REVIEW AND ANALYSIS 39 in delivering optimal outcomes, with the focus shifting to the concept of marginal utility. For example, a person would choose to spend money on goods or a service dependent on the marginal utility they receive from consuming one more unit of the goods or service. Value in this scenario depends on the final degree of utility. Key neoclassical economists include Alfred Marshall, William Stanley Jevons, Leon Walras and Irving Fisher. In the early 20th century, Cambridge University economist John Maynard Keynes decried the classical perspective. He argued that markets do not always self-correct and aggregate demand is the most important driving force in an economy, measured as the sum of spending by households, businesses and the government. Keynesian Economics By the 1960s, Keynesian economics was the prevailing economic model. In the Keynsian model government intervention through fiscal policy (government spending and taxation) and monetary policy (central bank interventions) became necessary to address economic downturns. Monetarism This gained prominence in the 1970s, refuting key elements of Keynesian economics and bringing forward what was at the time a radical new approach based on neoclassical principles. Key economists including Milton Friedman, Anna Schwartz, Karl Brunner and Allan Meltz, held that governments could foster economic stability by controlling the supply of money that flows into the economy and allowing the rest of the market to fix itself. They argued for a return to the free market, including smaller government and deregulation in most areas of the economy (the neoliberal ideology). Monetarism was famously adopted by the US President Ronald Reagan and Prime Minister Margaret Thatcher, who were staunch proponents of this approach. Their policies have significantly shaped our societies and economic trajectories today. Monetarism faded in the 1980s and 1990s, as its ability to explain the economy seemed to wane, bringing forward a resurgence of neoclassical economics and new Keynesian economics. ECONOMICS FOR THE FUTURE More recently, new branches of economics are gaining voice such as behavioural economics, neuroeconomics, experimental economics, econophysics, evolutionary game theory, complexity economics, feminist economics, ecological economics, doughnut economics, economics of the common good, amongst others. ‘Economics is in a state of flux.’ David Colander, 2009 Through time, the primary cause of the demise of the prevailing schools of economic thought has been the inability to explain or predict economic crises. For example, Keynesian economics emerged during the 1930s and 40s in the aftermath of the Wall Street Crash and the Great Depression. Keynesian economics was seen to offer a deeper understanding of the crisis and provide new solutions to revive the economy. However, when this school of thought was also brought into question (as it failed to explain the economic crises of the 1970s) so Keynesian economics also fell out of favour, alongside the rise of monetarism and free market capitalism. In 2008, the global economy was hit by a severe financial crisis taking economists by surprise. ‘We did not collectively predict the financial crisis and, worse still, we may have contributed to it through an overenthusiastic belief in the efficacy of markets, especially financial markets whose structure and implications we understood less well than we thought.’ (Angus Deaton, 2024). This has reignited the demand for a novel approach to economic thought that is more holistic in its approach. ‘The economics trinity of greed, rationality and equilibrium is giving way to a new trinity of enlightened self-interest, bounded rationality, and sustainability.’ David M. Kreps, 1997 ‘If [Keynes] were alive this century and were to witness the scale of social and ecological crises that we currently face, he would no doubt be urging his fellow economists to create new models that reflect the knowledge, reality and values of our time. He would be right.’ Kate Rayworth, 2024 Calls for change to our economic thinking are being driven by the failure of our current economic models to account for two crucial elements of society today: firstly, inequalities of wealth and, secondly, the climate crisis and the ongoing depletion of natural resources. Inequality Up to the 1980s, economic growth was accompanied by falling inequality. However, since then, empirical evidence shows growing inequality within nations. Evidence demonstrates that high levels of income inequality might act as a catalyst for other social issues which detract from societal wellbeing. Economic models and decisions lack considerations of the distribution of the costs and benefits of economic activity among different groups within society, enforcing the concentration of resources and wealth. ‘Research studies show the link between higher inequality levels and more frequent economic downturns. Even so, as of now, most of the macroeconomic models used by central banks and financial firms for forecasting and decision-making don’t take inequality into account.’ (Boushey, H, 2019) Climate Crisis and Depletion of Natural Resources This is evidenced to pose an existential threat to life on earth. Evidence shows the close association between our current economic models, patterns of consumption and production, economic policies and climate change. In the UK, the Treasury commissioned the 2021 Dasgupta Review, which argues that the current focus on achieving economic prosperity remains focused on the accumulation of produced capital (roads, machines, buildings, factories, and ports) and what we call human capital (health and education) today. Natural capital (comprising all of the ecosystem services that UK natural assets provide, including soil, air, water and all living things) has not featured in this model of prosperity and growth, which has led to the demise of nature. ‘Over the period 1992 to 2014, the value of produced capital per capita
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