Several ancient philosophers made various economic observations. Among them Aristotle is probably the most important.
Mediaeval Arabs also made contributions to the understanding of economics. In particular, Ibn Khaldun of Tunis (1332-1406) wrote on economic and political theory in his Prolegomena, showing for example, how population density is related to the division of labour which leads to economic growth and so in turn to greater population in a virtuous circle.
Early Western precursors of economics engaged in the scholastics theological debates during the middle ages. An important topic of discussion was the determination of the just price of a good. In the religious wars following the Reformation in the 16th century, ideas about free trade appeared, later formulated in legal terms by Hugo de Groot or Grotius (Mare liberum).
During the Early Modern period, mercantilists came closer to establishing an economic theory. This diverse school mirrored the emergence of nation states in Western Europe and they emphasized keeping a positive balance of payments[?].
During the Enlightenment, the French physiocrats were among the first to consider economics in and of itself. The most important physiocrat was arguably Francois Quesnay (other contemporary French thinkers include Richard Cantillon[?] and Anne Turgot).
The physiocrats were soon overshadowed by Adam Smith's Wealth of Nations[?], published in 1776. Today it is customary to consider Smith the founder of economic theory - and the classical economics that developed after him to be the beginnings of formal economic study.
The history of the various schools of thought in economics can be loosely categorised as follows:
For an overview of macroeconomic schools, see macroeconomics. In brief, this includes mainly,
Contemporary alternative schools outside the mainstream of economic thought include:
Neoclassical economics dominates in undergraduate textbooks. The core of contemporary economics rests on the microeconomic theory of neoclassical economics, but on many topics there is little agreement on which schools to develop to usefully explain existing economies. Outside mainstream economics more widely-divergent views abound.
Throughout the history of economic thought, different political ideas have often been associated with different schools of thought about how economies operate. For example, Adam Smith used his theories of trade and of the division of labour to argue for laissez-faire government economic policies, particularly against mercantilism. Similarly, Marx developed his theories, which focus on production and labor, to advocate socialism and communism.
An example of another economic system which has recently been advocated is the participatory economics model. This uses neither market methods nor centralised methods for allocation, but incorporates many local positive and negative feedback loops in order to respond to the most positive human values. In "-ist" terminology, the participatory economics model is neither communist nor capitalist.