6 Economists Everyone Should Know

Sure, the next time you're laid off, salaried down, underbudgeted, or wearing hand-me-downs, you could blame the economy. But why pick on the economy when you can pick on the economist instead?

1. Adam Smith (1723 - 1790)

Ever felt a push from behind on your way to work, but when you turned around no one was there? It was probably Smith's "invisible hand," the force that leads individuals pursuing self-interest to provide useful goods and services for others. Champion of the free market, Smith [wiki] pretty much founded economics as a systematic discipline, and his ideas echo through the profession to the present day. If you don't believe in economic forecasting, read Smith's masterwork, The Wealth of Nations (1776). Smith, a native Scot, argued that Great Britain couldn't afford to hold its rebellious American colonies - an impressive conjecture considering Britain's world domination at the time.

2. David Ricardo (1772 - 1823)

Ricardo [wiki] became the poster boy for middle achievers everywhere when he came up with the idea of comparative advantage. He showed how free trade allows countries to specialize in what they do best - even if they're not very good at anything. The same principle explains why Michael Jordan doesn't fix roofs, even though he might be better at it than many roofers; it's more efficient for him to focus on basketball. Disinherited for marrying outside his family's Jewish faith, Ricardo was originally a successful banker in London, then a mamber of Parliament, before he became an economist. In his "Essay on the Influence of a Low Price of Corn on the Profits of Stock," Ricardo presented the law of diminishing returns, which explains how adding more labor and machinery to a piece of land (or other fixed asset) after a certain point is just unproductive.

3. John Maynard Keynes (1883 - 1946)

Before Keynes [wiki], economics was in its classical phase. After him, it was in its Keynesian phase (just as there was Newtonian physics before Albert Einstein came along). The Great Depression convinced Keynes that the government had to engage in deficit spending to combat unemployment, a major break from the economic thinking of the time. He first became well known after World War I when he quit his British Treasury job, complaining that the Treaty of Versailles would wreak economic havoc. (He was right.) He also helped set up the system of fixed exchange rates used for decades after World War II. Unlike the majority of economists, Keynes led the life of a celebrity: he married a Russian ballerina, drank Champagne with literary figures, and made a fortune in the stock market. Keynes once said, "I would rather be vaguely right than precisely wrong," which may account for continued arguments between "new Keynesian" and "new classical" economists.

4. Joseph Schumpeter (1883 - 1950)

Scumpeter [wiki], born in Austria, reportedly vowed to become the best economist, horseman, and lover in Vienna - and later regretted not meeting the horseman goal. He argued that economists' traditional idea of competition (similar companies competing on price) was much less important than "creative destruction," whereby entrepreneurs create new products and industries. He predicted that capitalism would be undermined by its own success. But unlike Karl Marx, Schumpeter didn't look forward to the system's demise. He wrote, "If a doctor predicts that his patient will die presently, this does not mean that he desires it."

5. John Kenneth Galbraith (1908 - 2006)

Galbraith [wiki] once said, "The only function of economic forecasting is to make astrology look respectable." A prolific author and adept debater, Galbraith stands among the economists best known outside the economics profession. The Canadian-born Galbraith moved to the United States in the 1930s and worked as a price controller in World War II, a Harvard professor, an advisor to President John F. Kennedy, and eventually a U.S. ambassador to India. A persistent concern of his long career has been with corporate power. In such books as The Affluent Society (1958) and The New Industrial State (1967), he argued that big companies have little to fear from competitors and exercise lots of influence over consumers. Not everyone liked the thesis, of course; critics have pointed out that big companies sometimes lose market share and go out of business.

6. Milton Friedman (1912 - 2006)

Friedman [wiki] advocated free-floating exchange rates, school vouchers, the shift from the draft to a volunteer military, and for doctors to be allowed to practice medicine without a license. A proponent of free markets and limited government, Friedman challenged the Keynesian ideas that dominated economics in the decades after World War II and instead supported monetarism, an emphasis on the role of money in the economy. Born to immigrants in New York City, Friedman spent much of his career at the University of Chicago. In 1976 he won the Nobel Prize for economics for, among other things, "his demonstration of the complexity of stabilization policy" - meaning, why government has so much trouble keeping the economy on an even keel. His fame, however, only grew. In 1979 Friedman's book Free to Choose (coauthored by his wife and accompanied by a public-television series) reached a worldwide audience.

From mental_floss' book Condensed Knowledge: A deliciously Irreverent Guide to Feeling Smart Again, published in Neatorama with permission. Original article written by Kenneth Silber and Alexei Bayer.

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