Austrian Economics

Belief: Economic phenomena are the result of actions by the individual.

Policy recommendation: Reduce government intervention and decrease the influence of the central bank.

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Behavioural Economics

Belief: The economy is navigated by human beings who are imperfect participants; therefore creating a dynamic, complex and uncertain path.

Policy recommendation: To effectively manage the economy, we must first understand the relationship between human psychology with money, markets and the economy.

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Classical Economics

Belief: Free markets will achieve an efficient allocation of resources as a result of the price mechanism and invisible hand.

Policy recommendation: The government should take a laissez-faire approach and let the market work by itself … unless they have to correct market failures.

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Keynesian Economics

Belief: Aggregate demand determines employment and there is no guarantee that, in a free market, demand will be high enough for full employment.

Policy recommendation: The government must counter the business cycle by managing aggregate demand, and they must do this by, mainly, using fiscal policy.

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Marxist Economics

Belief: A capitalist economy is flawed and self-destructive; the capitalist class will inevitably become far wealthier than the working class.

Policy recommendation: The working class should revolt and establish socialism.

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Monetarist Economics

Belief: As the economy grows, the money supply should grow in order to keep prices general stable (or allow them to rise slightly) otherwise falling prices will encourage consumers to stop spending now in the hope of spending in the future when goods are cheaper.

Policy recommendation: The government must use monetary policy to control inflation.

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Neoclassical Economics

Belief: Agents are rational self-interested utility or profit maximisers and act in accordance with relevant constraints … this leads to an optimal allocation of resources.

Policy recommendation: The government should take a laissez-faire approach and leave the economy to work by itself … unless they have to correct market failure.

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New Classical Economics

Belief: Rational agents make optimal decisions and firms maximise profits, but the economy is susceptible to real shocks like unanticipated policy changes, technology advances and changes the supply of raw materials.

Policy recommendation: The government should take a laissez-faire approach and leave the economy to work by itself.

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New Keynesian Economics

Belief: Agents are rational but markets are imperfect due to such phenomena as ‘sticky prices’, and these imperfections can cause market failure and recessions.

Policy recommendation: The government should use monetary policy to stabilise the economy.

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Post-Keynesian Economics

Belief: Business cycles are driven by fluctuations in investment and this comes as a result of inherent instabilities in the capitalist system.

Policy recommendation: The government must counter the business cycle by managing aggregate demand, and they must do this by, mainly, using fiscal policy.

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