British philosopher Adam Smith is often cited as the father of modern economics for his treatise The Wealth of Nations (1776). His ideas built upon a considerable body of work from predecessors in the eighteenth century particularly the Physiocrats. His book appeared on the eve of the Industrial Revolution with associated major changes in the economy. Smith's successors included such classical economists as the Rev. Thomas Malthus, Jean-Baptiste Say, David Ricardo, and John Stuart Mill. They examined ways the landed, capitalist and labouring classes produced and distributed national output and modeled the effects of population and international trade. In London, Karl Marx castigated the capitalist system, which he described as exploitative and alienating. From about 1870, neoclassical economics attempted to erect a positive, mathematical and scientifically grounded field above normative politics.

After the wars of the early twentieth century, John Maynard Keynes led a reaction against what has been described as governmental abstention from economic affairs, advocating interventionist fiscal policy to stimulate economic demand and growth. With a world divided between the capitalist first world, the communist second world, and the poor of the third world, the post-war consensus broke down. Others like Milton Friedman and Friedrich von Hayek warned of The Road to Serfdom and socialism, focusing their theories on what could be achieved through better monetary policy and deregulation. As Keynesian policies seemed to falter in the 1970s there emerged the so called New Classical school, with prominent theorists such as Robert Lucas and Edward Prescott. Governmental economic policies from the 1980s were challenged, and development economists like Amartya Sen and information economists like Joseph Stiglitz introduced new ideas to economic thought in the twenty-first century.

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The earliest discussions of economics date back to ancient times (e.g. Chanakya's Arthashastra or Xenophon's Oeconomicus). Back then, and until the industrial revolution, economics was not a separate discipline but part of philosophy. In Ancient Athens, a slave based society but also one developing an embryonic model of democracy, Plato's book The Republic contained references to specialization of labour and production. But it was his pupil Aristotle that made some of the most familiar arguments, still in economic discourse today.

Aristotle's Politics (c.a. 350 BC) was mainly concerned to analyse different forms of a state (monarchy, aristocracy, constitutional government, tyranny, oligarchy, democracy) as a critique of Plato's advocacy of a ruling class of "philosopher-kings". In particular for economists, Plato had drawn a blueprint of society on the basis of common ownership of resources. Aristotle viewed this model as an oligarchical anathema. In Politics, Book II, Part V, he argued that,