Keynesian economicsJohn Maynard Keynes(right), was a key theorist in economics.Keynesian economics derives from John Maynard Keynes, in particular his book The General Theoryof Employment, Interest and Money(1936), which ushered in contemporary macroeconomicsas a distinct field.The book focused on determinants of national income in the short run when prices are relatively inflexible. Keynes attempted to explain in broad theoretical detail why high labour-market unemployment might not be self-correcting due to low "effective demand" and why even price flexibility and monetary policy might be unavailing. Such terms as "revolutionary" have been applied to the book in its impact on economic analysis.Keynesian economics has two successors. Post-Keynesian economicsalso concentrates on macroeconomic rigidities and adjustment processes. Research on micro foundations for their models is
represented as based on real-life practices rather than simple optimizing models. It is generally associated with the University of Cambridgeand the work of Joan Robinson.New-Keynesian economicsis also associated with developments in the Keynesian fashion. Within this group researchers tend to share with other economists the emphasis on models employing micro foundations and optimizing behavior but with a narrower focus on standard Keynesian themes such as price and wage rigidity. These are usually made to be endogenous features of the models, rather than simply assumed as in older Keynesian-style ones.Chicago School of economicsThe Chicago School of economics is best known for its free market advocacy and monetaristideas. According to Milton Friedmanand monetarists, market economies are inherently stable if the money supply does not greatly expand or contract. Ben Bernanke, current Chairman of the Federal Reserve, is among the economists today generally accepting Friedman's analysis of the causes of the Great Depression.Milton Friedman effectively took many of the basic principles set forth by Adam Smithand the classical economists and modernized them. One example of this is his article in the September 1970 issue of The New York Times Magazine, where he claims that the social responsibility of business should be “to use its resources and engage in activities designed to increase its profits...(through) open and free competition without deception or fraud.” Other schools and approachesOther well-known schools or trends of thought referring to a particular style of economics practiced at and disseminated from well-defined groups of academicians that have become known worldwide, include the Austrian School, the Freiburg School, the School of Lausanne, post-Keynesian economicsand the Stockholm school. Contemporary mainstream economicsis sometimes separated into the Saltwater approach of those universities along the Easternand Westerncoasts of the US, and the Freshwater, or Chicago-school approach.