theories and they all made some sense at the time. But the only truth to economics is capitalism, the organic function of life, the will to power by any means necessary, money as power to purchase the finer things in life. The playboy mansion. Sleeping in till whenever. Eating exquisite foods. Lounging at the poolside. Reading Nietzche. Throwing parties. Getting wasted. Getting old. Dying. Returning to the eternal reoccurance.

  13. Either you are all brainwashed or very good propagandists, video is good but the content is biased towards something scary. Look for funding some where else.

  14. Austrians came before Keynes and they refuted him and socialists too. It's a shame if this video is not corrected.

  15. So I'm seeing that many in the comments don't realize that saying that a country pursues economically socialist policies is not at all the same as saying a country is socialist or is pursuing socialism… They never say Sweden is socialist or aims to become a socialist country – they say that the economic policies presented by Sweden tend to demonstrate favor for the economic school of socialism as opposed to Keynesian economics.

    Also, to those roasting economics as a science in the comments: Sciences that have to take into account the behaviors and interests of people are inherently more complex and leave more room for competing theories to remain relevant at the same time in history, and that doesn't make them any less of a science. I'm sorry that people don't behave as predictably as chemicals or forces – that doesn't mean you can undermine the sciences that study a less reliably predictable set of behaviors. Psychology, Sociology, Economics, and Linguistics are sciences – they're social sciences, which only makes them trickier, not less relevant.

  16. A modern capitalist is a strange animal who turns into a socialist when he needs government bailout to survive.

  17. good economists are turning millions in the markets..
    bad economists that were out competed by the first group are advising governments…
    even worst economists are teaching in schools and colleges… (not even the government wanted to hire them)
    you guys are even bellow that… making YouTube videos… lol…

  18. Please talk about Co work ops also. democratizing the work place like is done in the catalonia province of Spain and northern Italy.

  19. Social democracy found in Scandinavia is not socialist or market socialist (employees don’t own the majority of firms). It just has a large social security net.

  20. Just so we're all clear, "Trickle-down economics" is not another name for Supply-Side Economics, it is a name created by its opponents in order to discredit it. The name itself is a literal strawman, suggesting that Supply-Side proponents believe in the poor getting their money from the rich through possible higher wages. In fact the actual theory says that wealth is most effectively generated through investment, whether in the stock market or in new business. These large investments generally come from those with large amounts of capital, which is why supply-side proponents are in favor of lower corporate taxes, and income taxes, as well as being skeptical of "progressive" tax brackets because they have the effect of punishing people for making money as well as making it harder for high-income people to make meaningful investments.

  21. “When the people find that they can vote themselves money, that will herald the end of the republic.”
    – Benjamin Franklin

  22. Americans will never learn the difference between having social programs in a free market economy and socialism.

  23. Since when were Austrian thinkers forceful?

    They're for free market, which is inherently voluntary.

    Redistribution of wealth requires force and is not in any way voluntary 🙄

  24. Keynes is the reason we are still living with all the boom and bust cycles. Mises and his student Hayek were and still are right.

  25. Democrats running this channel : Keynesian economics was right about 1 things so were gonna spend the rest of this video trying to criticize Austrian economics instead

  26. Social Darwinism? Oh that’s WRONG, WRONG WRONG! Communism and socialism? Uh…. oh hey look! The Great Depression. Ugh come on.

  27. First of all, Scandinavian countries aren't socialist countries. They have very free markets. The only socialist things about them are their welfare and healthcare system. And yes, the economy will correct itself if it is left alone. That's the beauty of capitalism. An industry I'm familiar with is the auto industry. In modern days, there are tons and tons of regulations on vehicles due to leftist's stringent economic policies and regulations. Instead of letting consumers vote with their money, the government is forcing features like catalytic converters to produce fewer carbon emissions (which originally produced even more toxic fumes), mandated airbags in 1998, even though they were still fairly dangerous and experimental at the time. Anti-lock brakes were mandated in 2008, even though they are completely useless in many parts of the country, and even in the north, they are only necessary for icy conditions. Backup cameras were mandated in 2018, and many other mandates on vehicles were made so we have low-quality, underpowered, technology-packed mini SUVs dominating the market which cost far more than they should. What if people still got to choose what features they wanted in their cars? Cars would be far more reliable and much cheaper. Imagine buying a brand new car for only $2,000? The only car that is sold for that cheap is the Tata Nano from India, which would not be street legal in the US. Thanks, government intervention on the free market.

  28. First of all, Scandinavian countries aren't socialist countries. They have very free markets. The only socialist things about them are their welfare and healthcare system. And yes, the economy will correct itself if it is left alone. That's the beauty of capitalism. An industry I'm familiar with is the auto industry. In modern days, there are tons and tons of regulations on vehicles due to leftist's stringent economic policies and regulations. Instead of letting consumers vote with their money, the government is forcing features like catalytic converters to produce fewer carbon emissions (which originally produced even more toxic fumes), mandated airbags in 1998, even though they were still fairly dangerous and experimental at the time. Anti-lock brakes were mandated in 2008, even though they are completely useless in many parts of the country, and even in the north, they are only necessary for icy conditions. Backup cameras were mandated in 2018, and many other mandates on vehicles were made so we have low-quality, underpowered, technology-packed mini SUVs dominating the market which cost far more than they should. What if people still got to choose what features they wanted in their cars? Cars would be far more reliable and much cheaper. Imagine buying a brand new car for only $2,000? The only car that is sold for that cheap is the Tata Nano from India, which would not be street legal in the US. Thanks, government intervention on the free market.

  29. "Scandinavia loves socialism" is a false statement that all leftists like to pull out of their butts when confronted about how socialism has never worked. Oh, so you point out capitalist countries with high taxes and say it works? That ain't socialism, buddy!

  30. Really hard to belive that they are experts. When they said that scandinavia is rule by socialism, when there is nothing more capitalism that a country with free market

  31. I have two questions:

    At 3:18 the video says "The end result was two main camps: free market capitalism supporting private property, and communism, advocating collective ownership of the means of productions."

    1.) Is privat property the same thing as the means of productions.

    2.) If these are two different things, why weren't the two camps able to get along with each other. I mean, from todays perspective it seems standing to reason to unite both wishes by creating a system where if people work together they share their means of productions, but outside of their working time (in their privat time) they can buy and own their privat property. I mean that seems totally obvious, from todays perspective. How come, the people hundret years ago came to that conclusion?

  32. There are many sub-genres of Socialism, ranging from Anarchism to Social Democracies. While this is a video on economics, it would probably behoove you to learn the differences between these different viewpoints of Socialism

  33. Please make some lectures on international relations theories. you haven't yet touched some important political thinker. You guys provide good stuff. please keep going on.

  34. I may be a little bit late, but where can I get that "Crash courses" sticker for my laptop? looks cool and inspiring. LOL

  35. "… Right when he said that ideas shape the course of history" she said, a promptly rejected historical materialism for the bwnefit of idealism… Why does she get to decide who's right? I beg to differ actually, and if you dissagree, you are free to argue.

  36. The next paradigm in the economic movement is back towards a disinflationary Austrian model. Hard money like gold, however backed by cryptographic code. Any ideas??

  37. Bruh… "The only country still trying communism is North Korea, but they're not a real good example" Are you kidding me? Are you really going to the cliche, "Communism just hasn't been done right" meme? Give me a break! LOL!

  38. This was a waste of 10 minutes of my life. The video talked a whole lot about different economic theory but didn't explain ANY of them in any meaningful way. Also, forgot to mention that Communist countries' economic policies were mostly responsible for the mass starvation and murder of their people…to the tune of tens of millions.

  39. there’s something wrong with this, socialism doesn’t support private property, and the scandinavian countries follow market economies, or a social democratic ideology

  40. The main point is the proportion of difference in classes and wealth the least difference the best for transition but total equality is obsence and unpractical. Just like life there is male and female, in circuit there is positive and negative but the computer has least difference in voltage is more efficient than the high power differential machine in 18th century. Therefore the three laws govern the universe are conservation, portional, and consequential meaning there is no free thing but extreme different in wealth distribution or wrongly pricing leads to disuption, and every action there is a reaction oposite and proportional.

  41. The assumption that the productivity of industrial agriculture based on monocultures is higher than the productivity of traditional (polycultural, ecological) agriculture is fundamentally wrong. This assumption is based on humancentric, mechanistic and reductionist worldview (industrial paradigm), short termism of corporatocracy and organized ecological ignorance in the modern industrial education system. We know today that polycultural and ecological agricultural is much more healthy, sustainable and efficient in the long term. Monocultures combined with lots of GMOs and chemicals (fertilizers, pesticides) generally destroy the ecosystem and balance in the soil.

  42. Scandinavians are socialist in the same way Bernie Sanders is socialist. People in the comments section just need to get over that. However the U.S. is hugely socialist too, thanks to Keynes, the fossil fuel industry received $649 billion in government subsidies last year. America loves corporate socialism.

  43. Neoclassical theory is not a synthesis between Keynesianism and classical economics. It is the vulgar economics(as karl Marx called it) of leon Walras (and his acolytes) who came up with the idea of perfect competition in response to the ideas of the classical economists (with the exception of Ricardo's theory on international trade) who thought of capitalism not as an idealized system but actually analyzed capitalism. Notice how no principles classes teaches Ricardos/Smith theories on economic rent or pricing. They don't teach you Marx(yes Marx falls under the umbrella of classical economics) theory of the reserve army of labor or profit rate equalization.

  44. Notice under the Keynsean policies of Obama growth was sluggish bordering on a new round of stagflation cause by quantitative easing. When supply side was brought in my Trump's administration, growth sped up to breakneck speeds. For my money the debate is finished. Keynes was mostly incorrect. Of course, he did claim later that his theories were misapplied… I think.

  45. 1. Karl Marx
    -ruling class vs. working class (capitalism)
    -private ownership to collective ownership transition
    -abolishment of private property and classless and stateless community.
    – communism: all properties are owned by the public but controlled by the government.

    2. Adam Smith
    – a country's wealth is not determined by gold/silver but its GDP
    – specialization and division of labor (Plato)
    – capitalist economies are the most beneficial and productive to their societies.

    3. Thomas Malthus
    – human population will outweigh food production
    – did not consider advancement of technology

    4. David Ricardo
    – theory of comparative advantage: when both focus at what they're best at, and then trade, everyone benefits.

    5. Alfred Marshall
    – supply and demand and marginal utility

    6. John Meynard Keynes
    – if a country's investment exceeds its savings, it will cause inflation.
    – if a country's savings is higher than its investment, it will cause recession.

    *socialism – the means of producing and distributing goods is owned by a centralized government.

    *Monetarism – focused on price stability and argue the money supply should increase slowly and predictably to allow for steady growth.

  46. well, marxism is not communism and it is not socialism, you cause a lot of confusion because you just expresed the optics from US, that is the level from usa i guess

  47. People who say that socialism/communism never work tend to forget that capitalism has brought humanity to the brink of destruction in only a few hundred years. Early forms of socialism, however, (Native Americans and Africans) have been stable for thousands of years before colonization.

  48. Albert Winsemius and Lee Kuan Yew would like a word with the libertarians. Also, no Scandinavian country is socialist. Very few countries have been, and co-operatives like Mondragon are just about the only examples of socialism.

  49. Wow! Even these respectable economists think Scandinavia is socialist rather than social democratic? If they get those confused, I guess we can’t expect other people to know either. Just a recap:
    Socialism = Central planning
    Social democracy = Mixed economy (Free Market + Welfare State)

  50. I think India and Sri Lanka were clever why because they adopted mixed economy way back in the 1940's

  51. Not a good video. The explanation was very bad. Looks like u just reading the lines from book not explaining

  52. Economic theory is fundamentally based on scarcity which is ultimately flawed, our current economic structure is intrinsically flawed hence the problems. We don't live in a monetary reality but a technical one. We need a complete a new model especially with the rate at which our science and technology is growing

  53. Scandanavian countries are not socialist they're market economies with expansive welfare states(also long term unsustainable) and for the love of god no supply side economics is not the same thing as "trickle down economics".

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