UNIVERSITY OF EASTERN PHILIPPINES

University of Eastern Philippines

University Town, Northern Samar

What to Make of the Twentieth Century?

Submitted by: (GROUP 7)

Solayao, Angela Maria Corazon S.
(Leader)

Members:
Marino, Rosalyn
Mendoza, Mendoza
Nebrida, Claire Mae S.
Perfecto, Katherine H.
Pinca, Juma
Quibal, Reymart
Subiaga, Cathy Mea

Submitted to:
Dr. Farah Madulid
Subject Instructor

First semester
SY. 2022-2023
Introduction
In this paper, we will be discussing three topics that will answer the question
What to Make the Twentieth Century?, but before that let us first know what happened
during the twentieth century in economics. The twentieth century is also known as The
Great Depression which lasted from 1929 to 1939 and was also known as the worst
economic downturn in history and this is because of the crash of Wall Street in 1929.
This is because of the steel production declined, construction was sluggish, automobile
sales went down, and consumers were building up large debts because of easy credit.

A. From the Neoclassical Synthesis to Modern Macro

The Neoclassical Synthesis also known as NCS or
neoclassical-Keynesian synthesis, or just neo-Keynesianism was a neoclassical
economics academic movement and paradigm in economics that worked
towards reconciling the macroeconomic thought of John Maynard Keynes in his
book The General Theory of Employment, Interest and Money (1936).It was
formulated most notably by John Hicks (1937),Franco Modigliani (1944), and
Paul Samuelson (1948), dominated economics in the post-war period and formed
the mainstream of macroeconomic thought in the 1950s 1960s, and 1970s.
According to Samuelson, the neoclassical synthesis should have become a new
general economic theory, that could unite positive aspects of previous economic
research and become a consensus, over which all members of the economic
community believed that the active fiscal and monetary interventions can be used
for stabilizing economy and ensuring full employment. The market economy,
based on the reasons described by J. Keynes, cannot provide full employment
on its own. But if monetary and fiscal policy is used to tackle underemployment, it
will put the economy on a trajectory that applies the principles of classical
equilibrium analysis to explain relative prices and resource allocation
In its modern form, macroeconomics is often defined as starting with John
Maynard Keynes and his book The General Theory of Employment, Interest, and
Money in 1936. Keynes explained the fallout from the Great Depression when
goods remained unsold, and workers were unemployed. Throughout the 20th
century, Keynesian economics, as Keynes' theories became known, diverged
into several other schools of thought. Keynesian economics believes that
because prices are somewhat rigid, fluctuations in any component of
spending—consumption, investment, or government expenditures—cause output
to change. If government spending increases, for example, and all other
spending components remain constant, then output will increase.
B. From Arrow-Debreu to Game Theory and the Economics of Information
The Arrow-Debreu Model suggests that uder certain economic
assumptions (convex, preferences, perfect competition, and demand
independence) there must be a set of prices such that aggregate supplies will
equal aggregate demands for every commodity in the economy. The model is
central to the theory of general equilibrium and it is often used as a general
reference for other microeconomic models. This model is named after Kenneth
Arrow and Gerard Debreu and sometimes also Lionel W. McKenzie for his
independent proof of equilibrium existence in 1984 as well as his later
improvements in 1959.
The Game Theory is a theoretical framework for conceiving social
situations among competingplayes. In some aspects, game theory is the science
of strategy, or at least the optimal decision-makinng of independent and
competing actors in a strategic setting. This theory was made by Oskar
Morgenstern and John vonn Neumann. The game theory has a wide range of
applications, including psychology, biology, war, politics, economics, and
businesses. The impact of game theory in economics is it brought a revolution by
addressing crucial problems in prior mathematical economic models. Next is in
the business, businesses often have several strategic chocies that affect their
ability to realize economic gain, game theory will help them develop new
marketing strategies or develop new products.
Whereas, economic of information is the branch of microeconomics that
studies how information and informatio system affect an economy and economic
decisions.

C. Metrics and Interpretive Framework Stiglitz, Mirowski, Backhouse, Caldwell

Readings: Caldwell, Hayek’s Challenge

Metrics
Metrics are quantitative assessment measures that are frequently used for
evaluating, contrasting, and tracking performance or output. Quantitative analysis
(QA) in finance is an approach that emphasizes mathematical and statistical
analysis to help determine the value of a financial asset, such as a stock or
option.In order to maintain performance assessments, opinions, and business
strategies, managers or analysts often employ a set of metrics to develop a
dashboard that they regularly monitor.

Metrics come in a wide range of varieties with industry standards and

proprietary models often governing their use. Executives use them to analyze
corporate finance and operational strategies. Analysts use them to form opinions
and investment recommendations. Portfolio managers use metrics to guide their
investing portfolios. Furthermore, project managers also find them essential in
leading and managing strategic projects of all kinds. Overall, metrics refer to a
wide variety (The wide variety strategy is a merchandising strategy that relies on
an impressive range of goods to draw customers into the store. The
old-fashioned five-and-dime store is a classic example of a wide variety
strategy.)of data points generated from a multitude of methods. Best practices
across industries have created a common set of comprehensive metrics used in
ongoing evaluations. However, individual cases and scenarios typically guide the
choice of metrics used. There are wide range of metrics, below are some
commonly used tools:

1. Economic Metrics
2. Gross Domestic Product (GDP)
3. Inflation
4. Unemployment Rate

Interpretive Framework Stiglitz

Joseph Stiglitz won Nobel Prize in 2001 for his analysis of markets with
asymmetric information particularly the insurance market. It started from the
plausible assumption that people buying insurance know more about their
relevant characteristics than the insurance company selling it. They then showed
that it would be in the insurance company’s interest to “sort” its customers by risk
category by offering a range of insurance products to all and letting the
customers self-select. A low-premium, high-deductible health insurance policy,
for example, would be attractive to healthy customers and unattractive to
unhealthy customers. The unhealthy customers would be more likely to purchase
a high-premium, low-deductible policy. In this way, the market would lead to what
the authors called a “separating” equilibrium—that is, a market in which people’s
risk category determined the kind of insurance they bought. Stiglitz and
Rothschild also showed certain conditions under which there would be no
equilibrium and the market would simply not exist.

Philip Mirowski

Philip Mirowski is a historian and philosopher of economic thought at the

University of Notre Dame. In his books History of Information in Modern
Economics, he examines the role of information in modern economics and how it
influences policy and politics. It Sheds light on the evolution of economic thinking
and its emphasis on markets rather than individuals and gave details one the
variety of intellectual battles fought to define, analyze, and employ economic
information in disparate ways.
Roger Backhouse

Roger Backhouse is a british economist, economic historian, and

academic. Backhouse is a noted scholar in the history of economics and
economic methodology and had published in the economics of Keynes,
disequilibrium macroeconomics, and the history of social science. He’s recent
research has been on the history of economics, focusing on 20th century of
economics and macroeconomics. In 2014, he was elected a Fellow of the British
Academy of the United Kingdom national academy for the humanities and social
sciences.

Bruce Caldwell

Bruce Caldwell is a Research Professor of Economics, for the past two

decades his research focuses on the history of economic thought, with a specific
interest in life and works of the Nobel Laureate economist anf social theorist
Hayek, he is the author of Hayek’s Challenge: An Intellectual Biography of F.A
Hayek (2004).

Readings: Caldwell, Hayek’s Challenge

Friedrich A. Hayek is regarded as one of the preeminent economic

theorists of the twentieth century, as much for his work outside of economics as
for his work within it. Bruce Caldwell—editor of The Collected Works of F. A.
Hayek—understands Hayek’s thought like few others, and with this book he
offers us the first full intellectual biography of this pivotal social theorist. Caldwell
begins by providing the necessary background for understanding Hayek’s
thought, tracing the emergence, in fin-de-siècle Vienna, of the Austrian school of
economics—a distinctive analysis forged in the midst of contending schools of
thought.

In a part of the book, Caldwell follows the path by which Hayek, beginning
from the standard Austrian assumptions, gradually developed his unique
perspective on not only economics but a broad range of social phenomena. In
the third part, Caldwell offers both an assessment of Hayek’s arguments and, in
an epilogue, an insightful estimation of how Hayek’s insights can help us to
clarify and reexamine changes in the field of economics during the twentieth
century. As Hayek's ideas matured, he became increasingly critical of
developments within mainstream economics: his works grew increasingly
contrarian and evolved in striking—and sometimes seemingly
contradictory—ways. Caldwell is ideally suited to explain the complex evolution
of Hayek's thought, and his analysis here is nothing short of brilliant, impressively
 situating Hayek in a broader intellectual context, unpacking the often difficult
turns in his thinking, and showing how his economic ideas came to inform his
ideas on the other social sciences.

Summary

The Twentieth Century is also known as The Great Depression and The Worst
Economic Downturn in History, the Neoclassical synthesis should have become a new
general economic theory. The market economy, based on the reasons described by J.
Keynes, cannot provide full employment on its own. But if monetary and fiscal policy is
used to tackle underemployment, it will put the economy on a trajectory. In some
aspects, game theory is the science of strategy, or at least the optimal decision-makinng
of independent and competing actors in a strategic setting. The Game Theory is a
theoretical framework for conceiving social situations among competing players.

Quantitative analysis (QA) in finance is an approach that emphasizes

mathematical and statistical analysis to help determine the value of a financial asset,
such as a stock or option. Metrics are assessment measures that are frequently used
for evaluating, contrasting, and tracking performance or output.

Conclusion

Therefore, in the twentieth century also known as The Great Depression took the
country’s upside down specially those countries whose main source of their income was
industrial. That is why on this paper we tackle theories and readings that will help a
country’s economy to prevent The Great Depression from happening once again.