ABSTRACT
This chapter explains competing economic theories in the early 20th century that led to a battle over liberal and conservative economic philosophies, which resonate more than ever in policymaking. It examines the history of economic policy by examining economic models prior to the establishment of "modern economics." Adam Smith, often called the "Father of Economics," developed a theory of the market that emphasized trade as the driver of economic growth, rather than wealth accumulation. Governments around the world adopted free market economics to some extent, but continued to play an important role in driving the direction of their markets by imposing regulations and taxes on certain industries and activities. The industrial revolution that generated tremendous economic growth in the United States and elsewhere also turned a largely equal agrarian society into an increasingly unequal industrialized society. As an economic theory, capitalism refers to private ownership of the means of production and the use of those means for private profit.
