Economic generations

Economics change its central beliefs about every 30-50 years. I guess that is the length of a generation of economists who start with the standard thinking and then are replaced by the next generation who have a new standard.

Two generations ago (~1900-1930s): Economists used Victorian thinking and followed classical theories about human behavior. Rigid, predictable models. Sociological and historical theories formed the basis of economic thinking. People were driven by "animal spirits".

One generation ago (~1950-1970s): Lots of math and physics influenced the models. Some results seemed bizarre from everyday assumptions. Statistical models of crowds drove economic thinking. "Aggregate demand" was measured and predicted.

Now (~1990-?) Models of randomness and risk are now getting more attention. Instead of Guassian probabilities, the new theories refer to Levy processes and Doob's martindale. This is like quantum physics instead of Newtonian. Models look at game theory and probabilistic outcomes.

Next generation? Who knows. Maybe machine learning combined with behavioral economics will drive new theories where people are not 100% rational agents that decide based on marginal utility.