The Best Economists of the 20th Century

by TBS Staff

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Study Economics As The Best Economists Professional Did

Do you live indoors? Use transportation powered by gasoline? How about buy food, you do that right? And not to get awkward or anything, but you do wear clothes from time to time, right . . . right?

Presumably the answer to these questions is yes. If you partake in any sort of interaction with modern civilization you are constantly acquiring goods and services in exchange for some medium, a medium we call money. Money provides a way for us to acquire what we want from others without engaging in violence or coercion. It enables two strangers who have no reason to trust each other to efficiently, often almost instantaneously, work out a deal that benefits each other and then separate and go about their day.

But what is money? Where does it come from, and who decides how it is distributed? These questions strike at the core of society. Whatever position your government and context take towards the nature of economics has incredible impact on your daily life and whether your goals come to fruition. Consequently, the study of economics in recent times is both very important and controversial.

But studying economics can be difficult due to the overwhelming changes the subject has undergone. In 1900 we were living under the classical gold standard and enjoying perhaps the greatest period of economic development the world had ever seen. But after the world bludgeoned prosperity in the Great War, much of the previous era's stability came crashing down. Whatever was left of the international gold standard was drowned in blood a second time during World War II, and since then the world has slowly transitioned from a commodity-backed monetary system tied to the U.S. dollar to a multinational central bank backed system.

What this means is that even the rules of the economic game have radically changed. Several generations ago debt was bad and banks were never to be trusted. Now, avoiding a mortgage and student loans is considered irresponsible. Thirty to forty years ago central bankers saw price stability as the mandate behind their existence. Now they have a dual mandate which also includes full employment.

Most economists will love some of the names on this list and hate others. But regardless of whether you think a particular thinker included here was brilliant or foolish, noble or wicked, you are living with the consequences of their actions. Hopefully understanding this will help us all build a brighter future.

1 John Maynard Keynes (1882-1946)

John Maynard Keynes

The flow of history is a river that most ride, but every so often a man, through sheer brilliance or force of will, builds a dam and redirects the course of civilization. John Maynard Keynes was such a man. As the most influential economist since 1900, some would argue in history, Keynes' influence is difficult to overstate. He was the son of a successful economist and trafficked in the circles of the intellectual elite from his youth. He would become the leading figure in economics at Cambridge at a time when Cambridge became the leading center of economic study in the world.

It is difficult to appreciate Keynes' impact until one compares what economics was like before him with what exists today. Before Keynes the world used the relatively simple gold standard. Money had a straightforward definition, namely it equaled a certain weight, and economics followed certain basic, common sense principles. Everyone knew that saving money was a good thing, and that it formed the foundation of future investment. Everyone also knew that debt was a dangerous drug that was only to be used in small doses.

But Keynes challenged the intellectual orthodoxy of his day. He argued that a gold standard shackled the hands of policy makers. For Keynes, an elastic currency allowed governments to spend money when the economy was most in need of new, economic energy. Under Keynesianism, deficit spending was the antidote to recession. His ideas informed governments' response to the great depression, and played a pivotal role in the creation of a new monetary standard at the close of World War II. To this day, many of Keynes' most radical ideas are still economic orthodoxy.

2 Friedrich August von Hayek (1899-1992)

Friedrich von Hayek

Friedich August von Hayek, often referred to as F.A. Hayek, was the foil to Keynes' early rise to prominence. This Austrian-born economist who later settled in Britain had a distinguished career. He earned two doctorates, one in law and the other in political science. He was made a member of the Order of the Companions of Honour by Queen Elizabeth II at the urging of Margaret Thatcher, the first person to receive the Hanns Martin Schleyer Prize, a recipient of the U.S. Presidential Medal of Freedom under George Bush, and a winner of the Nobel Prize.

Hayek was especially known for his contribution to our knowledge of changing prices and their ramifications. According to Hayek, changes in prices provide information which then allow individuals to adjust their expenditures. Under his view, changes in price are an essential element in communicating the state of the economy. This provided a powerful argument in defense of free markets, because manipulating markets encouraged consumers and entrepreneurs alike to make poor investment decisions, whereas free markets communicated truths about the actual health of the economy and therefore the future. Hayek, more so than anyone else in the 20th century, kept the Austrian School in mainstream academic discussions of economics. Although now largely underappreciated in left-leaning western nations, he has become the chief economist for nations recovering from communism and looking to move in a free market direction.

Hayek worked with the Cato Institute which ranks highly among The Most Influential Think Tanks

3 Milton Friedman (1912-2006)

Milton Friedman

If the 20th century was the time of central banking and Keynesian economics, then Milton Friedman was the most mainstream alternative. Friedman defended the free market and is considered the leading figure behind the Chicago School of Economics. He received the John Bates Clark Medal honoring economists under the age of 40, and won the 1976 Nobel Prize in Economics.

When Friedman entered economics, Keynesianism dominated the intellectual milieu. But slowly Friedman chipped away at the intellectual orthodoxy. His coauthored volume, Income from Independent Professional Practice, argued that government licensing for doctors artificially raised the price of medicine. A Theory of the Consumption Function, argued that the Keynesian view that households adjust their consumption based on their actual income, as opposed to projected income, was false. In Capitalism and Freedom, he argued for floating exchange rates, a volunteer army, a negative income tax, education vouchers, a deregulated medical field, and numerous other free market proposals for a general audience. His devastating critique of the Federal Reserve in Monetary History of the United States, 1867-1960 so frustrated the Fed that they commissioned a counter history and stopped making their meetings public. To this day, they still keep their meeting minutes private.

By the time Friedman was finished, his conservative views had become the new orthodoxy. He established a place at the table for free market capitalism, and still has many devout followers and ardent enemies.

Friedman worked with the Cato Institute and the National Bureau of Economic Research which rank highly among The Most Influential Think Tanks

4 Lawrence Robert Klein (1920-2013)

Lawrence Robert Klein

Of the various underlying paradigms in economics, which include historical, behavioral, philosophical, and others, Lawrence Robert Klein is one of the best examples of a mathematical approach to the field. Born in Omaha, Nebraska, this MIT trained economist dedicated his career to developing new macroeconometric computer models. He created this metric for economies of all macroeconomic sizes, ranging from the national, to the regional, to the world. Unlike so many economists who spend half their time telling you why their predictions did not pan out, Klein's work gained notoriety from a series of early successes. While acquiring his Ph.D. under Paul Samuelson in 1944, Klein made multiple successful predictions concerning the economic context of the world immediately following the Second World War. Despite these successes, Klein still left the United States during the post-war Red Scare under McCarthyism due to his brief time in the communist party. Nevertheless, he did eventually return to America and his successes contributed to his winning the John Bates Clark Medal in 1959 and the Nobel Prize in 1980. These models embody Keynesianism, and are still in use by the Federal Reserve, other major central banks around the world, and the International Monetary Fund.

5 Robert Lucas Jr. (1937-Present)

Robert Lucas, Jr

The classics never die! Or at least, they never will as long as smart guys like Robert Lucas Jr. keep resurrecting them. Lucas has pushed back Keynes' macroeconomics and fought to revive many traditional views. He is now considered one of the leading figures in neo-classical economics. Not surprisingly, he is very skeptical of government intervention. He casts doubt on the Phillips curve, which purports to show that government induced inflation lowers unemployment. Lucas has taught at both Carnegie Mellon University and the University of Chicago. He has spent a great deal of time exploring the theory of rational expectations, which begins with certain assumptions about human behavior attempting to act in sensible ways, which maximize utility and build expectations out from these presuppositions. His work won him the Nobel Prize in 1995. Lucas also produced the novel idea that microeconomic behavior should be seen as foundational to macroeconomic behavior. Before Lucas, the Keynesian school saw these two sub-branches of economics as largely independent, but Lucas saw the larger scale model as reducing to the former. Lucas was also very leery of the dangers of unsystematic monetary policy deceiving market participants into making poor choices. This view obviously emphasizes the dangers of government manipulation of markets, even if well intended. As a whole, Lucas is a prime example of the conservative Chicago School of Economics at work.

6 Elinor Ostrom (1933-2012)

Elinor Ostrom

Many economists have incorporated prior interest in other fields of study into their analysis of money. Usually this involves math, history, or sociology, but Elinor Ostrom has approached things from a different angle. She has championed New Institutional Economics. Under this approach, one studies the background political context that thereby produces the rules under which commerce operates. For Ostrom, the institutional context is critical in order to understand economics, and often the key to advancing the economic agenda involves reforming the pre-existent institutional structure.

This is not surprising considering Ostrom's formal training at UCLA was in political science. She later took a professorship at Indiana University where she became the Arthur F. Bentley Professor of Political Science. Both she and her husband started the Workshop in Political Theory and Policy Analysis. In 1999 she won the Johan Skytte Prize in Political Science, the John J. Carty Award from the National Academy of Sciences in 2004, and the James Madison Award by the American Political Science Association in 2005. She served as a lead researcher for the government's SANREM CRSP program, (an initiative studying natural resource management). In 2009 she became the first woman to win the Nobel Prize in economics.

7 Leon Walras (1834-1910)

Leon Walras

Leon Walras was the son of economist Auguste Walras. This Frenchmen was educated at the University of Paris and became a professor of political economy at the University of Lausanne. He was one of the first figures to use marginal utility, and became the first person to mathematically model general equilibrium in Elements of Pure Economics. This made him an early pioneer in broader, general equilibrium theory. Walras spent substantial energy trying to draw attention to his text, but unfortunately its mathematical sophistication was too intricate to allow the thinkers of his day to adequately appreciate it. Like many great minds, he would not be fully recognized until after his death. He began his models with two parties working in a barter system and then slowly built greater and greater levels of complexity into his system. Despite being largely known for his more theoretical work, Walras was also very interested in practical application. He wanted to improve society with moderately socialist reforms, but passed away before completing a full, systematic treatment on the subject comparable to what he achieved with Elements of Pure Economics.

8 Carmen Reinhart (1955-Present)

Carmen Reinhart

There are numerous pithy sayings which speak to the circular nature of history. But whether you prefer, "the lesson of history is that we learn nothing from history," or, "those who don't study the past are doomed to repeat it," or even, "those who do study the past are doomed to watch helplessly as everyone else repeats it," the same overarching point remains. Simply put, people are slow to learn from readily available lessons.

This is why Carmen Reinhart's book, This Time is Different: Eight centuries of Financial Folly, is as pragmatic a text as one can find for people in power. In it she shows incredible similarity between the boom and bust cycles in history. Her book has been translated into over 20 languages and won the 2010 Paul A. Samuelson TIAA-CREF Institute Award. This, and her numerous other scholarly achievements, is why she now servers as professor of the International Financial System at Harvard's elite Kennedy School.

Luckily for the rest of us, Reinhart's work is not merely ivory tower intellectual material that has no substantial impact on the real world. She has served as both the Chief Economist and the Vice President at the Bear Stearns investment bank and worked at the International Monetary Fund. Hopefully her words of wisdom have fallen on open-minded ears.

9 James Tobin (1918-2002)

James Tobin

As a Harvard trained academic who later went on to be Yale's Sterling Professor of Economics, James Tobin was an internationally respected intellectual. He is regarded by many to be the greatest American from the Keynesian School, and eventually won the Nobel Prize for his work in 1981. However, Tobin's work was more than theoretical. Much of his research was geared towards providing investors with valuable tools so that they could know where to place their money. His pragmatic approach is part of why both during 1955-1961 and 1964-1965 he was the director of the Cowles Foundation for Research in Economics.

Tobin argued that monetary policy is only effective in capital investment. He also noted that although interest rates are a critical factor in understanding capital investment, they are but one of many influences. He is famous for developing "Tobin's q," which describes the ratio of market value for an asset to the asset's replacement cost. Under this model, if a given asset's q is greater than 1, then the asset should be profitable. He is also well known for what came to be known as, "Tobin's Tax," which is a tax on foreign exchange transactions. Tobin saw speculation in foreign currency markets as wasteful at best, and potentially destructive, and consequently encouraged policies which limited this behavior.

10 Irving Fisher (1867-1947)

Irving Fisher

Irving Fisher was one of the most prominent American economists of the early 20th century, and to this day he is arguably the greatest besides Milton Friedman. Like many of his contemporaries, he began his studies in mathematics and later switched to economics. He would eventually receive the first Ph.D. in economics ever offered by Yale. In particular, his Mathematical Investigations in the Theory of Value and Prices, and Appreciation and Interest gained wide acclaim. He spent most of his career at Yale, where he became a member of the Skull and Bones Society and supported various social and political causes aimed at building a utopian world. He advocated for prohibition, world peace, and like many intellectuals of his day, eugenics. He was also a founder and the first president of the Econometric Society.

Fisher was a major figure in the quantity theory. In particular, his theory was the first to utilize both currency and bank credit. He also built on the tradition of Eugen Von Böhm-Bawerk by further developing models of interest. Additionally, Fisher helped advance discussions of utility and general equilibrium. His work inspired the monetarist school of macroeconomic thought. Fisher was also the first celebrity economist, having achieved public intellectual status relatively early in his career. Unfortunately his reputation was forever tarnished when, in 1929, he said the stock market had reached a "permanently high plateau," shortly before it crashed. Nevertheless, his work on debt deflation has become increasingly influential in recent years as mainstream economists become more and more concerned with deflation.

11 Eugen von Böhm-Bawerk (1851-1914)

Eugen von Böhm-Bawerk

There are few economists whose ideas are both more relevant and challenged in today's world of negative interest rates than Eugen von Böhm-Bawerk. This man was born and educated in law in Vienna. His career oscillated between professional occupations, which included three terms as minister of finance, and academic ventures, including professorships at both the University of Vienna and Innsbruck.

Böhm-Bawerk was diametrically opposed to Karl Marx, and alongside Friedrich von Wieser, greatly popularized the Austrian school of economics. His contribution to the field centers on "roundaboutness," or the concept that physical capital investment both lengthens production and improves productivity. He was one of the first economists to incorporate the passage of time into his theories in a clear and precise way. He noted that people have a time preference. They prefer their desires met sooner rather than later. This time preference is what allows for meaningful interest rates. People will borrow in order to buy today and pay later because they are typically more concerned about the present than the future.

Until very recently, one could make a good argument that Böhm-Bawerk undergirded our entire financial system. After all, the world's current economic order runs on banking and debt, or stated otherwise, if it were not for the phenomenon that Böhm-Bawerk studied, the modern world as we know it could not exist. However, at the time of this article's creation, well over 400 million people are living in nations with negative interest rates. Thus, the question poised to current economists is, "was Böhm-Bawerk wrong, or have we utterly perverted the economic order?" And likewise we can also ask, "if he was wrong, then how did we manage to build an entire economy based on debt?" Surely the answer to these questions will remain controversial for some time.

12 Ludwig von Mises (1881-1973)

Ludwig von Mises

Ludwig von Mises has been called the last knight of liberalism. In many ways, his thought represents the most significant leap forward in the Austrian School. As an Austrian Jew he fled his homeland for the safety of America as the dangers of the Third Reich grew. He was a true genius, having attained fluency in German, Polish, and French, literacy of Latin, and comprehension in Ukrainian by the age of 12.

Mises served as the chief economist for the Austrian Chamber of Commerce before taking a teaching position in Switzerland and eventually fleeing the Nazi advance for New York City. There he became a professor of economics at New York University until his retirement. He spent the majority of his career developing the study of praxeology, or human choice. His magna opus, Human Action, meticulously outlines how individual choices form the bedrock of economics. For Mises, economics is an entirely bottom-up science that extends from the individual. This stands in stark contrast from Marx and various other socialists who think in terms of the aggregate. His work had a major influence on other free market thinkers such as F.A. Hayek and Murray Rothbard. The Mises Institute, one of the world's foremost think tanks promoting free market capitalism and limited government, promotes both his ideas and those of kindred thinkers.

The Ludwig von Mises Institute ranks highly among The Most Influential Think Tanks

13 Alfred Marshall (1842-1924)

Alfred Marshall

Alfred Marshall was one of the most influential economists of his generation. His book, Principles of Economics, was a standard textbook in the field for decades. The text unifies marginal utility, supply and demand, and costs of production under a larger theory. He also contributes to discussions of increasing and decreasing returns in production. Like many economists of the period, he was first trained in mathematics and even served as a professor in that field before later switching to political economics. But despite his extensive mathematics background, his work typically relegates complex equations to footnotes. His work's consequent readability may have contributed to its influence.

Marshall's theory revolves around price determination. For Marshall, price results from the relationship between demand and supply and can behave in different ways based on different time periods. In the short term, price is chiefly effected by demand, but in the long term, the cost of production becomes much more significant. At all times, the price is heavily influenced by how competitive the market has become. Marshall was also famous for his scissors analogy, in which he spoke of utility and cost of production as two blades working together as they do in a pair of scissors.

14 Joseph Stiglitz (1943-present)

Joseph Stiglitz

Sometimes an old idea needs a new champion. Keynesian economics, despite having achieved the status of intellectual orthodoxy in the first half of the 20th century and still retaining it, has come under fire numerous times from New Classical Economics. Consequently, proponents of Keynes like MIT-trained Joseph Stiglitz have responded by defending the updated versions of the theory.

Stiglitz has done this in numerous ways, but perhaps the most obvious includes his development of a new branch of economics called "The Economics of Information." This field studies information asymmetries and develops novel ideas like adverse selection and moral hazard. Much of this work led to him receiving the Noble Prize in economics in 2001. Furthermore, he acted as the lead author of the 1995 Report of the Intergovernmental Panel on Climate Change, which received the Noble Peace Prize in 2007. He has been given over 40 honorary doctorates. The New York Times listed him as one of the 100 most influential people in the world. He was chief economist of the World Bank from 1997-2000 before Janet Yellen succeeded him. He now serves on various prestigious boards such as the Acumen Fund and Resources for the Future.

Stiglitz worked with the National Bureau of Economic Research which ranks highly among The Most Influential Think Tanks

15 William Forsyth Sharpe (1934-present)

William Forsyth Sharpe

Some economists spend a lot of time talking about hypothetical abstract models, others put their time into championing political causes, and still others put their knowledge to practical applications like making a ton of money. These are the sort of people that corporations, not-for-profits, and other big money people go to for advice. People like William Forsyth Sharpe are the pragmatically-driven sort who build ideas in order to fill bank accounts.

Sharpe received his Ph.D. in economics from the University of California, Los Angeles. He won the Nobel Prize in 1990. Early in his career he met economist Harry Markowitz during his tenure at the RAND Corporation. Markowitz had a profound impact on his thinking. Later, his work became influential enough to establish financial economics as its own branch of study. He developed a model to explain how securities prices reflect risks and returns. He taught first at the University of Washington in Seattle and later at Stanford University until he left academia in order to start an investment consulting firm. He created the Sharpe ratio, which measures risk-adjusted investment performance. He also played a role in creating the binomial method for options analysis, the gradient method to help determine ideal assets to invest in, and returns-based style analysis for investigating investment fund track records.

16 Christopher Antoniou Pissarides (1948-present)

Christopher Antoniou Pissarides

Christopher Antoniou Pissarides was born in Cyprus but has since moved to Britain and done most of his professional work there. He won the Nobel Prize in 2010 for his research on markets with search frictions. He earned his Ph.D. from the London School of Economics in 1973 in mathematical economics, and was elected to the prestigious British Academy in 2002. Since 2009 he has also been a part of the executive committee of the European Economic Association, and a fellow in numerous other academic societies. In 2013 he was even knighted. Pissarides has been a professor at the London School of Economics since 1976, has become the Regius professor there, and is now the Chair for the Centre for Macroeconomics.

Pissarides is particularly known for his work in the search and matching theory underlying relations between the macroeconomy and the labor market. He provided the empirical evidence necessary to model this relationship using the matching function, which shows how labor market changes from unemployment to employment occur in time. In addition to this mathematical modeling, his additional studies include work on structural change and expanding economies. Pissarides' work is now standard material for graduate students in economics the world over.

17 Arthur Laffer (1940-Present)

Arthur Laffer

Did you ever wish you could have your cake and eat it too? Well, according to Arthur Laffer the government can do exactly that. He argued for this by developing the famous "Laffer Curve," which showed that although raising taxes will initially raise government revenue, doing so beyond a certain point so stymies the economy that it actually does more harm. In other words, if a government raises taxes too much, it will slow economic activity and in the process decrease tax revenue. If one follows this argument to its logical conclusion, then one should be able to lower taxes in such a way so as to increase economic activity and consequently offset the loss in revenue.

The practicality of the Laffer Curve has been criticized by some and praised by others, but love it or hate it, Laffer's ideas provided the grounding for Reaganomics. Laffer gave Reagan the intellectual justification the president needed to both increase military spending and cut taxes. In addition to this work, he also taught at the University of Chicago, the University of Southern California, and Pepperdine University. Furthermore, he worked as a consultant to the U.S. Treasury and Defense Departments. He eventually became the founder and CEO of a consulting firm in Nashville, Tennessee called Laffer Associates.

18 Daniel Kahneman (1934-Present)

Daniel Kahneman

If the first half of the 20th century economics represented the rise of the Keynesianism school and the decline of the classical gold standard, and if the second half represented the Chicago School's free market challenge, then the early 20th century represents the rise of anthropology-based economics that focus on the frailties of human thinking. Daniel Kahneman is a University of Jerusalem and Berkeley trained Israeli-American psychologist and behavioral economist. As is typical with his school of thought, Kahneman draws heavily on the social sciences to understand game theory and decision making. His work establishes a cognitive basis for poor human choices based on heuristics and biases through a series of groundbreaking articles on judgement and decision making. This work eventually came together in a full-blown model called Prospect Theory.

Kahneman's work was given the Nobel Prize in 2002. He was included in a list of leading international thinkers by Foreign Policy magazine in 2011. He has worked at Princeton since 1993, and is now professor emeritus of psychology and public affairs at the Woodrow Wilson School of Public Policy. He was one of the founders of TGG, a respected business and charity consulting firm.

19 Vilfredo Pareto (1848-1923)

Vilfredo Pareto

In a bygone era the ideal scholar was a generalist renaissance man who knew much about a lot, while in the present era specialist scholars strive to know everything about a little. Vilfredo Pareto was one of the last polyglots who, among his contributions to economics, also worked in philosophy, sociology, and engineering. This Italian economist developed the 80/20 rule, which broadly speaking, states that 80 percent of the effect comes from 20 percent of the causes after he noticed that 80 percent of Italian land was owned by 20 percent of the population. This pattern is common in nature but Pareto found it prevalent in various forms of wealth distribution. He believed that every major civilization's wealth distribution looked more like an arrow head than a pyramid. There was no gradual distribution of wealth, but a natural division along the 80/20 distinction between the wealthy and the masses. This was true of all peoples across all of history. He was also the first person to popularize the term, "elite," when referring to a class of people. Pareto was instrumental in transforming economics from a subcategory of moral philosophy as it was practiced during the enlightenment into a mathematically-driven social science. His views were also popular among Darwinists and Mussolini's fascists supporters, and thus had tremendous historical as well as economic impact, (although Pareto's personal views of fascism are a matter of more nuanced debate).

20 John Bates Clark (1847-1938)

John Bates Clark

Very rarely do scholars reverse an opinion that they have directed considerable energy towards defending, but John Bates Clark did exactly that with respect to his views about just wages. Earlier in his career he wrote Philosophy of Wealth, Economic Principles Newly Formulated, which attacked competition as a viable form of just wage discovery. Although simultaneously being critical of the communists, Clark nevertheless felt that intervention was required to prevent unfair underpayment of workers, and even compared such practices to indirect cannibalism. However, shortly after publishing this work he began reversing his opinion, and eventually published The Distribution of Wealth, which defended a neo-classical view of economics. Clark used Darwinism to justify a competition-based economics model that allowed the better equipped to advance. Although elements of this process may have appeared savage, the final outcome was superior. Clark also had a unique understanding of capital. For Clark, capital was not the means of production, but rather it was more of a productive tool. This alternative view led to the Cambridge capital controversy between Cambridge University and MIT between 1954 and 1965.

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