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{{Short description|Social science}} {{other uses}} {{pp-semi-indef}} {{pp-move}} {{Use Oxford spelling|date=August 2016}} {{Use British English|date=August 2016}} {{CS1 config|mode=cs1}} {{Economics sidebar|expanded=all}} '''Economics''' ({{IPAc-en|ˌ|ɛ|k|ə|ˈ|n|ɒ|m|ᵻ|k|s|,_|ˌ|iː|k|ə|-}})<ref name="OED">{{Cite OED | term=economics |id=270555}}</ref><ref>{{Cite web |title=ECONOMICS {{!}} Meaning & Definition for UK English |url=https://lexico.com/definition/economics |access-date=2024-04-13 |website=Lexico.com |archive-date=24 August 2022 |archive-url=https://web.archive.org/web/20220824032001/https://lexico.com/definition/economics |url-status=dead }}</ref> is a [[behavioral science]] that studies the [[Production (economics)|production]], [[distribution (economics)|distribution]], and [[Consumption (economics)|consumption]] of [[goods and services]].<ref>{{cite book |last1=Krugman |first1=Paul |author-link=Paul Krugman |last2=Wells |first2=Robin |title=Economics |publisher=Worth Publishers |series= |volume= |edition=3rd |date=2012 |location= |page=2 |url= |doi= |id= |isbn=978-1464128738 |mr= |zbl= |jfm=}}</ref><ref>{{Cite book |last=Backhouse |first=Roger |url=https://www.worldcat.org/oclc/59475581 |title=The Penguin history of economics |date=2002 |isbn=0-14-026042-0 |oclc=59475581 |quote=The boundaries of what constitutes economics are further blurred by the fact that economic issues are analysed not only by 'economists' but also by historians, geographers, ecologists, management scientists, and engineers. |publisher=Penguin }}</ref> Economics focuses on the behaviour and interactions of [[Agent (economics)|economic agents]] and how [[economy|economies]] work. [[Microeconomics]] analyses what is viewed as basic elements within [[economy|economies]], including individual agents and [[market (economics)|markets]], their interactions, and the outcomes of interactions. Individual agents may include, for example, households, firms, buyers, and sellers. [[Macroeconomics]] analyses economies as systems where production, distribution, consumption, [[savings]], and [[Expenditure|investment expenditure]] interact; and the [[factors of production]] affecting them, such as: [[Labour (human activity)|labour]], [[Capital (economics)|capital]], [[Land (economics)|land]], and [[Entrepreneurship|enterprise]], [[inflation]], [[economic growth]], and [[public policies]] that impact [[glossary of economics|these elements]]. It also seeks to [[International economics|analyse and describe]] the [[World economy|global economy]]. Other broad distinctions within economics include those between [[positive economics]], describing "what is", and [[normative economics]], advocating "what ought to be";<ref>{{cite book |last=Friedman |first=Milton |date=1953 |chapter=[[Essays in Positive Economics#The Methodology of Positive Economics|The Methodology of Positive Economics]] |title=Essays in Positive Economics |publisher=University of Chicago Press |page=5}}</ref> between economic theory and [[applied economics]]; between [[Rational choice theory|rational]] and [[behavioural economics]]; and between [[mainstream economics]] and [[heterodox economics]].<ref>{{Cite book |url=https://books.google.com/books?id=k2d8SFFyeNEC&pg=PP1 |title=The Foundations of Positive and Normative Economics: A Handbook |date=2008 |publisher=Oxford University Press |isbn=978-0-19-532831-8 |editor-last=Caplin |editor-first=Andrew |editor-last2=Schotter |editor-first2=Andrew}}</ref> Economic analysis can be applied throughout society, including [[business economics|business]],<ref>{{Cite book |last=Dielman |first=Terry E. |title=Applied regression analysis for business and economics |date=2001 |publisher=Duxbury/Thomson Learning |isbn=0-534-37955-9 |oclc=44118027}}</ref> [[financial economics|finance]], [[Economics of security|cybersecurity]],<ref>{{cite journal |last1=Kianpour |first1=Mazaher |last2=Kowalski |first2=Stewart |last3=Øverby |first3=Harald |date=2021 |title=Systematically Understanding Cybersecurity Economics: A Survey |journal= Sustainability|volume= 13 |issue=24 |page=13677 |doi= 10.3390/su132413677|doi-access=free |bibcode=2021Sust...1313677K |hdl=11250/2978306 |hdl-access=free }}</ref> [[Health economics|health care]],<ref>{{Cite journal |last=Tarricone |first=Rosanna |date=2006 |title=Cost-of-illness analysis |journal=Health Policy |language=en |volume=77 |issue=1 |pages=51–63 |doi=10.1016/j.healthpol.2005.07.016 |pmid=16139925}}</ref> [[engineering economics|engineering]]<ref name="Dharmaraj2010">{{Cite book |last=Dharmaraj |first=E. |title=Engineering Economics |location=Mumbai |publisher=Himalaya Publishing House |date=2010 |isbn=978-9350432471 |oclc=1058341272}} <!-- original citation mismatched publisher and year for 1st and 2nd(rev.) editions, so confirmation needed which is being cited --></ref> and [[Economic policy|government]].<ref>{{Cite book |last=King |first=David |title=Fiscal Tiers: the economics of multi-level government |date=2018 |publisher=[[Routledge]] |isbn=978-1-138-64813-5 |oclc=1020440881}}</ref> It is also applied to such diverse subjects as [[crime]],<ref>{{Cite book |last=Becker |first=Gary S |date=January 1974 |chapter=Crime and Punishment: An Economic Approach |title=Essays in the Economics of Crime and Punishment |editor-last1=Becker |editor-first1=Gary S. |editor-last2=Landes |editor-first2=William M. |pages=1–54 |publisher=[[National Bureau of Economic Research]] |isbn=0-87014-263-1 |chapter-url=https://www.nber.org/system/files/chapters/c3625/c3625.pdf |access-date=2022-07-01 |archive-date=13 September 2021 |archive-url=https://web.archive.org/web/20210913194049/https://www.nber.org/system/files/chapters/c3625/c3625.pdf |url-status=live }}</ref> [[education economics|education]],<ref>{{Cite web|date=2007 |title=Economics of Education |url=https://openknowledge.worldbank.org/handle/10986/7154 |publisher=[[The World Bank]] |last1=Hanushek |first1=Eric A. |last2=Woessmannr |first2=Ludger |series=Policy Research Working Papers |doi=10.1596/1813-9450-4122 |hdl=20.500.12323/2954 |s2cid=13912607 |access-date=17 December 2020 |archive-date=6 January 2022 |archive-url=https://web.archive.org/web/20220106142511/https://openknowledge.worldbank.org/handle/10986/7154 |url-status=live }}</ref> the [[Family economics|family]],<ref>{{Cite book |author-link=Gary Becker |last=Becker |first=Gary S. |orig-date=1981 |date=1991 |title=A Treatise on the Family |edition=Enlarged |publisher=Harvard University Press |isbn=0-674-90698-5 |url=https://books.google.com/books?id=NLB1Ty75DOIC |access-date=2022-07-01 |archive-date=30 July 2022 |archive-url=https://web.archive.org/web/20220730075050/https://books.google.com/books?id=NLB1Ty75DOIC |url-status=live }}</ref> [[Feminist economics|feminism]],<ref>{{Cite journal |author-link=Julie A. Nelson |last=Nelson |first=Julie A. |date=1995 |title=Feminism and Economics |journal=Journal of Economic Perspectives |volume=9 |issue=2 |pages=131–148 |doi=10.1257/jep.9.2.131 |url=https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.9.2.131 |access-date=2022-07-01 |archive-date=7 April 2022 |archive-url=https://web.archive.org/web/20220407203919/https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.9.2.131 |url-status=live }} {{Cite book |author-link=Marianne A. Ferber |editor-last1=Ferber |editor-first1=Marianne A. |editor-last2=Nelson |editor-first2=Julie A. |date=October 2003 |orig-date=1993 |title=Feminist Economics Today: Beyond Economic Man |publisher=University of Chicago Press |isbn=978-0226242071 |url=https://books.google.com/books?id=DeWgyqLvmfsC |access-date=2022-07-01 |archive-date=30 July 2022 |archive-url=https://web.archive.org/web/20220730075049/https://www.google.com/books/edition/Feminist_Economics_Today/DeWgyqLvmfsC |url-status=live }}</ref> [[Law and economics|law]],<ref>{{unbulleted list citebundle |1 = {{Cite book |author-link=Richard A. Posner |last=Posner |first=Richard A. |orig-date=1972 |date=2007 |title=Economic Analysis of Law |edition=7th |publisher=Wolters Kluwer – Aspen Publishers |isbn=978-0735563544 |url=https://books.google.com/books?id=ooFDAQAAIAAJ |access-date=2022-07-01 }} |2 = {{Cite book |author-link=Richard A. Posner |last=Posner |first=Richard A. |date=1983 |title=The Economics of Justice |publisher=Harvard University Press |isbn=978-0674235267 |url=https://books.google.com/books?id=CKEN0F07ChUC |access-date=2022-07-01 |archive-date=30 July 2022 |archive-url=https://web.archive.org/web/20220730075050/https://books.google.com/books?id=CKEN0F07ChUC |url-status=live }} }}</ref> [[Philosophy and economics|philosophy]],<ref>{{unbulleted list citebundle |1 = {{Cite book |author-link=Adam Smith |last=Smith |first=Adam |orig-date=1759 |date=1982 |title-link=The Theory of Moral Sentiments |title=The Theory of Moral Sentiments |editor-last1=Raphael |editor-first1=D. D. |editor-last2=Macfie |editor-first2=A. L. |location=Indianapolis |publisher=Liberty Classics 1976 |isbn=978-0-86597-012-0}} [https://storage.googleapis.com/catalog.libertyfund.org/PDFPreview/Smith_TheoryofMoralSentiments_1757_preview.pdf Introduction only]. |2 = {{Cite journal |author-link=Kenneth E. Boulding |last=Boulding |first=Kenneth E. |date=1969 |title=Economics as a Moral Science |journal=American Economic Review |volume=59 |issue=1 |pages=1–12 |jstor=1811088 |url=https://en-econ.tau.ac.il/sites/economy_en.tau.ac.il/files/media_server/Economics/grad/mini%20courses/David%20Colander/Boulding.pdf |access-date=2022-07-01 |archive-date=5 October 2021 |archive-url=https://web.archive.org/web/20211005213945/https://en-econ.tau.ac.il/sites/economy_en.tau.ac.il/files/media_server/Economics/grad/mini%20courses/David%20Colander/Boulding.pdf |url-status=live }} |3 = {{Cite book |author-link=Robert Heilbroner |last=Heilbroner |first=Robert L. |orig-date=1953 |date=1999 |edition=7th |title=The Worldly Philosophers: The Lives, Times, and Ideas of the Great Economic Thinkers |publisher=Touchstone |isbn=0-684-86214-X |url=https://books.google.com/books?id=vIxtW9cw-DQC |access-date=2022-07-01 |archive-date=30 July 2022 |archive-url=https://web.archive.org/web/20220730075050/https://www.google.com/books/edition/The_Worldly_Philosophers/vIxtW9cw-DQC |url-status=live }} <!-- original cite mismatches gbooks url and isbn --> |4 = {{Cite book |author-link=Amartya Sen |last=Sen |first=Amartya |date=2009 |title-link=The Idea of Justice |title=The Idea of Justice |publisher=Harvard University Press |isbn=978-0674036130}} <!-- title wikilink conflicts with url=https://www.google.com/books/edition/The_Idea_of_Justice/enqMd_ze6RMC --> <!-- original cite mismatches 2009 Harvard pub with 2011 Belknap pub --> }}</ref> [[public choice|politics]], [[Economics of religion|religion]],<ref>{{Cite journal |last=Iannaccone |first=Laurence R. |author-link=Laurence R. Iannaccone |date=September 1998 |title=Introduction to the Economics of Religion |journal=Journal of Economic Literature |volume=36 |issue=3 |pages=1465–1495 |jstor=2564806 |url=https://edisciplinas.usp.br/pluginfile.php/262957/mod_resource/content/2/Iannaccone%20-%20Economics%20of%20Religion.pdf |access-date=2022-07-01 |archive-date=9 February 2020 |archive-url=https://web.archive.org/web/20200209225107/https://edisciplinas.usp.br/pluginfile.php/262957/mod_resource/content/2/Iannaccone%20-%20Economics%20of%20Religion.pdf |url-status=live }}</ref> [[Institutional economics|social institutions]], [[Economics of war|war]],<ref>{{Cite book |author-link=William D. Nordhaus |last=Nordhaus |first=William D. |title=War with Iraq: Costs, Consequences, and Alternatives |date=2002 |veditors=Kaysen C, Miller SE, Malin MB, Nordhaus WD, Steinbruner JD |publisher=American Academy of Arts and Sciences |isbn=978-0-87724-036-5 |location=Cambridge, Massachusetts |pages=51–85 |chapter=The Economic Consequences of a War with Iraq |access-date=21 October 2007 |chapter-url=http://nordhaus.econ.yale.edu/AAAS_War_Iraq_2.pdf |archive-url=https://web.archive.org/web/20070202005510/http://nordhaus.econ.yale.edu/AAAS_War_Iraq_2.pdf |archive-date=2 February 2007}}</ref> [[economics of science|science]],<ref>{{Cite encyclopedia |last=Diamond | first=Arthur M. Jr. |chapter=Science, economics of |date=2008 |edition=2nd |pages=328–334 |doi=10.1057/9780230226203.1491 |isbn=978-0-333-78676-5 |dictionary=[[The New Palgrave Dictionary of Economics]] |editor-last1=Durlauf |editor-first1=Steven N. |editor-last2=Blume |editor-first2=Lawrence E. |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde2008_E000222 <!--chapter-url throws error with archive-url --> |archive-url=https://web.archive.org/web/20170929232007/http://www.dictionaryofeconomics.com/article?id=pde2008_E000222 |archive-date=2017-09-29}} (Note the page is broken in some browsers but is still readable through the source.)</ref> and [[Green economics|the environment]].<ref>{{Cite report |title=Towards a Green Economy: Pathways to Sustainable Development and Poverty Eradication |date=2011 |publisher=[[United Nations Environment Programme]] |url=https://sustainabledevelopment.un.org/content/documents/126GER_synthesis_en.pdf |access-date=2022-07-01 |archive-date=26 March 2017 |archive-url=https://web.archive.org/web/20170326154152/https://sustainabledevelopment.un.org/content/documents/126GER_synthesis_en.pdf |url-status=live }}</ref> == Definitions of economics == {{anchor|The term and its various definitions€}} {{main|Definitions of economics}} The earlier term for the discipline was "political economy", but since the late 19th century, it has commonly been called "economics".<ref>{{Cite book |last=Backhouse |first=Roger |url=https://www.worldcat.org/oclc/59475581 |title=The Penguin history of economics |date=2002 |isbn=0-14-026042-0 |pages=117 |publisher=Penguin Adult |oclc=59475581}}</ref> The term is ultimately derived from [[Ancient Greek]] {{lang|grc|[[wikt:οἰκονομία|οἰκονομία]]}} (''oikonomia'') which is a term for the "way (nomos) to run a household (oikos)", or in other words the know-how of an {{lang|grc|οἰκονομικός}} (''oikonomikos''), or "household or homestead manager". Derived terms such as "economy" can therefore often mean "frugal" or "thrifty".<ref name="etymology">The terms derive ultimately from {{lang|grc|[[wikt:οἶκος|οἶκος]]}} (''{{lang|grc-Latn|oikos}}'' "house") and {{lang|grc|[[wikt:νόμος|νόμος]]}} (''{{lang|grc-Latn|nomos}}'', "custom" or "law"). {{Cite encyclopedia |last=Harper |first=Douglas |author-link=Douglas Harper |date=February 2007 |dictionary=Online Etymology Dictionary |title=Economy |url=http://www.etymonline.com/index.php?term=economic |access-date=27 October 2007 |archive-date=12 May 2013 |archive-url=https://web.archive.org/web/20130512162853/http://www.etymonline.com/index.php?term=economic |url-status=live }}</ref><ref name="Free2010">{{Cite book |url=https://books.google.com/books?id=hRFadIRMaMsC&pg=PA8 |title=21st Century Economics: A Reference Handbook |publisher=Sage Publications |year=2010 |isbn=978-1-4129-6142-4 |editor-last=Free |editor-first=Rhona C. |volume=1 |page=8}}</ref><ref name="MarshallMarshall1888">{{cite book |last1=Marshall |first1=Alfred |author-link1=Alfred Marshall |last2=Marshall |first2=Mary Paley |author-link2=Mary Paley Marshall |title=The Economics of Industry |url=https://archive.org/details/economicsindust00marsgoog |year=1888 |publisher=Macmillan |page=[https://archive.org/details/economicsindust00marsgoog/page/n22 2]|orig-year=1879}}</ref><ref name="Jevons1879">{{cite book |last=Jevons |first=William Stanley |author-link=William Stanley Jevons |title=The Theory of Political Economy |url=https://archive.org/details/theorypolitical00jevogoog |edition=2nd |year=1879 |publisher=Macmillan and Co |page=XIV}}</ref> By extension then, "political economy" was the way to manage a [[polis]] or state. There are a variety of modern [[definitions of economics]]; some reflect evolving views of the subject or different views among economists.<ref name="Backhouse">{{cite encyclopedia |author-link1=Roger E. Backhouse |last1=Backhouse |first1=Roger E. |title=The New Palgrave Dictionary of Economics |pages=720–722 |first2=Steven |last2=Medema |date=2008 |edition=2nd|editor-first1=Steven N. |editor-last1=Durlauf |editor-first2=Lawrence E. |editor-last2=Blume |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde2008_E000291 |doi=10.1057/9780230226203.0442 |isbn=978-0-333-78676-5 |chapter=Economics, definition of |publisher=Palgrave Macmillan UK |access-date=23 December 2011 |archive-date=5 October 2017 |archive-url=https://web.archive.org/web/20171005001939/http://www.dictionaryofeconomics.com/article?id=pde2008_E000291 |url-status=live }}</ref><ref name="BackhouseMedema2009">{{cite journal |last1=Backhouse |first1=Roger E. |first2=Steven |last2=Medema |date=Winter 2009 |title=Retrospectives: On the Definition of Economics |journal=[[Journal of Economic Perspectives]] |volume=23 |issue=1 |pages=221–233 |jstor=27648302 |doi=10.1257/jep.23.1.221|doi-access=free }}</ref> [[Scottish people|Scottish]] philosopher [[Adam Smith]] (1776) defined what was then called [[political economy]] as "an inquiry into the nature and causes of the wealth of nations", in particular as: {{blockquote|text=a branch of the science of a statesman or legislator [with the twofold objectives of providing] a plentiful revenue or subsistence for the people ... [and] to supply the state or commonwealth with a revenue for the publick services.<ref name="Groenwegen">{{cite book |last=Smith |first=Adam |author-link=Adam Smith |date=1776 |title=An Inquiry into the Nature and Causes of the Wealth of Nations|title-link=An Inquiry into the Nature and Causes of the Wealth of Nations }} and Book IV, as quoted in {{cite encyclopedia |first=Peter |last=Groenwegen |date=2008 |pages=476–480 |title=The New Palgrave Dictionary of Economics |edition=2nd |editor-first1=Steven N. |editor-last1=Durlauf |editor-first2=Lawrence E. |editor-last2=Blume |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde2008_P000114 |doi=10.1057/9780230226203.1300 |chapter=Political Economy |publisher=Palgrave Macmillan UK |isbn=978-0-333-78676-5 |access-date=4 October 2017 |archive-date=5 October 2017 |archive-url=https://web.archive.org/web/20171005000524/http://www.dictionaryofeconomics.com/article?id=pde2008_P000114 |url-status=live }}</ref>}} [[Jean-Baptiste Say]] (1803), distinguishing the subject matter from its [[public policy|public-policy]] uses, defined it as the science ''of'' production, distribution, and consumption of [[wealth]].<ref name="Say1803">{{cite book|last=Say|first=Jean Baptiste|author-link=Jean-Baptiste Say|title=A Treatise on Political Economy|year=1803|publisher=Grigg and Elliot|title-link=Say's Political Economy}}</ref> On the [[satirical]] side, [[Thomas Carlyle]] (1849) coined "[[the dismal science]]" as an [[Epithet#Alternative contemporary usage|epithet]] for [[classical economics]], in this context, commonly linked to the pessimistic analysis of [[Malthus]] (1798).<ref name="Dismal">{{unbulleted list citebundle |1 = {{cite magazine |last=Carlyle |first=Thomas |author-link=Thomas Carlyle |date=1849 |title=Occasional Discourse on the Negro Question |magazine=[[Fraser's Magazine]] |title-link=Occasional Discourse on the Negro Question }} |2 = {{cite book |last=Malthus |first=Thomas Robert |author-link=Thomas Robert Malthus |date=1798 |title=An Essay on the Principle of Population |publisher=J. Johnson |location=London|title-link=An Essay on the Principle of Population }} |3 = {{cite journal |last=Persky |first=Joseph |date=Autumn 1990 |title=Retrospectives: A Dismal Romantic |journal=Journal of Economic Perspectives |volume=4 |issue=4 |pages=165–172 |jstor=1942728 |doi=10.1257/jep.4.4.165|doi-access= }} }}</ref> [[John Stuart Mill]] (1844) delimited the subject matter further: {{blockquote|text=The science which traces the laws of such of the phenomena of society as arise from the combined operations of mankind for the production of wealth, in so far as those phenomena are not modified by the pursuit of any other object.<ref>{{cite book|last=Mill|first=John Stuart|author-link=John Stuart Mill|title=Essays on Some Unsettled Questions of Political Economy|chapter-url=https://books.google.com/books?id=4TxQqkP40fYC&pg=PA99|year=2007|publisher=Cosimo|isbn=978-1-60206-978-7|chapter=On the Definition of Political Economy; and on the Method of Investigation Proper to It|orig-year=1844|access-date=4 October 2017|archive-date=1 August 2020|archive-url=https://web.archive.org/web/20200801073208/https://books.google.com/books?id=4TxQqkP40fYC&pg=PA99|url-status=live}}</ref>}} [[Alfred Marshall]] provided a still widely cited definition in his textbook ''[[Principles of Economics (Marshall)|Principles of Economics]]'' (1890) that extended analysis beyond [[Economic wealth|wealth]] and from the [[societal]] to the [[microeconomic]] level: {{blockquote|text=Economics is a study of man in the ordinary business of life. It enquires how he gets his income and how he uses it. Thus, it is on the one side, the study of wealth and on the other and more important side, a part of the study of man.<ref>{{cite book|last=Marshall|first=Alfred|author-link=Alfred Marshall|title=Principles of Economics|url=https://archive.org/details/principlesecono00marsgoog|year=1890|publisher=Macmillan and Company|pages=[https://archive.org/details/principlesecono00marsgoog/page/n196 1]–2}}</ref>}} [[Lionel Robbins]] (1932) developed implications of what has been termed "[p]erhaps the most commonly accepted current definition of the subject":<ref name="BackhouseMedema2009"/> {{blockquote |text=Economics is the science which studies [[human behaviour]] as a relationship between ends and scarce means which have alternative uses.<ref>{{cite book|last=Robbins|first=Lionel|title=An Essay on the Nature and Significance of Economic Science|url=https://books.google.com/books?id=nySoIkOgWQ4C&pg=PA15|year=2007|orig-year=1932|publisher=Ludwig von Mises Institute|isbn=978-1-61016-039-1|page=15}}</ref>}} Robbins described the definition as not ''classificatory'' in "pick[ing] out certain ''kinds'' of behaviour" but rather ''analytical'' in "focus[ing] attention on a particular ''aspect'' of behaviour, the form imposed by the influence of [[scarcity]]."{{sfnp|Robbins|2007|p=16}} He affirmed that previous economists have usually centred their studies on the analysis of wealth: how wealth is created (production), distributed, and consumed; and how wealth can grow.{{sfnp|Robbins|2007|pp=4–7}} But he said that economics can be used to study other things, such as war, that are outside its usual focus. This is because war has as the goal winning it (as a sought-after ''end''), generates both cost and benefits; and, ''resources'' (human life and other costs) are used to attain the goal. If the war is not winnable or if the expected costs outweigh the benefits, the deciding ''actors'' (assuming they are rational) may never go to war (a ''decision'') but rather explore other alternatives. Economics cannot be defined as the science that studies wealth, war, crime, education, and any other field economic analysis can be applied to; but, as the science that studies a particular common aspect of each of those subjects (they all use scarce resources to attain a sought-after end). Some subsequent comments criticised the definition as overly broad in failing to limit its subject matter to analysis of markets. From the 1960s, however, such comments abated as the economic theory of maximizing behaviour and [[rational choice|rational-choice]] modelling [[Economic imperialism (economics)|expanded the domain]] of the subject to areas previously treated in other fields.<ref name="Backhouse2009Stigler">{{unbulleted list citebundle |1 = {{cite journal |last1=Backhouse |first1=Roger E. |first2=Steven G. |last2=Medema |date=October 2009 |title=Defining Economics: The Long Road to Acceptance of the Robbins Definition |journal=Economica |volume=76 |issue=s1 |pages=805–820 |doi=10.1111/j.1468-0335.2009.00789.x|s2cid=148506444 |doi-access=free }} |2 = {{cite journal |author-link=George J. Stigler |last=Stigler |first=George J. |date=1984 |title=Economics – The Imperial Science? |journal=Scandinavian Journal of Economics |volume=86 |issue=3 |pages=301–313 |jstor=3439864|doi=10.2307/3439864 }} }}</ref> There are other criticisms as well, such as in scarcity not accounting for the [[macroeconomics]] of high unemployment.<ref>{{cite encyclopedia |author-link=Mark Blaug |last=Blaug |first=Mark |date=15 September 2017 |title=Economics |encyclopedia=Encyclopædia Britannica |url=https://www.britannica.com/topic/economics |access-date=4 October 2017 |archive-date=25 June 2022 |archive-url=https://web.archive.org/web/20220625153920/https://www.britannica.com/topic/economics |url-status=live }}</ref> [[Gary Becker]], a contributor to the expansion of economics into new areas, described the approach he favoured as "combin[ing the] assumptions of maximizing behaviour, stable [[preference (economics)|preferences]], and [[economic equilibrium|market equilibrium]], used relentlessly and unflinchingly."<ref>{{cite book|last=Becker|first=Gary S.|title=The Economic Approach to Human Behavior|url=https://books.google.com/books?id=iwEOFKSKbMgC&pg=PA5|year=1976|publisher=University of Chicago Press|isbn=978-0-226-04112-4|page=5}}</ref> One commentary characterises the remark as making economics an approach rather than a subject matter but with great specificity as to the "choice process and the type of [[social interaction]] that [such] analysis involves." The same source reviews a range of definitions included in principles of economics textbooks and concludes that the lack of agreement need not affect the subject-matter that the texts treat. Among economists more generally, it argues that a particular definition presented may reflect the direction toward which the author believes economics is evolving, or should evolve.<ref name=BackhouseMedema2009/> Many economists including Nobel Prize winners [[James M. Buchanan]] and [[Ronald Coase]] reject the method-based definition of Robbins and continue to prefer definitions like those of Say, in terms of its subject matter.<ref name="Backhouse2009Stigler"/> [[Ha-Joon Chang]] has for example argued that the definition of Robbins would make economics very peculiar because all other sciences define themselves in terms of the area of inquiry or object of inquiry rather than the methodology. In the biology department, it is not said that all biology should be studied with DNA analysis. People study living organisms in many different ways, so some people will perform DNA analysis, others might analyse anatomy, and still others might build game theoretic models of animal behaviour. But they are all called biology because they all study living organisms. According to Ha Joon Chang, this view that the economy can and should be studied in only one way (for example by studying only rational choices), and going even one step further and basically redefining economics as a theory of everything, is peculiar.<ref>{{cite web |url=https://www.huffpost.com/entry/ha-joon-chang-economics_n_5120030 |title=Ha-Joon Chang: Economics Is A Political Argument |author=Seung-Yoon Lee |date=4 September 2014 |website=huffpost.com |publisher=Huffington Post |access-date= |quote= |archive-date=19 October 2021 |archive-url=https://web.archive.org/web/20211019151027/https://www.huffpost.com/entry/ha-joon-chang-economics_n_5120030 |url-status=live }}</ref> == History of economic thought == {{Main|History of economic thought|History of macroeconomic thought}} {{Missing information|section|information and behavioural economics, contemporary microeconomics|date=September 2020}} === From antiquity through the physiocrats === [[File:Lorrain.seaport.jpg|thumb|upright=1.2|A 1638 painting of a French seaport during the heyday of [[mercantilism]]|alt=A seaport with a ship arriving]] Questions regarding distribution of resources are found throughout the writings of the [[Boeotia]]n poet [[Hesiod]] and several economic historians have described Hesiod as the "first economist".<ref>{{unbulleted list citebundle |1 = {{cite book|last=Gordan|first=Barry J.|title=Economic analysis before Adam Smith: Hesiod to Lessius|publisher=MacMillan|date=1975|page=3|isbn=978-1-349-02116-1|doi=10.1007/978-1-349-02116-1|url=https://books.google.com/books?id=YReyCwAAQBAJ&pg=PA3}} |2 = {{cite book|last=Brockway|first=George P.|title=The End of Economic Man: An Introduction to Humanistic Economics|edition=4th|date=2001|page=128|publisher=W. W. Norton & Company |isbn=978-0-393-05039-4 |url=https://books.google.com/books?id=i8ZhZFqUl7kC|access-date=18 September 2020|archive-date=14 April 2021|archive-url=https://web.archive.org/web/20210414142715/https://books.google.com/books?id=i8ZhZFqUl7kC|url-status=live}} }}</ref> However, the word [[Oikos]], the Greek word from which the word economy derives, was used for issues regarding how to manage a household (which was understood to be the landowner, his family, and his slaves<ref>{{Cite book |last=Backhouse |first=Roger |url=https://www.worldcat.org/oclc/59475581 |title=The Penguin history of economics |date=2002 |publisher=Penguin Adult |isbn=0-14-026042-0 |oclc=59475581 |access-date=3 June 2022 |archive-date=30 July 2022 |archive-url=https://web.archive.org/web/20220730075150/https://www.worldcat.org/title/penguin-history-of-economics/oclc/59475581 |url-status=live }}</ref>) rather than to refer to some normative societal system of distribution of resources, which is a more recent phenomenon.<ref>Cameron, Gregory. (2008). Oikos and Economy: The Greek Legacy in Economic Thought.</ref><ref>{{Cite web|title=Oikos Meaning in Bible – New Testament Greek Lexicon – New American Standard|url=https://www.biblestudytools.com/lexicons/greek/nas/oikos.html|access-date=2021-11-19|website=biblestudytools.com|language=en|archive-date=19 November 2021|archive-url=https://web.archive.org/web/20211119121115/https://www.biblestudytools.com/lexicons/greek/nas/oikos.html|url-status=live}}</ref><ref>{{Cite web|last=Jameson|first=Michael H.|date=2015-12-22|title=houses, Greek|url=https://oxfordre.com/classics/view/10.1093/acrefore/9780199381135.001.0001/acrefore-9780199381135-e-3169|access-date=2021-11-19|website=Oxford Research Encyclopedia of Classics|language=en|doi=10.1093/acrefore/9780199381135.013.3169|isbn=978-0-19-938113-5|archive-date=19 November 2021|archive-url=https://web.archive.org/web/20211119121120/https://oxfordre.com/classics/view/10.1093/acrefore/9780199381135.001.0001/acrefore-9780199381135-e-3169|url-status=live}}</ref> [[Xenophon]], the author of the [[Oeconomicus]], is credited by [[Philology|philologues]] for being the source of the word economy.<ref>{{Cite book |last=Lowry |first=S. Todd |title=Xenophons Oikonomikos, Über einen Klassiker der Haushaltsökonomie |publisher=Verlag Wirtschaft und Finanzen |year=1998 |isbn=3878811276 |location=[[Düsseldorf]] |pages=77 |language=de}}</ref> [[Joseph Schumpeter]] described 16th and 17th century [[Second scholasticism|scholastic]] writers, including [[Tomás de Mercado]], [[Luis de Molina]], and [[Juan de Lugo]], as "coming nearer than any other group to being the 'founders' of scientific economics" as to [[Monetary economics|monetary]], [[interest#Theories of interest|interest]], and [[microeconomics|value]] theory within a [[natural law|natural-law]] perspective.<ref>{{cite book |last=Schumpeter |first=Joseph A. |date=1954 |title=History of Economic Analysis |publisher=Routledge |pages=97, 101, 112|isbn=978-0-415-10888-1 |url=https://books.google.com/books?id=pl4DABZfGREC&pg=PA97}}</ref> Two groups, who later were called "mercantilists" and "physiocrats", more directly influenced the subsequent development of the subject. Both groups were associated with the rise of [[economic nationalism]] and [[History of capitalism#Merchant capitalism and mercantilism|modern capitalism]] in Europe. [[Mercantilism]] was an economic doctrine that flourished from the 16th to 18th century in a prolific pamphlet literature, whether of merchants or statesmen. It held that a nation's wealth depended on its accumulation of gold and silver. Nations without access to mines could obtain gold and silver from trade only by selling goods abroad and restricting imports other than of gold and silver. The doctrine called for importing inexpensive raw materials to be used in manufacturing goods, which could be exported, and for state regulation to impose protective [[tariff]]s on foreign manufactured goods and prohibit manufacturing in the colonies.<ref>{{unbulleted list citebundle|{{cite encyclopedia |title=Mercantilism |encyclopedia=Encyclopædia Britannica |date=26 August 2016 |url=https://www.britannica.com/topic/mercantilism |access-date=24 October 2017 |archive-date=31 October 2017 |archive-url=https://web.archive.org/web/20171031160310/https://www.britannica.com/topic/mercantilism |url-status=live }}|{{harvp|Blaug|2017|page=343}}.}}</ref> [[Physiocrats]], a group of 18th-century French thinkers and writers, developed the idea of the economy as a [[circular flow]] of income and output. Physiocrats believed that only agricultural production generated a clear surplus over cost, so that agriculture was the basis of all wealth.<ref>{{Cite journal|last=Bertholet|first=Auguste|date=2021|title=Constant, Sismondi et la Pologne|url=https://www.slatkine.com/fr/editions-slatkine/75250-book-05077807-3600120175625.html|journal=Annales Benjamin Constant|volume=46|pages=78–81|access-date=20 January 2022|archive-date=12 May 2022|archive-url=https://web.archive.org/web/20220512143530/https://www.slatkine.com/fr/editions-slatkine/75250-book-05077807-3600120175625.html|url-status=live}}</ref> Thus, they opposed the mercantilist policy of promoting manufacturing and trade at the expense of agriculture, including import tariffs. Physiocrats advocated replacing administratively costly tax collections with a single tax on income of land owners. In reaction against copious mercantilist trade regulations, the physiocrats advocated a policy of ''[[laissez-faire]]'',<ref>{{Cite book |last1=Bertholet |first1=Auguste |url=https://www.sgeaj.ch/wp-content/uploads/2024/12/bertholet-kapossy-la-physiocratie-et-la-suisse-2023.pdf |title=La Physiocratie et la Suisse |last2=Kapossy |first2=Béla |publisher=Slatkine |year=2023 |isbn=9782051029391 |location=Geneva |language=fr}}</ref> which called for minimal government intervention in the economy.<ref>{{unbulleted list citebundle |1 = {{cite encyclopedia|title=Physiocrat|encyclopedia=Encyclopædia Britannica Online|date=7 March 2014|url=https://www.britannica.com/topic/physiocrat|access-date=24 October 2017|archive-date=25 October 2017|archive-url=https://web.archive.org/web/20171025023645/https://www.britannica.com/topic/physiocrat|url-status=live}} |2 = {{cite book|last=Blaug|first=Mark|title=Economic Theory in Retrospect|url=https://books.google.com/books?id=4nd6alor2goC&pg=PA24|edition=5th|year=1997|publisher=Cambridge University Press|isbn=978-0-521-57701-4|pages=24–29, 82–84}} }}</ref> [[Adam Smith]] (1723–1790) was an early economic theorist.<ref>{{cite book|last=Hunt|first=E. K.|title=History of Economic Thought: A Critical Perspective|url=https://books.google.com/books?id=duYaugxYHdIC&pg=PA36|year=2002|publisher=M.E. Sharpe|isbn=978-0-7656-0606-8|page=36}}</ref> Smith was harshly critical of the mercantilists but described the physiocratic system "with all its imperfections" as "perhaps the purest approximation to the truth that has yet been published" on the subject.<ref>{{cite book|last=Skousen|first=Mark|title=The Making of Modern Economics: The Lives and Ideas of the Great Thinkers|url=https://archive.org/details/makingo_sko_2001_00_5649|url-access=registration|year=2001|publisher=M.E. Sharpe|isbn=978-0-7656-0479-8|page=[https://archive.org/details/makingo_sko_2001_00_5649/page/36 36]}}</ref> === Classical political economy === {{Main|Classical economics}} [[File:AdamSmith.jpg|thumb|upright=0.8|The publication of [[Adam Smith]]'s ''[[The Wealth of Nations]]'' in 1776 is considered to be the first formalisation of economic thought.|alt=Picture of Adam Smith facing to the right]] The publication of [[Adam Smith]]'s ''[[The Wealth of Nations]]'' in 1776, has been described as "the effective birth of economics as a separate discipline."{{sfnp|Blaug|2017|p=343}} The book identified land, labour, and capital as the three factors of production and the major contributors to a nation's wealth, as distinct from the physiocratic idea that only agriculture was productive. Smith discusses potential benefits of specialisation by [[division of labour]], including increased [[labour productivity]] and [[gains from trade]], whether between town and country or across countries.<ref>{{cite web |author-link=Alan Deardorff |last=Deardorff |first=Alan V. |date=2016 |title=Division of labor |website=Deardorffs' Glossary of International Economics |publisher=University of Michigan |url=http://www-personal.umich.edu/~alandear/glossary/d.html#DivisionOfLabor |access-date=1 March 2012 |archive-date=16 March 2020 |archive-url=https://web.archive.org/web/20200316082342/http://www-personal.umich.edu/~alandear/glossary/d.html#DivisionOfLabor |url-status=live }}</ref> His "theorem" that "the division of labor is limited by the extent of the market" has been described as the "core of a [[Theory of the firm|theory of the functions of firm]] and [[industrial organization|industry]]" and a "fundamental principle of economic organization."<ref>{{cite journal |author-link=George J. Stigler |last=Stigler |first=George J. |date=June 1951 |title=The Division of Labor Is Limited by the Extent of the Market |journal=Journal of Political Economy |volume=59 |issue=3 |pages=185–193 |jstor=1826433 |url=https://www.sfu.ca/~allen/stigler.pdf |doi=10.1086/257075 |s2cid=36014630 |access-date=26 August 2017 |archive-date=25 August 2016 |archive-url=https://web.archive.org/web/20160825225559/http://www.sfu.ca/~allen/stigler.pdf |url-status=live }}</ref> To Smith has also been ascribed "the most important substantive proposition in all of economics" and foundation of [[Allocation of resources|resource-allocation]] theory—that, under [[Competition (economics)|competition]], resource owners (of labour, land, and capital) seek their most profitable uses, resulting in an equal rate of return for all uses in [[Economic equilibrium|equilibrium]] (adjusted for apparent differences arising from such factors as training and unemployment).<ref>{{cite journal |last=Stigler |first=George J. |date=December 1976 |title=The Successes and Failures of Professor Smith |journal=Journal of Political Economy |volume=84 |issue=6 |pages=1199–1213 |jstor=1831274 |doi=10.1086/260508|s2cid=41691663 }} Also published as {{cite report |title=The Successes and Failures of Professor Smith |work=Selected Papers, No. 50 |url=http://testwww.chicagobooth.edu/research/selectedpapers/sp50c.pdf |publisher=Graduate School of Business, University of Chicago |date= |access-date=16 August 2010 |archive-date=25 August 2016 |archive-url=https://web.archive.org/web/20160825213630/http://testwww.chicagobooth.edu/research/selectedpapers/sp50c.pdf |url-status=live }}</ref> In an argument that includes "one of the most famous passages in all economics,"{{sfnp|Samuelson|Nordhaus|2010|p=30|loc=ch. 2, "Markets and Government in a Modern Economy", The Invisible Hand}} Smith represents every individual as trying to employ any capital they might command for their own advantage, not that of the society,{{efn|"Capital" in Smith's usage includes [[fixed capital]] and [[circulating capital]]. The latter includes wages and labour maintenance, money, and inputs from land, mines, and fisheries associated with production.{{sfn|Smith|1776|loc=Bk. II: ch. 1, 2, and 5}}}} and for the sake of profit, which is necessary at some level for employing capital in domestic industry, and positively related to the value of produce.{{sfnp|Smith|1776|loc=Bk. IV: Of Systems of political Œconomy, ch. II, "Of Restraints upon the Importation from Foreign Countries of such Goods as can be Produced at Home", IV.2.3 para. 3–5 and 8–9}} In this: {{blockquote|He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.{{sfnp|Smith|1776|loc=Bk. IV: Of Systems of political Œconomy, ch. II, "Of Restraints upon the Importation from Foreign Countries of such Goods as can be Produced at Home", para. 9}} }} The [[Reverend]] [[Thomas Robert Malthus]] (1798) used the concept of [[diminishing returns]] to explain low living standards. [[Human population]], he argued, tended to increase geometrically, outstripping the production of food, which increased arithmetically. The force of a rapidly growing population against a limited amount of land meant diminishing returns to labour. The result, he claimed, was chronically low wages, which prevented the standard of living for most of the population from rising above the subsistence level.<ref>{{cite book |last=Malthus |first=Thomas |date=1798 |title=An Essay on the Principle of Population |publisher=J. Johnson Publisher|title-link=An Essay on the Principle of Population }}</ref>{{Primary source inline|date=November 2021}} Economist [[Julian Simon]] has criticised Malthus's conclusions.<ref>{{cite book|last=Simon|first=Julian Lincoln|title=The Ultimate Resource|year=1981|publisher=Princeton University Press|title-link=The Ultimate Resource}}; and {{cite book|last=Simon|first=Julian Lincoln|title=The Ultimate Resource 2|url=https://books.google.com/books?id=wVyDwYqq5fMC&pg=PP1|year=1996|publisher=Princeton University Press|isbn=978-0-691-00381-8}}</ref> While Adam Smith emphasised production and income, [[David Ricardo]] (1817) focused on the distribution of income among landowners, workers, and capitalists. Ricardo saw an inherent conflict between landowners on the one hand and labour and capital on the other. He posited that the growth of population and capital, pressing against a fixed supply of land, pushes up rents and holds down wages and profits. Ricardo was also the first to state and prove the principle of [[comparative advantage]], according to which each country should specialise in producing and exporting goods in that it has a lower ''relative'' cost of production, rather relying only on its own production.<ref>{{cite book |first=David |last=Ricardo |date=1817 |title=On the Principles of Political Economy and Taxation |publisher=John Murray|title-link=On the Principles of Political Economy and Taxation }}</ref> It has been termed a "fundamental analytical explanation" for [[gains from trade]].<ref>{{cite encyclopedia|author-link=Ronald Findlay |first=Ronald |last=Findlay |date=2008 |edition=2nd |editor-first1=Steven N. |editor-last1=Durlauf |editor-first2=Lawrence E. |editor-last2=Blume |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde2008_C000254 |doi=10.1057/9780230226203.0274 |title=The New Palgrave Dictionary of Economics |pages=28–33 |isbn=978-0-333-78676-5 |chapter=Comparative advantage |publisher=Palgrave Macmillan UK |access-date=16 August 2010 |archive-date=11 October 2017 |archive-url=https://web.archive.org/web/20171011021521/http://www.dictionaryofeconomics.com/article?id=pde2008_C000254 |url-status=live }}</ref> Coming at the end of the classical tradition, [[John Stuart Mill]] (1848) parted company with the earlier classical economists on the inevitability of the distribution of income produced by the market system. Mill pointed to a distinct difference between the market's two roles: allocation of resources and distribution of income. The market might be efficient in allocating resources but not in distributing income, he wrote, making it necessary for society to intervene.<ref>{{cite book |last=Mill |first=John Stuart |date=1848 |title=Principles of Political Economy |publisher=John W. Parker Publisher|title-link=Principles of Political Economy }}</ref> Value theory was important in classical theory. Smith wrote that the "real price of every thing ... is the toil and trouble of acquiring it". Smith maintained that, with rent and profit, other costs besides wages also enter the price of a commodity.{{sfnp|Smith|1776|loc=Bk. 1, Ch. 5, 6}} Other classical economists presented variations on Smith, termed the '[[labour theory of value#The theory's development|labour theory of value]]'. Classical economics focused on the tendency of any market economy to settle in a final [[Steady-state economy#Concept of the stationary state in classical economics|stationary state]] made up of a constant stock of physical wealth (capital) and a constant population size. === Marxian economics === {{Main|Marxian economics}} [[File:Karl Marx 001.jpg|thumb|upright=0.8|The [[Marxian economics|Marxist]] [[critique of political economy]] comes from the work of German philosopher [[Karl Marx]].|alt=Photograph of Karl Marx facing the viewer]] Marxist (later, Marxian) economics descends from classical economics and it derives from the work of [[Karl Marx]]. The first volume of Marx's major work, {{lang|de|[[Das Kapital]]}}, was published in 1867. Marx focused on the [[labour theory of value]] and [[theory of surplus value]]. Marx wrote that they were mechanisms used by capital to exploit labour.<ref name="Roemer">{{unbulleted list citebundle |1 = {{cite encyclopedia |author-link=John Roemer |last=Roemer |first=J. E. |date=1987 |dictionary=The New Palgrave Dictionary of Economics |publisher=Palgrave Macmillan |editor-first1=John |editor-last1=Eatwell |editor-first2=Murray |editor-last2=Milgate |editor-first3=Peter |editor-last3=Newman |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde1987_X001420 |doi=10.1057/9780230226203.3052 |isbn=978-0-333-78676-5 |chapter=Marxian value analysis |pages=1–6 |access-date=19 October 2017 |archive-date=20 October 2017 |archive-url=https://web.archive.org/web/20171020033131/http://www.dictionaryofeconomics.com/article?id=pde1987_X001420 |url-status=live }} |2 = {{cite encyclopedia |author-link=Ernest Mandel |last=Mandel |first=Ernest |date=1987 |title=The New Palgrave Dictionary of Economics |publisher=Palgrave Macmillan |editor-first1=John |editor-last1=Eatwell |editor-first2=Murray |editor-last2=Milgate |editor-first3=Peter |editor-last3=Newman |pages=372, 376 |url=http://www.dictionaryofeconomics.com/article?id=pde1987_X001419 |doi=10.1057/9780230226203.3051 |isbn=978-0-333-78676-5 |chapter=Marx, Karl Heinrich (1818–1883) |access-date=19 October 2017 |archive-date=20 October 2017 |archive-url=https://web.archive.org/web/20171020032814/http://www.dictionaryofeconomics.com/article?id=pde1987_X001419 |url-status=live |url-access=subscription }} }}</ref> The labour theory of value held that the value of an exchanged commodity was determined by the labour that went into its production, and the theory of surplus value demonstrated how workers were only paid a proportion of the value their work had created.<ref name="THOMAS FULLER">{{cite news|url=https://www.nytimes.com/2009/09/18/world/asia/18laos.html|work=The New York Times|first=Thomas|last=Fuller|title=Communism and Capitalism Are Mixing in Laos|date=17 September 2009|access-date=24 February 2017|archive-date=22 February 2017|archive-url=https://web.archive.org/web/20170222010636/http://www.nytimes.com/2009/09/18/world/asia/18laos.html|url-status=live}}</ref> Marxian economics was further developed by [[Karl Kautsky]] (1854–1938)'s ''The Economic Doctrines of Karl Marx'' and ''[[The Class Struggle (Erfurt Program)]]'', [[Rudolf Hilferding]]'s (1877–1941) ''[[Finance Capital]]'', [[Vladimir Lenin]] (1870–1924)'s ''[[The Development of Capitalism in Russia]]'' and ''[[Imperialism, the Highest Stage of Capitalism]]'', and [[Rosa Luxemburg]] (1871–1919)'s ''[[The Accumulation of Capital]]''. === Neoclassical economics === {{Main|Neoclassical economics}} At its inception as a social science, ''economics'' was defined and discussed at length as the study of production, distribution, and consumption of wealth by Jean-Baptiste Say in his ''Treatise on Political Economy or, The Production, Distribution, and Consumption of Wealth'' (1803). These three items were considered only in relation to the increase or diminution of wealth, and not in reference to their processes of execution.{{efn|"This science indicates the cases in which commerce is truly productive, where whatever is gained by one is lost by another, and where it is profitable to all; it also teaches us to appreciate its several processes, but simply in their results, at which it stops. Besides this knowledge, the merchant must also understand the processes of his art. He must be acquainted with the commodities in which he deals, their qualities and defects, the countries from which they are derived, their markets, the means of their transportation, the values to be given for them in exchange, and the method of keeping accounts. The same remark is applicable to the agriculturist, to the manufacturer, and to the practical man of business; to acquire a thorough knowledge of the causes and consequences of each phenomenon, the study of political economy is essentially necessary to them all; and to become expert in his particular pursuit, each one must add thereto a knowledge of its processes." {{harv|Say|1803|page=XVI}} }} Say's definition has survived in part up to the present, modified by substituting the word "wealth" for "goods and services" meaning that wealth may include non-material objects as well. One hundred and thirty years later, [[Lionel Robbins, Baron Robbins|Lionel Robbins]] noticed that this definition no longer sufficed,{{efn|"And when we submit the definition in question to this test, it is seen to possess deficiencies which, so far from being marginal and subsidiary, amount to nothing less than a complete failure to exhibit either the scope or the significance of the most central generalisations of all." {{harv|Robbins|2007|p=5}} }} because many economists were making theoretical and philosophical inroads in other areas of human activity. In his ''[[An Essay on the Nature and Significance of Economic Science|Essay on the Nature and Significance of Economic Science]]'', he proposed a definition of economics as a study of human behaviour, subject to and constrained by scarcity,{{efn|"The conception we have adopted may be described as analytical. It does not attempt to pick out certain kinds of behaviour, but focuses attention on a particular aspect of behaviour, the form imposed by the influence of scarcity. {{harv|Robbins|2007|p=17}} }} which forces people to choose, allocate scarce resources to competing ends, and economise (seeking the greatest welfare while avoiding the wasting of scarce resources). According to Robbins: "Economics is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses".{{sfnp|Robbins|2007|p=16}} Robbins' definition eventually became widely accepted by mainstream economists, and found its way into current textbooks.<ref>{{cite conference |title=Defining Economics: the Long Road to Acceptance of the Robbins Definition |first1=Roger E. |last1=Backhouse |first2=Steven G. |last2=Medema |work=Lionel Robbins's essay on the Nature and Significance of Economic Science, 75th anniversary conference proceedings |date=10 December 2007 |pages=209–230 |url=http://darp.lse.ac.uk/papersdb/LionelRobbinsConferenceProveedingsVolume.pdf#page=213 |conference= |access-date=30 July 2014 |archive-date=4 March 2016 |archive-url=https://web.archive.org/web/20160304060656/http://darp.lse.ac.uk/papersdb/LionelRobbinsConferenceProveedingsVolume.pdf#page=213 |url-status=live }} also published in {{cite journal |title=Defining Economics: The Long Road to Acceptance of the Robbins Definition |journal=Economica |date=October 2009 |volume=76 |issue=Supplement 1 |pages=805–820 |jstor=40268907 |doi=10.1111/j.1468-0335.2009.00789.x|last1=Backhouse |first1=Roger E |last2=Medema |first2=Steve G |s2cid=148506444 |doi-access=free }}</ref> Although far from unanimous, most mainstream economists would accept some version of Robbins' definition, even though many have raised serious objections to the scope and method of economics, emanating from that definition.{{sfnp|Backhouse|Medema|2007|page=223|ps=: "There remained division over whether economics was defined by a method or a subject matter but both sides in that debate could increasingly accept some version of the Robbins definition."}} A body of theory later termed "neoclassical economics" formed from about 1870 to 1910. The term "economics" was popularised by such neoclassical economists as [[Alfred Marshall]] and [[Mary Paley Marshall]] as a concise synonym for "economic science" and a substitute for the earlier "[[political economy]]".<ref name="MarshallMarshall1888" /><ref name="Jevons1879"/> This corresponded to the influence on the subject of mathematical methods used in the [[natural science]]s.<ref name="Clark">{{cite book |last=Clark |first=Barry |title=Political Economy: A Comparative Approach |url=https://books.google.com/books?id=3wpiDzS45PsC&pg=PP1 |edition=2nd |year=1998 |publisher=Praeger |isbn=978-0-275-95869-5}}</ref> Neoclassical economics systematically integrated [[supply and demand]] as joint determinants of both price and quantity in market equilibrium, influencing the allocation of output and income distribution. It rejected the classical economics' [[labour theory of value]] in favour of a [[marginal utility]] theory of value on the demand side and a more comprehensive theory of costs on the supply side.<ref>{{cite encyclopedia |chapter=Marginalist economics |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde1987_X001393 |access-date=27 October 2017 |last=Campus |first=Antonietta |date=1987 |editor-last1=Eatwell |editor-first1=John |edition=first |volume=III |pages=1–6 |doi=10.1057/9780230226203.3031 |isbn=978-0-333-78676-5 |archive-url=https://web.archive.org/web/20171027231849/http://www.dictionaryofeconomics.com/article?id=pde1987_X001393 |archive-date=27 October 2017 |dictionary=The New Palgrave Dictionary of Economics |editor-first2=Murray |editor-last2=Milgate |editor-first3=Peter |editor-last3=Newman |url-status=live}}</ref> In the 20th century, neoclassical theorists departed from an earlier idea that suggested measuring total utility for a society, opting instead for [[ordinal utility]], which posits behaviour-based relations across individuals.<ref name="Hicks" /><ref>{{cite encyclopedia |title=The New Palgrave Dictionary of Economics |publisher=Palgrave Macmillan UK |access-date=27 October 2017 |last=Black |first=R.D. Collison |date=2008 |editor-last1=Durlauf |editor-first1=Steven N. |edition=2nd |pages=577–581 |doi=10.1057/9780230226203.1781 |isbn=978-0-333-78676-5 |archive-url=https://web.archive.org/web/20171028042451/http://www.dictionaryofeconomics.com/article?id=pde2008_U000047 |archive-date=28 October 2017 |editor-first2=Lawrence E. |editor-last2=Blume |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde2008_U000047 |chapter=Utility |url-status=live}}</ref> In [[microeconomics]], neoclassical economics represents incentives and costs as playing a pervasive role in shaping [[decision making]]. An immediate example of this is the [[consumer theory]] of individual demand, which isolates how prices (as costs) and income affect quantity demanded.<ref name="Hicks"/> In [[macroeconomics]] it is reflected in an early and lasting [[neoclassical synthesis]] with Keynesian macroeconomics.<ref name="Blanchard2008"/><ref name="Hicks">{{cite journal |author-link=John Hicks |last=Hicks |first=J.R. |date=April 1937 |title=Mr. Keynes and the "Classics": A Suggested Interpretation |journal=Econometrica |volume=5 |issue=2 |pages=147–159 |jstor=1907242 |doi=10.2307/1907242 }}</ref> Neoclassical economics is occasionally referred as ''orthodox economics'' whether by its critics or sympathisers. Modern [[mainstream economics]] builds on neoclassical economics but with many refinements that either supplement or generalise earlier analysis, such as [[econometrics]], [[game theory]], analysis of [[market failure]] and [[imperfect competition]], and the [[neoclassical model]] of [[economic growth]] for analysing long-run variables affecting [[national income]]. Neoclassical economics studies the behaviour of [[individual]]s, [[household]]s, and [[organisation]]s (called economic actors, players, or agents), when they manage or use [[Scarcity|scarce]] resources, which have alternative uses, to achieve desired ends. Agents are assumed to act rationally, have multiple desirable ends in sight, limited resources to obtain these ends, a set of stable preferences, a definite overall guiding objective, and the capability of making a choice. There exists an economic problem, subject to study by economic science, when a [[Decision theory|decision]] (choice) is made by one or more players to attain the best possible outcome.<ref>{{cite journal |first=Leigh |last=Tesfatsion |title=Agent-Based Computational Economics: Growing Economies from the Bottom Up |journal=[[Artificial Life (journal)|Artificial Life]] |date=Winter 2002 |volume=8 |issue=1 |pages=55–82 |url=https://www2.econ.iastate.edu/tesfatsi/acealife.pdf |pmid=12020421 |doi=10.1162/106454602753694765 |citeseerx=10.1.1.194.4605 |s2cid=1345062 |access-date=24 June 2020 |archive-date=26 November 2020 |archive-url=https://web.archive.org/web/20201126182912/https://www2.econ.iastate.edu/tesfatsi/acealife.pdf |url-status=live }}</ref> === Keynesian economics === {{Main|Keynesian economics}} [[File:Lopokova and Keynes 1920s cropped.jpg|thumb|upright=0.8|alt=John Maynard Keynes|[[John Maynard Keynes]], a key economics theorist]] Keynesian economics derives from [[John Maynard Keynes]], in particular his book ''[[The General Theory of Employment, Interest and Money]]'' (1936), which ushered in contemporary [[macroeconomics]] as a distinct field.<ref>{{unbulleted list citebundle |1 = {{cite book |last=Keynes |first=John Maynard |title=The General Theory of Employment, Interest and Money |publisher= Macmillan|year=1936 |location=London |isbn=978-1-57392-139-8 |title-link=The General Theory of Employment, Interest and Money }} |2 = {{harvp|Blaug|2017|p=347}} }}</ref> The book focused on determinants of national income in the short run when prices are relatively inflexible. Keynes attempted to explain in broad theoretical detail why high labour-market unemployment might not be self-correcting due to low "[[effective demand]]" and why even price flexibility and monetary policy might be unavailing. The term "revolutionary" has been applied to the book in its impact on economic analysis.<ref>{{unbulleted list citebundle |1 = {{cite encyclopedia |last=Tarshis |first=L. |author-link=Lorie Tarshis |date=1987 |title=The New Palgrave Dictionary of Economics |publisher=Palgrave Macmillan |edition= |editor-first1=John |editor-last1=Eatwell |editor-first2=Murray |editor-last2=Milgate |editor-first3=Peter |editor-last3=Newman |volume=III |pages=47–50 |url=http://www.dictionaryofeconomics.com/article?id=pde1987_X001226 |doi=10.1057/9780230226203.2888 |isbn=978-0-333-78676-5 |chapter=Keynesian Revolution |access-date=27 October 2017 |archive-date=28 October 2017 |archive-url=https://web.archive.org/web/20171028042612/http://www.dictionaryofeconomics.com/article?id=pde1987_X001226 |url-status=live |doi-access=free |url-access=subscription }} |2 = {{harvp|Samuelson|Nordhaus|2010|p=5}} |3 = {{harvp|Blaug|2017|p=346}} }}</ref> During the following decades, many economists followed Keynes' ideas and expanded on his works. [[John Hicks]] and [[Alvin Hansen]] developed the [[IS–LM model]] which was a simple formalisation of some of Keynes' insights on the economy's short-run equilibrium. [[Franco Modigliani]] and [[James Tobin]] developed important theories of [[Consumption (economics)|private consumption]] and [[investment]], respectively, two major components of [[aggregate demand]]. [[Lawrence Klein]] built the first [[large-scale macroeconometric model]], applying the Keynesian thinking systematically to the [[Economy of the United States|US economy]].<ref>Blanchard et al. (2017), p. 510.</ref> === Post-WWII economics === Immediately after World War II, Keynesian was the dominant economic view of the United States establishment and its allies, Marxian economics was the dominant economic view of the Soviet Union nomenklatura and its allies. ==== Monetarism ==== {{Main|Monetarism}} Monetarism appeared in the 1950s and 1960s, its intellectual leader being [[Milton Friedman]]. Monetarists contended that monetary policy and other monetary shocks, as represented by the growth in the money stock, was an important cause of economic fluctuations, and consequently that monetary policy was more important than fiscal policy for [[stabilization policy|purposes of stabilisation]].<ref>Blanchard et al. (2017), p. 511.</ref><ref name="fed">{{cite web|url=http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021108/default.htm|title=Remarks by Governor Ben S. Bernanke|publisher=The Federal Reserve Board|date=8 November 2002|first=Ben|last=Bernanke|access-date=22 February 2009|archive-date=24 March 2020|archive-url=https://web.archive.org/web/20200324160935/https://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021108/default.htm|url-status=live}}</ref> Friedman was also skeptical about the ability of central banks to conduct a sensible active monetary policy in practice, advocating instead using simple rules such as a steady rate of money growth.<ref>Blanchard et al. (2017), p. 512.</ref> Monetarism rose to prominence in the 1970s and 1980s, when several major central banks followed a monetarist-inspired policy, but was later abandoned because the results were unsatisfactory.<ref>Blanchard et al. (2017), p. 483–484.</ref><ref name="Historical">{{cite web |title=Federal Reserve Board - Historical Approaches to Monetary Policy |url=https://www.federalreserve.gov/monetarypolicy/historical-approaches-to-monetary-policy.htm |website=Board of Governors of the Federal Reserve System |access-date=29 October 2023 |language=en |date=8 March 2018}}</ref> ==== New classical economics ==== {{Main|New classical macroeconomics}} A more fundamental challenge to the prevailing Keynesian paradigm came in the 1970s from [[new classical macroeconomics|new classical economists]] like [[Robert Lucas Jr.|Robert Lucas]], [[Thomas Sargent]] and [[Edward Prescott]]. They introduced the notion of [[rational expectations]] in economics, which had profound implications for many economic discussions, among which were the so-called [[Lucas critique]] and the presentation of [[Real business-cycle theory|real business cycle models]].<ref>Blanchard et al. (2017), pp. 512–516.</ref> ==== New Keynesians ==== {{Main|New Keynesian economics}} During the 1980s, a group of researchers appeared being called [[New Keynesian economics|New Keynesian economists]], including among others [[George Akerlof]], [[Janet Yellen]], [[Gregory Mankiw]] and [[Olivier Blanchard]]. They adopted the principle of rational expectations and other monetarist or new classical ideas such as building upon models employing micro foundations and optimizing behaviour, but simultaneously emphasised the importance of various [[market failure]]s for the functioning of the economy, as had Keynes.<ref>Blanchard et al. (2017), pp. 516–517.</ref> Not least, they proposed various reasons that potentially explained the empirically observed features of [[Nominal rigidity|price and wage rigidity]], usually made to be endogenous features of the models, rather than simply assumed as in older Keynesian-style ones. ====New neoclassical synthesis==== {{Main|New neoclassical synthesis}} After decades of often heated discussions between Keynesians, monetarists, new classical and new Keynesian economists, a synthesis emerged by the 2000s, often given the name ''the [[new neoclassical synthesis]]''. It integrated the rational expectations and optimizing framework of the new classical theory with a new Keynesian role for nominal rigidities and other market imperfections like [[imperfect information]] in goods, labour and credit markets. The monetarist importance of monetary policy in stabilizing<ref>{{cite journal |last1=Woodford |first1=Michael |title=Convergence in Macroeconomics: Elements of the New Synthesis |journal=American Economic Journal: Macroeconomics |date=2009 |volume=1 |issue=1 |pages=267–279 |doi=10.1257/mac.1.1.267 |jstor=25760267 |url=https://www.jstor.org/stable/25760267 |issn=1945-7707}}</ref> the economy and in particular controlling inflation was recognised as well as the traditional Keynesian insistence that fiscal policy could also play an influential role in affecting [[aggregate demand]]. Methodologically, the synthesis led to a new class of applied models, known as [[dynamic stochastic general equilibrium]] or DSGE models, descending from real business cycles models, but extended with several new Keynesian and other features. These models proved useful and influential in the design of modern monetary policy and are now standard workhorses in most central banks.<ref>Blanchard et al. (2017), pp. 517–518.</ref> ==== After the 2008 financial crisis==== After the [[2008 financial crisis]], macroeconomic research has put greater emphasis on understanding and integrating the financial system into models of the general economy and shedding light on the ways in which problems in the financial sector can turn into major macroeconomic recessions. In this and other research branches, inspiration from [[behavioural economics]] has started playing a more important role in mainstream economic theory.<ref>Blanchard et al. (2017), pp. 518–519.</ref> Also, [[Heterogeneity in economics|heterogeneity]] among the economic agents, e.g. differences in income, plays an increasing role in recent economic research.<ref>{{cite web |last1=Guvenen |first1=Fatih |title=Macroeconomics with Heterogeneity: A Practical Guide |url=https://www.nber.org/system/files/working_papers/w17622/w17622.pdf |website=www.nber.org |publisher=National Bureau of Economic Research |access-date=29 October 2023}}</ref> === Other schools and approaches === {{Main|Schools of economic thought}} Other schools or trends of thought referring to a particular style of economics practised at and disseminated from well-defined groups of academicians that have become known worldwide, include the [[Freiburg School]], the [[School of Lausanne]], the [[Stockholm school (economics)|Stockholm school]] and the [[Chicago school of economics]]. During the 1970s and 1980s [[mainstream economics]] was sometimes separated into the [[Saltwater and freshwater economics|Saltwater approach]] of those universities along the [[East Coast of the United States|Eastern]] and [[West coast of the United States|Western]] coasts of the US, and the Freshwater, or [[Chicago school (economics)|Chicago school]] approach.<ref name=gordonessays>{{Citation | last = Gordon | first = Robert J. | author-link = Robert J. Gordon | title = Productivity Growth, Inflation, and Unemployment | publisher = [[Cambridge University Press]] | year = 2003 | pages = 226–227 | url = https://books.google.com/books?id=VXINsDT1sFwC |isbn = 978-0-521-53142-9}}</ref> Within macroeconomics there is, in general order of their historical appearance in the literature; [[classical economics]], [[neoclassical economics]], [[Keynesian economics]], the [[neoclassical synthesis]], [[monetarism]], [[new classical economics]], [[New Keynesian economics]]<ref>{{Cite book |last=Gali |first=Jordi |date=2015 |title=Monetary Policy, Inflation and the Business Cycle: An Introduction to the New Keynesian Framework and Its Applications |url=https://books.google.com/books?id=5GuYDwAAQBAJ&pg=PA5 |edition=2nd |publisher=Princeton University Press |isbn=978-0-691-16478-6 |pages=5–6}}</ref> and the [[new neoclassical synthesis]].<ref>{{cite web |last=Woodford |first=Michael |title=Convergence in Macroeconomics: Elements of the New Synthesis |work=The New Consensus |date=January 2008 |url=http://www.columbia.edu/~mw2230/Convergence_AEJ.pdf |access-date=31 August 2021 |url-status=live|archive-url=https://web.archive.org/web/20081221064431/http://www.columbia.edu:80/~mw2230/Convergence_AEJ.pdf |archive-date=21 December 2008 }}</ref> Beside the [[mainstream economics|mainstream]] development of economic thought, various alternative or [[Heterodox economics|heterodox economic theories]] have evolved over time, positioning themselves in contrast to mainstream theory.<ref name=Lee>{{cite journal |last1=Lee |first1=Frederic S. |title=Heterodox Economics |journal=The New Palgrave Dictionary of Economics |date=2008 |pages=1–7 |doi=10.1057/978-1-349-95121-5_2487-1|isbn=978-1-349-95121-5 }}</ref> These include:<ref name=Lee/> * [[Austrian School]], emphasizing [[human action]], [[property rights]] and the freedom to contract and transact to have a thriving and successful economy.<ref>{{cite web |title=WHAT IS AUSTRIAN ECONOMICS? |date=16 May 2014 |url=https://mises.org/what-austrian-economics |access-date=February 13, 2022 |archive-date=23 October 2020 |archive-url=https://web.archive.org/web/20201023162020/https://mises.org/what-austrian-economics |url-status=live }}</ref> It also emphasises that the state should play as small role as possible (if any role) in the regulation of economic activity between two transacting parties.<ref>{{cite web|title=The Austrian Theory of Efficiency and the Role of Government|url=https://mises.org/library/austrian-theory-efficiency-and-role-government-0|date=November 9, 2019|access-date=14 February 2022|archive-date=14 February 2022|archive-url=https://web.archive.org/web/20220214010751/https://mises.org/library/austrian-theory-efficiency-and-role-government-0|url-status=live}}</ref> [[Friedrich Hayek]] and [[Ludwig von Mises]] are the two most prominent representatives of the Austrian school. * [[Post-Keynesian economics]] concentrates on macroeconomic rigidities and adjustment processes. It is generally associated with the [[University of Cambridge]] and the work of [[Joan Robinson]].<ref>{{cite encyclopedia |last=Harcourt |first=G.C. |date=1987 |title=The New Palgrave: A Dictionary of Economics |edition= |editor-first1=John |editor-last1=Eatwell |editor-first2=Murray |editor-last2=Milgate |editor-first3=Peter |editor-last3=Newman |volume=III |pages=47–50 |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde1987_X001728 |doi=10.1057/9780230226203.3307 |isbn=978-0-333-78676-5 |chapter=Post-Keynesian economics |publisher=Palgrave Macmillan UK |url=http://www.e-elgar.com/shop/isbn/9781852788018 |access-date=13 February 2020 |archive-date=12 April 2020 |archive-url=https://web.archive.org/web/20200412222941/https://www.e-elgar.com/shop/gbp/post-keynesian-economics-9781852788018.html |url-status=live |url-access=subscription }}</ref> * [[Ecological economics]] like [[environmental economics]] studies the interactions between human economies and the ecosystems in which they are embedded,<ref>{{cite journal |last1=Xepapadeas |first1=Anastasios |title=Ecological Economics |journal=The New Palgrave Dictionary of Economics |date=2008 |pages=1–8 |doi=10.1057/978-1-349-95121-5_2141-1|isbn=978-1-349-95121-5 }}</ref> but in contrast to environmental economics takes an oppositional position towards general mainstream economic principles. A major difference between the two subdisciplines is their assumptions about the [[Substitute good|substitution possibilities]] between human-made and [[natural capital]].<ref>{{cite web |last1=Berlin |first1=D. I. W. |title=DIW Berlin: A Matter of Opinion : How Ecological and Neoclassical Environmental Economists Think about Sustainability and Economics |url=https://www.diw.de/sixcms/detail.php?id=diw_01.c.450284.de |website=www.diw.de |access-date=29 October 2023 |language=de |date=2006}}</ref> Additionally, alternative developments include [[Marxian economics]], [[constitutional economics]], [[institutional economics]], [[evolutionary economics]], [[dependency theory]], [[structuralist economics]], [[world systems theory]], [[econophysics]], [[econodynamics]], [[feminist economics]] and [[biophysical economics]].<ref>{{cite news |first=Nathanial |last=Greenwolde |date=23 October 2009 |title=New School of Thought Brings Energy to 'the Dismal Science' |work=[[The New York Times]] |url=https://www.nytimes.com/gwire/2009/10/23/23greenwire-new-school-of-thought-brings-energy-to-the-dis-63367.html |access-date=24 February 2017 |archive-date=29 November 2016 |archive-url=https://web.archive.org/web/20161129124417/http://www.nytimes.com/gwire/2009/10/23/23greenwire-new-school-of-thought-brings-energy-to-the-dis-63367.html |url-status=live }}</ref> [[Feminist economics]] emphasises the role that gender plays in economies, challenging analyses that render gender invisible or support gender-oppressive economic systems.<ref>{{Cite book |chapter=Feminist Economics |author= Julie A. Nelson |title= The New Palgrave Dictionary of Economics |chapter-url= https://link.springer.com/referenceworkentry/10.1057/978-1-349-95121-5_2210-1 |date=2016-01-01|pages= 1–6 |doi= 10.1057/978-1-349-95121-5_2210-1 |isbn= 978-1-349-95121-5 |access-date=2023-12-07 }}</ref> The goal is to create economic research and policy analysis that is inclusive and gender-aware to encourage gender equality and improve the well-being of marginalised groups. == Methodology == === Theoretical research === {{Main|Microeconomics|Macroeconomics|Mathematical economics}} {{redirect|Economic theory|the publication|Economic Theory (journal){{!}}''Economic Theory'' (journal)}} Mainstream economic theory relies upon analytical [[model (economics)|economic models]]. When creating theories, the objective is to find assumptions which are at least as simple in information requirements, more precise in predictions, and more fruitful in generating additional research than prior theories.{{sfn|Friedman|1953|p=10}} While [[neoclassical economics|neoclassical]] economic theory constitutes both the dominant or orthodox theoretical as well as [[General equilibrium theory|methodological framework]], economic theory can also take the form of other [[Schools of economic thought|schools of thought]] such as in [[heterodox economics|heterodox economic theories]]. In [[microeconomics]], principal concepts include [[supply and demand]], [[marginalism]], [[rational choice theory]], [[opportunity cost]], [[budget constraint]]s, [[utility]], and the [[theory of the firm]].<ref>{{unbulleted list citebundle |1 = {{cite encyclopedia |last=Boland |first=Lawrence A. |date=1987 |dictionary=The New Palgrave Dictionary of Economics |publisher=Palgrave Macmillan |edition= |editor-first1=John |editor-last1=Eatwell |editor-first2=Murray |editor-last2=Milgate |editor-first3=Peter |editor-last3=Newman |volume=III |pages=455–458 |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde1987_X001456 |doi=10.1057/9780230226203.3083 |isbn=978-0-333-78676-5 |chapter=Methodology |access-date=23 October 2017 |archive-date=24 October 2017 |archive-url=https://web.archive.org/web/20171024043230/http://www.dictionaryofeconomics.com/article?id=pde1987_X001456 |url-status=live }} |2 = {{cite journal |title=Consensus and Dissension among Economists: An Empirical Inquiry |last1=Frey |first1=Bruno S. |last2=Pommerehne |first2=Werner W. |last3=Schneider |first3=Friedrich |last4=Gilbert |first4=Guy |journal=[[The American Economic Review]] |issn=0002-8282 |volume=74 |issue=5 |date=December 1984 |pages=986–994 |jstor=557 }} }}</ref> Early [[macroeconomic]] models focused on modelling the relationships between aggregate variables, but as the relationships appeared to change over time macroeconomists, including [[new Keynesian]]s, reformulated their models with [[microfoundations]],<ref name="Dixon2008"/> in which microeconomic concepts play a major part. Sometimes an economic hypothesis is only ''[[qualitative economics|qualitative]]'', not ''quantitative''.<ref>{{cite encyclopedia |last=Quirk |first=James |date=1987 |title=The New Palgrave: A Dictionary of Economics |edition= |editor-first1=John |editor-last1=Eatwell |editor-first2=Murray |editor-last2=Milgate |editor-first3=Peter |editor-last3=Newman |volume=IV |pages=1–3 |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde1987_X001811 |doi=10.1057/9780230226203.3369 |isbn=978-0-333-78676-5 |chapter=Qualitative economics |publisher=Palgrave Macmillan UK |access-date=23 October 2017 |archive-date=23 October 2017 |archive-url=https://web.archive.org/web/20171023230514/http://www.dictionaryofeconomics.com/article?id=pde1987_X001811 |url-status=live }}</ref> Expositions of economic reasoning often use two-dimensional graphs to illustrate theoretical relationships. At a higher level of generality, [[mathematical economics]] is the application of [[Mathematics|mathematical]] methods to represent theories and analyse problems in economics. [[Paul Samuelson]]'s treatise ''[[Foundations of Economic Analysis]]'' (1947) exemplifies the method, particularly as to maximizing behavioural relations of agents reaching equilibrium. The book focused on examining the class of statements called ''operationally meaningful theorems'' in economics, which are [[theorem]]s that can conceivably be refuted by empirical data.<ref name="Foundations">{{cite book |title=Foundations of Economic Analysis|edition=enlarged |last=Samuelson |first=Paul A. |author-link=Paul Samuelson |orig-year=1947 |year=1983 |page=[https://archive.org/details/foundationsofeco0000samu/page/4 4] |publisher=Harvard University Press |location=Boston |isbn=978-0-674-31301-9 |title-link=Foundations of Economic Analysis }}</ref> === Empirical research === {{Main|Econometrics|Experimental economics}} Economic theories are frequently tested [[empirical]]ly, largely through the use of [[econometrics]] using [[economic data]].<ref>{{cite encyclopedia |last=Hashem |first=M. Pesaren |date=1987 |title=The New Palgrave: A Dictionary of Economics |edition= |editor-first1=John |editor-last1=Eatwell |editor-first2=Murray |editor-last2=Milgate |editor-first3=Peter |editor-last3=Newman |volume=II |page=8 |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde1987_X000646 |doi=10.1057/9780230226203.2430 |isbn=978-0-333-78676-5 |chapter=Econometrics |publisher=Palgrave Macmillan UK |access-date=23 October 2017 |archive-date=24 October 2017 |archive-url=https://web.archive.org/web/20171024100955/http://www.dictionaryofeconomics.com/article?id=pde1987_X000646 |url-status=live }}</ref> The controlled experiments common to the [[physical science]]s are difficult and uncommon in economics,<ref>{{cite book|last=Keuzenkamp|first=Hugo A.|author-link=Hugo A. Keuzenkamp|title=Probability, Econometrics and Truth: The Methodology of Econometrics|url=https://archive.org/details/probabilityecono0000keuz|url-access=registration|year=2000|publisher=Cambridge University Press|isbn=978-0-521-55359-9|page=[https://archive.org/details/probabilityecono0000keuz/page/13 13]|quote=... in economics, controlled experiments are rare and reproducible controlled experiments even more so ...}}</ref> and instead broad data is [[observational study|observationally studied]]; this type of testing is typically regarded as less rigorous than controlled experimentation, and the conclusions typically more tentative. However, the field of [[experimental economics]] is growing, and increasing use is being made of [[natural experiments]]. [[Statistics|Statistical methods]] such as [[regression analysis]] are common. Practitioners use such methods to estimate the size, economic significance, and [[statistical significance]] ("signal strength") of the hypothesised relation(s) and to adjust for noise from other variables. By such means, a hypothesis may gain acceptance, although in a probabilistic, rather than certain, sense. Acceptance is dependent upon the [[falsifiability|falsifiable]] hypothesis surviving tests. Use of commonly accepted methods need not produce a final conclusion or even a consensus on a particular question, given different tests, [[data set]]s, and prior beliefs. [[Experimental economics]] has promoted the use of [[Scientific control|scientifically controlled]] [[experiment]]s. This has reduced the long-noted distinction of economics from [[natural science]]s because it allows direct tests of what were previously taken as axioms.<ref>{{unbulleted list citebundle|{{cite encyclopedia |last=Bastable |first=C. F. |dictionary=The New Palgrave Dictionary of Economics |edition= |editor-first1=John |editor-last1=Eatwell |editor-first2=Murray |editor-last2=Milgate |editor-first3=Peter |editor-last3=Newman |volume=II |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde1987_X000762 |doi=10.1057/9780230226203.2512 |year=2008 |isbn=978-0-333-78676-5 |chapter=Experimental methods in economics (i) |pages=1–2 |access-date=23 October 2017 |archive-date=24 October 2017 |archive-url=https://web.archive.org/web/20171024101031/http://www.dictionaryofeconomics.com/article?id=pde1987_X000762 |url-status=live }}|{{cite encyclopedia |author-link=Vernon L. Smith |last=Smith |first=Vernon L. |dictionary=The New Palgrave Dictionary of Economics |publisher=Palgrave Macmillan |edition= |editor-first1=John |editor-last1=Eatwell |editor-first2=Murray |editor-last2=Milgate |editor-first3=Peter |editor-last3=Newman |volume=II |pages=241–242 |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde1987_X000763 |doi=10.1057/9780230226203.2513 |year=2008 |isbn=978-0-333-78676-5 |chapter=Experimental methods in economics (ii) |access-date=23 October 2017 |archive-date=24 October 2017 |archive-url=https://web.archive.org/web/20171024101020/http://www.dictionaryofeconomics.com/article?id=pde1987_X000763 |url-status=live }}}}</ref> In some cases these have found that the axioms are not entirely correct. In [[behavioural economics]], psychologist [[Daniel Kahneman]] won the Nobel Prize in economics in 2002 for his and [[Amos Tversky]]'s empirical discovery of several [[cognitive bias]]es and [[heuristics in judgment and decision making|heuristics]]. Similar empirical testing occurs in [[neuroeconomics]]. Another example is the assumption of narrowly selfish preferences versus a model that tests for selfish, altruistic, and cooperative preferences.<ref>{{unbulleted list citebundle |1 = {{cite journal |last1=Fehr |first1=Ernst |first2=Urs |last2=Fischbacher |date=23 October 2003 |title=The Nature of Human Altruism |journal=[[Nature (journal)|Nature]] |volume=425 |issue=6960 |pages=785–791 |doi=10.1038/nature02043|pmid=14574401 |bibcode=2003Natur.425..785F |s2cid=4305295 }} |2 = {{cite journal |last1=Sigmund |first1=Karl |first2=Ernst |last2=Fehr |first3=Martin A. |last3=Nowak |date=January 2002 |title=The Economics of Fair Play |journal=[[Scientific American]] |volume=286 |issue=1 |pages=82–87 |pmid=11799620 |doi=10.1038/scientificamerican0102-82|bibcode=2002SciAm.286a..82S }} }}</ref> These techniques have led some to argue that economics is a "genuine science".<ref>{{cite journal |last=Lazear |first=Edward P. |title=Economic Imperialism |date=1 February 2000 |volume=115 |issue=1 |jstor=2586936 |pages=99–146 |journal=Quarterly Journal of Economics |doi=10.1162/003355300554683}}</ref> == Microeconomics == {{Main|Microeconomics|Market (economics)}} [[File:Ballard Farmers' Market - vegetables.jpg|thumb|Economists study trade, production, and consumption decisions, including those that occur in a traditional [[marketplace]]|alt=A vegetable vendor in a marketplace.]] [[File:Sao Paulo Stock Exchange.jpg|thumb|[[São Paulo Stock Exchange]] in [[Brazil]], an [[electronic trading]] network that brings together buyers and sellers through an [[electronic trading platform]]|alt=Two traders sit at computer monitors with financial information.]] Microeconomics examines how entities, forming a [[market structure]], interact within a [[Market (economics)|market]] to create a [[market system]]. These entities include private and public players with various classifications, typically operating under scarcity of tradable units and [[regulation]]. The item traded may be a tangible [[product (business)|product]] such as apples or a [[Service (economics)|service]] such as repair services, legal counsel, or entertainment. Various market structures exist. In [[perfect competition|perfectly competitive markets]], no participants are large enough to have the [[market power]] to set the price of a homogeneous product. In other words, every participant is a "price taker" as no participant influences the price of a product. In the real world, markets often experience [[imperfect competition]]. Forms of imperfect competition include [[monopoly]] (in which there is only one seller of a good), [[duopoly]] (in which there are only two sellers of a good), oligopoly (in which there are few sellers of a good), [[monopolistic competition]] (in which there are many sellers producing highly differentiated goods), [[monopsony]] (in which there is only one buyer of a good), and [[oligopsony]] (in which there are few buyers of a good). Firms under imperfect competition have the potential to be "price makers", which means that they can influence the prices of their products. In [[partial equilibrium]] method of analysis, it is assumed that activity in the market being analysed does not affect other markets. This method aggregates (the sum of all activity) in only one market. [[General equilibrium|General-equilibrium]] theory studies various markets and their behaviour. It aggregates (the sum of all activity) across ''all'' markets. This method studies both changes in markets and their interactions leading towards equilibrium.<ref>{{unbulleted list citebundle|{{harvp|Blaug|2017|pp=347–349}}.|{{cite encyclopedia |author-link=Hal R. Varian |last=Varian |first=Hal R. |date=1987 |dictionary=The New Palgrave Dictionary of Economics |publisher=Palgrave Macmillan |edition= |editor-first1=John |editor-last1=Eatwell |editor-first2=Murray |editor-last2=Milgate |editor-first3=Peter |editor-last3=Newman |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde1987_X001460 |doi=10.1057/9780230226203.3086 |isbn=978-0-333-78676-5 |chapter=Microeconomics |pages=1–5 |access-date=4 October 2017 |archive-date=5 October 2017 |archive-url=https://web.archive.org/web/20171005051338/http://www.dictionaryofeconomics.com/article?id=pde1987_X001460 |url-status=live }}}}</ref> === Production, cost, and efficiency === {{Main|Production (economics)|Opportunity cost|Economic efficiency|Production–possibility frontier}} [[File:Production Possibilities Frontier Curve.svg|thumb|An example [[production–possibility frontier]] with illustrative points marked]] In microeconomics, [[Production (economics)|production]] is the conversion of [[factor of production|inputs]] into [[Output (economics)|outputs]]. It is an economic process that uses inputs to create a [[good (economics)|commodity]] or a service for [[trade|exchange]] or direct use. Production is a [[Stock and flow|flow]] and thus a rate of output per period of time. Distinctions include such production alternatives as for [[Consumption (economics)|consumption]] (food, haircuts, etc.) vs. [[Investment#In economics or macroeconomics|investment goods]] (new tractors, buildings, roads, etc.), [[Public good (economics)|public good]]s (national defence, smallpox vaccinations, etc.) or [[private good]]s, and [[Guns versus butter model|"guns" vs "butter"]]. Inputs used in the production process include such primary [[factors of production]] as [[Labour (economics)|labour services]], [[Capital (economics)|capital]] (durable produced goods used in production, such as an existing factory), and [[Land (economics)|land]] (including natural resources). Other inputs may include [[intermediate good]]s used in production of final goods, such as the steel in a new car. [[Economic efficiency]] measures how well a system generates desired output with a given set of inputs and available [[technology]]. Efficiency is improved if more output is generated without changing inputs. A widely accepted general standard is [[Pareto efficiency]], which is reached when no further change can make someone better off without making someone else worse off. The [[production–possibility frontier]] (PPF) is an expository figure for representing scarcity, cost, and efficiency. In the simplest case, an [[economy]] can produce just two goods (say "guns" and "butter"). The PPF is a table or graph (as at the right) that shows the different quantity combinations of the two goods producible with a given technology and total factor inputs, which limit feasible total output. Each point on the curve shows [[Potential output|potential total output]] for the economy, which is the maximum feasible output of one good, given a feasible output quantity of the other good. [[Scarcity]] is represented in the figure by people being willing but unable in the aggregate to consume ''beyond the PPF'' (such as at ''X'') and by the negative slope of the curve.<ref>{{cite encyclopedia|last=Montani |first=Guido |date=1987 |dictionary=The New Palgrave: A Dictionary of Economics |edition= |editor-first1=John |editor-last1=Eatwell |editor-first2=Murray |editor-last2=Milgate |editor-first3=Peter |editor-last3=Newman |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde1987_X001949 |doi=10.1057/9780230226203.3485 |title=The New Palgrave Dictionary of Economics |isbn=978-0-333-78676-5 |chapter=Scarcity |pages=1–4 |access-date=4 October 2017 |archive-date=5 October 2017 |archive-url=https://web.archive.org/web/20171005051007/http://www.dictionaryofeconomics.com/article?id=pde1987_X001949 |url-status=live }}</ref> If production of one good ''increases'' along the curve, production of the other good ''decreases'', an [[inverse relationship]]. This is because increasing output of one good requires transferring inputs to it from production of the other good, decreasing the latter. The [[slope]] of the curve at a point on it gives the [[trade-off#Examples from common life|trade-off]] between the two goods. It measures what an additional unit of one good costs in units forgone of the other good, an example of a ''real opportunity cost''. Thus, if one more Gun costs 100 units of butter, the opportunity cost of one Gun is 100 Butter. ''Along the PPF'', scarcity implies that choosing ''more'' of one good in the aggregate entails doing with ''less'' of the other good. Still, in a [[market economy]], movement along the curve may indicate that the [[utility|choice]] of the increased output is anticipated to be worth the cost to the agents. By construction, each point on the curve shows ''[[productive efficiency]]'' in maximizing output for given total inputs. A point ''inside'' the curve (as at ''A''), is feasible but represents ''production inefficiency'' (wasteful use of inputs), in that output of ''one or both goods'' could increase by moving in a northeast direction to a point on the curve. Examples cited of such inefficiency include high [[unemployment]] during a [[business cycle|business-cycle]] [[recession]] or economic organisation of a country that discourages full use of resources. Being on the curve might still not fully satisfy [[allocative efficiency]] (also called [[Pareto efficiency]]) if it does not produce a mix of goods that consumers prefer over other points. Much [[applied economics]] in [[public policy]] is concerned with determining how the efficiency of an economy can be improved. Recognizing the reality of scarcity and then figuring out how to organise society for the most efficient use of resources has been described as the "essence of economics", where the subject "makes its unique contribution."{{sfnp|Samuelson|Nordhaus|2010|loc= ch. 1, p. 5 (quotation) and sect. C, "The Production-Possibility Frontier", pp. 9–15; ch. 2, "Efficiency" sect.; ch. 8, sect. D, "The Concept of Efficiency}} === Specialisation === {{Main|Division of labour|Comparative advantage|Gains from trade}} [[File:Late Medieval Trade Routes.jpg|thumb|upright=1.4|A map showing the main [[trade route]]s for goods within [[Late Middle Ages|late medieval Europe]]]] Specialisation is considered key to economic efficiency based on theoretical and [[empirical]] considerations. Different individuals or nations may have different real opportunity costs of production, say from differences in [[stock and flow|stocks]] of [[human capital]] per worker or [[capital (economics)|capital]]/[[labor force|labour]] ratios. According to theory, this may give a [[comparative advantage]] in production of goods that make more intensive use of the relatively more abundant, thus ''relatively'' cheaper, input. Even if one region has an [[absolute advantage]] as to the ratio of its outputs to inputs in every type of output, it may still specialise in the output in which it has a comparative advantage and thereby gain from trading with a region that lacks any absolute advantage but has a comparative advantage in producing something else. It has been observed that a high volume of trade occurs among regions even with access to a similar technology and mix of factor inputs, including high-income countries. This has led to investigation of economies of [[Returns to scale|scale]] and [[economies of agglomeration|agglomeration]] to explain specialisation in similar but differentiated product lines, to the overall benefit of respective trading parties or regions.<ref>{{cite journal |author-link=Paul Krugman |last=Krugman |first=Paul |date=December 1980 |title=Scale Economies, Product Differentiation, and the Pattern of Trade |journal=[[American Economic Review]] |volume=70 |issue=5 |pages=950–959 |url=http://www.princeton.edu/~pkrugman/scale_econ.pdf |jstor=1805774 |access-date=16 August 2010 |archive-date=18 May 2013 |archive-url=https://web.archive.org/web/20130518075839/http://www.princeton.edu/~pkrugman/scale_econ.pdf |url-status=live }}</ref><ref>{{cite journal |first=William C. |last=Strange |date=2008 |editor-first1=Steven N. |editor-last1=Durlauf |editor-first2=Lawrence E. |editor-last2=Blume |journal=The New Palgrave Dictionary of Economics |publisher=Palgrave Macmillan |edition=2nd |url=http://www.dictionaryofeconomics.com/article?id=pde2008_U000064 |doi=10.1057/9780230226203.1769 |pages=533–536 |isbn=978-0-333-78676-5 |title=Urban agglomeration |access-date=16 August 2010 |archive-date=10 October 2017 |archive-url=https://web.archive.org/web/20171010211747/http://www.dictionaryofeconomics.com/article?id=pde2008_U000064 |url-status=live |url-access=subscription }}</ref> The general theory of specialisation applies to trade among individuals, farms, manufacturers, [[Service (economics)|service]] providers, and [[economy|economies]]. Among each of these production systems, there may be a corresponding ''[[division of labour]]'' with different work groups specializing, or correspondingly different types of [[Capital (economics)|capital equipment]] and differentiated [[Land (economics)|land]] uses.<ref>{{unbulleted list citebundle |1 = {{cite journal|last=Groenewegen |first=Peter |date=2008 |editor-first1=Steven N. |editor-last1=Durlauf |editor-first2=Lawrence E. |editor-last2=Blume |journal=The New Palgrave Dictionary of Economics |edition=2nd |url=http://www.dictionaryofeconomics.com/article?id=pde2008_D000176 |doi=10.1057/9780230226203.0401 |pages=517–526 |isbn=978-0-333-78676-5 |title=Division of labour |access-date=16 August 2010 |archive-date=10 October 2017 |archive-url=https://web.archive.org/web/20171010211714/http://www.dictionaryofeconomics.com/article?id=pde2008_D000176 |url-status=live |url-access=subscription }} |2 = {{cite web |last=Johnson |first=Paul M. |date=2005 |url=http://www.auburn.edu/~johnspm/gloss/specialization |title=Specialization |website=A Glossary of Political Economy Terms |publisher=Department of Political Science, [[Auburn University]] |access-date=27 March 2008 |archive-date=29 January 2013 |archive-url=https://web.archive.org/web/20130129085436/http://www.auburn.edu/~johnspm/gloss/specialization |url-status=live }} |3 = {{cite book|last1=Yang|first1=Xiaokai|last2=Ng|first2=Yew-Kwang|title=Specialization and Economic Organization: A New Classical Microeconomic Framework|url=https://books.google.com/books?id=xuG4AAAAIAAJ&pg=PP1|year=1993|publisher=North-Holland|isbn=978-0-444-88698-9}} }}</ref> An example that combines features above is a country that specialises in the production of high-tech knowledge products, as developed countries do, and trades with developing nations for goods produced in factories where labour is relatively cheap and plentiful, resulting in different in opportunity costs of production. More total output and utility thereby results from specializing in production and trading than if each country produced its own high-tech and low-tech products. Theory and observation set out the conditions such that market [[price]]s of outputs and productive inputs select an allocation of factor inputs by comparative advantage, so that (relatively) [[Production-possibility frontier#Opportunity cost|low-cost]] inputs go to producing low-cost outputs. In the process, aggregate output may increase as a [[invisible hand|by-product]] or by [[mechanism design|design]].<ref>{{cite book|last=Cameron|first=Rondo E.|author-link=Rondo Cameron|title=A Concise Economic History of the World: From Paleolithic Times to the Present|url=https://books.google.com/books?id=aEHX63g1XsYC&pg=PA25|edition=2nd|year=1993|publisher=Oxford University Press|isbn=978-0-19-507445-1|pages=25–25, 32, 276–280|access-date=10 October 2017|archive-date=1 August 2020|archive-url=https://web.archive.org/web/20200801065517/https://books.google.com/books?id=aEHX63g1XsYC&pg=PA25|url-status=live}}</ref> Such specialisation of production creates opportunities for [[gains from trade]] whereby resource owners benefit from [[trade]] in the sale of one type of output for other, more highly valued goods. A measure of gains from trade is the ''increased income levels'' that trade may facilitate.<ref>{{unbulleted list citebundle|{{harvp|Samuelson|Nordhaus|2010|pages=37, 433, 435}}.|{{cite journal|last=Findlay |first=Ronald |date=2008 |editor-first1=Steven N. |editor-last1=Durlauf |editor-first2=Lawrence E. |editor-last2=Blume |journal=The New Palgrave Dictionary of Economics |publisher=Palgrave Macmillan |edition=2nd |url=http://www.dictionaryofeconomics.com/article?id=pde2008_C000254 |doi=10.1057/9780230226203.0274 |pages=28–33 |isbn=978-0-333-78676-5 |title=Comparative advantage |access-date=16 August 2010 |archive-date=11 October 2017 |archive-url=https://web.archive.org/web/20171011021521/http://www.dictionaryofeconomics.com/article?id=pde2008_C000254 |url-status=live |url-access=subscription }}|{{cite encyclopedia |last=Kemp |first=Murray C. |date=1987 |dictionary=The New Palgrave Dictionary of Economics |publisher=Palgrave Macmillan |editor-first1=John |editor-last1=Eatwell |editor-first2=Murray |editor-last2=Milgate |editor-first3=Peter |editor-last3=Newman |edition= |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde1987_X000902 |doi=10.1057/9780230226203.2613 |pages=1–3 |isbn=978-0-333-78676-5 |chapter=Gains from trade |access-date=10 October 2017 |archive-date=10 October 2017 |archive-url=https://web.archive.org/web/20171010211136/http://www.dictionaryofeconomics.com/article?id=pde1987_X000902 |url-status=live }}}}</ref> === Supply and demand === {{Main|Supply and demand}} [[File:Supply-demand-right-shift-demand.svg|thumb|The [[supply and demand]] model describes how prices vary as a result of a balance between product availability and demand. The graph depicts an increase in demand from D<sub>1</sub> to D<sub>2</sub> and the resulting increase in price and quantity required to reach a new equilibrium point on the supply curve (S).|alt=A graph depicting Quantity on the X-axis and Price on the Y-axis]] [[Prices and quantities]] have been described as the most directly observable attributes of goods produced and exchanged in a [[market economy]].<ref>{{cite encyclopedia|last=Brody |first=A. |date=1987 |dictionary=The New Palgrave: A Dictionary of Economics |edition= |editor-first1=John |editor-last1=Eatwell |editor-first2=Murray |editor-last2=Milgate |editor-first3=Peter |editor-last3=Newman |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde1987_X001748 |doi=10.1057/9780230226203.3325 |title=The New Palgrave Dictionary of Economics |pages=1–7 |isbn=978-0-333-78676-5 |chapter=Prices and quantities |access-date=10 October 2017 |archive-date=11 October 2017 |archive-url=https://web.archive.org/web/20171011071908/http://www.dictionaryofeconomics.com/article?id=pde1987_X001748 |url-status=live }}</ref> The theory of supply and demand is an organizing principle for explaining how prices coordinate the amounts produced and consumed. In [[microeconomics]], it applies to price and output determination for a market with [[perfect competition]], which includes the condition of no buyers or sellers large enough to have price-setting [[market power|power]]. For a given market of a [[Good (economics and accounting)|commodity]], ''demand'' is the relation of the quantity that all buyers would be prepared to purchase at each unit price of the good. Demand is often represented by a table or a graph showing price and quantity demanded (as in the figure). [[consumer theory|Demand theory]] describes individual consumers as [[rational choice theory|rationally]] choosing the most preferred quantity of each good, given income, prices, tastes, etc. A term for this is "constrained utility maximisation" (with income and [[Wealth (economics)|wealth]] as the [[budget constraint|constraints]] on demand). Here, [[utility]] refers to the hypothesised relation of each individual consumer for ranking different commodity bundles as more or less preferred. The [[law of demand]] states that, in general, price and quantity demanded in a given market are inversely related. That is, the higher the price of a product, the less of it people would be prepared to buy (other things [[ceteris paribus|unchanged]]). As the price of a commodity falls, consumers move toward it from relatively more expensive goods (the [[substitution effect]]). In addition, [[purchasing power]] from the price decline increases ability to buy (the [[income effect]]). Other factors can change demand; for example an increase in income will shift the demand curve for a [[normal good]] outward relative to the origin, as in the figure. All determinants are predominantly taken as constant factors of demand and supply. ''Supply'' is the relation between the price of a good and the quantity available for sale at that price. It may be represented as a table or graph relating price and quantity supplied. Producers, for example business firms, are hypothesised to be ''profit maximisers'', meaning that they attempt to produce and supply the amount of goods that will bring them the highest profit. Supply is typically represented as a function relating price and quantity, if other factors are unchanged. That is, the higher the price at which the good can be sold, the more of it producers will supply, as in the figure. The higher price makes it profitable to increase production. Just as on the demand side, the position of the supply can shift, say from a change in the price of a productive input or a technical improvement. The "Law of Supply" states that, in general, a rise in price leads to an expansion in supply and a fall in price leads to a contraction in supply. Here as well, the determinants of supply, such as price of substitutes, cost of production, technology applied and various factors inputs of production are all taken to be constant for a specific time period of evaluation of supply. [[Market equilibrium]] occurs where quantity supplied equals quantity demanded, the intersection of the supply and demand curves in the figure above. At a price below equilibrium, there is a shortage of quantity supplied compared to quantity demanded. This is posited to bid the price up. At a price above equilibrium, there is a surplus of quantity supplied compared to quantity demanded. This pushes the price down. The [[Model (economics)|model]] of supply and demand predicts that for given supply and demand curves, price and quantity will stabilise at the price that makes quantity supplied equal to quantity demanded. Similarly, demand-and-supply theory predicts a new price-quantity combination from a shift in demand (as to the figure), or in supply. === Firms === {{Main|Theory of the firm|Industrial organisation|Business economics|Managerial economics}} People frequently do not trade directly on markets. Instead, on the supply side, they may work in and produce through ''firms''. The most obvious kinds of firms are [[corporation]]s, [[partnerships]] and [[trusts]]. According to [[Ronald Coase]], people begin to organise their production in firms when the costs of doing business becomes lower than doing it on the market.<ref>{{cite journal |last=Coase |first=Ronald | author-link=Ronald Coase |year=1937 |title=The Nature of the Firm |journal=[[Economica]] |volume=4 |issue=16 |pages=386–405 |jstor=2626876 |doi=10.1111/j.1468-0335.1937.tb00002.x|title-link=The Nature of the Firm }}</ref> Firms combine labour and capital, and can achieve far greater [[economies of scale]] (when the average cost per unit declines as more units are produced) than individual market trading. In [[perfect competition|perfectly competitive]] markets studied in the theory of supply and demand, there are many producers, none of which significantly influence price. [[Industrial organisation]] generalises from that special case to study the strategic behaviour of firms that do have significant control of price. It considers the structure of such markets and their interactions. Common market structures studied besides perfect competition include monopolistic competition, various forms of oligopoly, and monopoly.<ref>{{cite encyclopedia |last=Schmalensee |first=Richard |author-link=Richard L. Schmalensee |date=1987 |dictionary=The New Palgrave: A Dictionary of Economics |edition= |editor-first1=John |editor-last1=Eatwell |editor-first2=Murray |editor-last2=Milgate |editor-first3=Peter |editor-last3=Newman |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde1987_X001118 |doi=10.1057/9780230226203.2788 |title=The New Palgrave Dictionary of Economics |pages=1–9 |isbn=978-0-333-78676-5 |chapter=Industrial organization |series=Students business book series |hdl=2027/uc1.$b37792 |publisher=Chicago |hdl-access=free |access-date=10 October 2017 |archive-date=11 October 2017 |archive-url=https://web.archive.org/web/20171011022150/http://www.dictionaryofeconomics.com/article?id=pde1987_X001118 |url-status=live }}</ref> [[Managerial economics]] applies [[microeconomic]] analysis to specific decisions in business firms or other management units. It draws heavily from quantitative methods such as [[operations research]] and programming and from statistical methods such as [[regression analysis]] in the absence of certainty and perfect knowledge. A unifying theme is the attempt to [[Optimization (mathematics)|optimise]] business decisions, including unit-cost minimisation and profit maximisation, given the firm's objectives and constraints imposed by technology and market conditions.<ref>{{unbulleted list citebundle |1 = {{cite encyclopedia |author=<!-- Staff Writers --> |date=5 May 2013 |title=Managerial Economics |encyclopedia=Encyclopædia Britannica Online |url=https://www.britannica.com/topic/managerial-economics |access-date=10 October 2017 |archive-date=11 October 2017 |archive-url=https://web.archive.org/web/20171011023121/https://www.britannica.com/topic/managerial-economics |url-status=live }} |2 = {{cite encyclopedia|last=Hughes |first=Alan |date=1987 |dictionary=The New Palgrave Dictionary of Economics |location=London |publisher=Palgrave Macmillan |edition= |editor-first1=John |editor-last1=Eatwell |editor-first2=Murray |editor-last2=Milgate |editor-first3=Peter |editor-last3=Newman |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde1987_X001379 |doi=10.1057/9780230226203.3017 |isbn=978-0-333-78676-5 |chapter=Managerial capitalism |pages=1–5 |access-date=10 October 2017 |archive-date=11 October 2017 |archive-url=https://web.archive.org/web/20171011072045/http://www.dictionaryofeconomics.com/article?id=pde1987_X001379 |url-status=live }} <!-- check definitions because entries say they went online in 2016 --> }}</ref> === Uncertainty and game theory === {{Main|Information economics|Game theory|Financial economics}} [[Uncertainty]] in economics is an unknown prospect of gain or loss, whether quantifiable as [[Risk#Risk and uncertainty|risk]] or not. Without it, household behaviour would be unaffected by uncertain employment and income prospects, [[financial market|financial]] and [[capital market]]s would reduce to exchange of a single [[financial instrument|instrument]] in each market period, and there would be no [[communication]]s industry.<ref>{{cite encyclopedia |author-link1=Mark J. Machina |last1=Machina |first1=Mark J. |title=The New Palgrave Dictionary of Economics |pages=190–197 |author-link2=Michael Rothschild |last2=Rothschild |first2=Michael |date=2008 |edition=2nd |editor-first1=Steven N. |editor-last1=Durlauf |editor-first2=Lawrence E. |editor-last2=Blume |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde2008_R000152 |doi=10.1057/9780230226203.1442 |isbn=978-0-333-78676-5 |chapter=Risk |publisher=Palgrave Macmillan UK |access-date=2 March 2011 |archive-date=11 October 2017 |archive-url=https://web.archive.org/web/20171011071806/http://www.dictionaryofeconomics.com/article?id=pde2008_R000152 |url-status=live }}</ref> Given its different forms, there are various ways of representing uncertainty and modelling economic agents' responses to it.<ref>{{cite encyclopedia |last=Wakker |first=Peter P. |date=2008 |edition=second |editor-first1=Steven N. |editor-last1=Durlauf |editor-first2=Lawrence E. |editor-last2=Blume |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde2008_U000005 |doi=10.1057/9780230226203.1753 |title=The New Palgrave Dictionary of Economics |pages=428–439 |isbn=978-0-333-78676-5 |chapter=Uncertainty |publisher=Palgrave Macmillan UK |access-date=2 March 2011 |archive-date=30 December 2010 |archive-url=https://web.archive.org/web/20101230071633/http://www.dictionaryofeconomics.com/article?id=pde2008_U000005 |url-status=live }}</ref> [[Game theory]] is a branch of [[applied mathematics]] that considers [[Strategy#Strategies in game theory|strategic interactions]] between agents, one kind of uncertainty. It provides a mathematical [[microfoundation|foundation]] of [[industrial organisation]], discussed above, to model different types of firm behaviour, for example in a solipsistic industry (few sellers), but equally applicable to wage negotiations, [[Bargaining#Game theory|bargaining]], [[Contract theory|contract design]], and any situation where individual agents are few enough to have perceptible effects on each other. In [[behavioural economics]], it has been used to model the strategies [[Agent (economics)|agents]] choose when interacting with others whose interests are at least partially adverse to their own.<ref>{{unbulleted list citebundle|{{harvp|Samuelson|Nordhaus|2010|loc=ch. 11, "Uncertainty and Game Theory" and [end] Glossary of Terms, "Economics of information", "Game theory", and "Regulation"}}.|{{cite book |last=Camerer |first=Colin F. |author-link=Colin F. Camerer |date=2003 |title=Behavioral Game Theory: Experiments in Strategic Interaction |url=https://books.google.com/books?id=cr_Xg7cRvdcC&pg=PP1 |chapter=Chapter 1: Introduction |chapter-url=http://assets.press.princeton.edu/chapters/i7517.pdf |publisher=Princeton University Press |isbn=978-1-4008-4088-5}}}}</ref> In this, it generalises maximisation approaches developed to analyse market actors such as in the [[supply and demand]] model and allows for incomplete information of actors. The field dates from the 1944 classic ''[[Theory of Games and Economic Behavior]]'' by [[John von Neumann]] and [[Oskar Morgenstern]]. It has significant applications seemingly outside of economics in such diverse subjects as the formulation of [[nuclear strategies]], [[Game theory#Philosophy|ethics]], [[Game theory#Political science|political science]], and [[evolutionary biology]].<ref>{{cite encyclopedia |title=Game Theory |dictionary=The New Palgrave Dictionary of Economics |url=http://www.dictionaryofeconomics.com/article?id=pde2008_G000007 |access-date=2 March 2011 |last=Aumann |first=R. J. |date=2008 |author-link=Robert Aumann |editor-last1=Durlauf |editor-first1=Steven N. |edition=2nd |archive-url=https://web.archive.org/web/20101229164520/http://www.dictionaryofeconomics.com/article?id=pde2008_G000007 |archive-date=29 December 2010 |editor-first2=Lawrence E. |editor-last2=Blume |url-status=live}}</ref> [[Risk aversion]] may stimulate activity that in well-functioning markets smooths out risk and communicates information about risk, as in markets for [[insurance]], commodity [[futures market|futures contracts]], and [[financial instruments]]. [[Financial economics]] or simply [[finance]] describes the allocation of financial resources. It also analyses the pricing of financial instruments, the [[capital structure|financial structure]] of companies, the efficiency and fragility of [[financial market]]s,<ref>{{cite journal |author-link1=Ben Bernanke |last1=Bernanke |first1=Ben |author-link2=Mark Gertler (economist) |first2=Mark |last2=Gertler |date=February 1990 |title=Financial Fragility and Economic Performance |journal=Quarterly Journal of Economics |volume=105 |issue=1 |pages=87–114 |jstor=2937820 |doi=10.2307/2937820 |s2cid=155048192 |url=http://www.nber.org/papers/w2318.pdf |access-date=3 September 2019 |archive-date=26 November 2019 |archive-url=https://web.archive.org/web/20191126210951/https://www.nber.org/papers/w2318.pdf |url-status=live }}</ref> [[Financial crisis|financial crises]], and related government policy or [[Financial regulation|regulation]].<ref>{{cite encyclopedia |title=The New Palgrave Dictionary of Economics |editor-first1=Steven N. |editor-last1=Durlauf |editor-first2=Lawrence E. |editor-last2=Blume |edition=2nd |date=2008}}</ref><ref>{{cite encyclopedia |author-link=Stephen Ross (economist) |last=Ross |first=Stephen A. |title=Finance |url=http://www.dictionaryofeconomics.com/article?id=pde2008_F000071 }}</ref><ref>{{cite encyclopedia |last1=Burnside |first1=Craig |first2=Martin |last2=Eichenbaum |first3=Sergio |last3=Rebelo |title=Currency Crises Models |url=http://www.dictionaryofeconomics.com/article?id=pde2008_S000204 |access-date=2 March 2011 |archive-date=26 March 2012 |archive-url=https://web.archive.org/web/20120326015628/http://www.dictionaryofeconomics.com/article?id=pde2008_S000204 |url-status=live }}</ref><ref>{{cite encyclopedia |last=Kaminsky |first=Graciela Laura |title=Currency Crises |url=http://www.dictionaryofeconomics.com/article?id=pde2008_C000468 |access-date=2 March 2011 |archive-date=26 March 2012 |archive-url=https://web.archive.org/web/20120326015551/http://www.dictionaryofeconomics.com/article?id=pde2008_C000468 |url-status=live }} </ref><ref>{{cite encyclopedia |last=Calomiris |first=Charles W. |title=Banking Crises |url=http://www.dictionaryofeconomics.com/article?id=pde2008_B000051 |access-date=2 March 2011 |archive-date=3 January 2015 |archive-url=https://web.archive.org/web/20150103021252/http://www.dictionaryofeconomics.com/article?id=pde2008_B000051 |url-status=live }}</ref> Some market organisations may give rise to inefficiencies associated with uncertainty. Based on [[George Akerlof]]'s "[[Market for Lemons]]" article, the [[paradigm]] example is of a dodgy second-hand car market. Customers without knowledge of whether a car is a "lemon" depress its price below what a quality second-hand car would be.<ref>{{cite journal |last=Akerlof |first=George A. |date=August 1970 |title=The Market for 'Lemons': Quality Uncertainty and the Market Mechanism |journal=Quarterly Journal of Economics |volume=84 |issue=3 |pages=488–500 |jstor=1879431 |doi=10.2307/1879431 |s2cid=6738765 |url=http://hydrogen.its.ucdavis.edu/eec/education/EEC-classes/eeclimate/class-readings/akerlof-the%20market%20for%20lemons.pdf |archive-url=https://web.archive.org/web/20110818045155/http://hydrogen.its.ucdavis.edu/eec/education/EEC-classes/eeclimate/class-readings/akerlof-the%20market%20for%20lemons.pdf |archive-date=18 August 2011}}</ref> [[Information asymmetry]] arises here, if the seller has more relevant information than the buyer but no incentive to disclose it. Related problems in insurance are [[adverse selection]], such that those at most risk are most likely to insure (say reckless drivers), and [[moral hazard]], such that insurance results in riskier behaviour (say more reckless driving).<ref name="sciencedirect">{{cite encyclopedia |last1=Lippman |first1=S.S. |title=International Encyclopedia of the Social & Behavioral Sciences |pages=7480–7486 |first2=J.J. |last2=McCall |date=2001 |publisher=Elsevier |doi=10.1016/B0-08-043076-7/02244-0|isbn=978-0-08-043076-8 |chapter=Information, Economics of }}</ref> Both problems may raise insurance costs and reduce efficiency by driving otherwise willing transactors from the market ("[[incomplete markets]]"). Moreover, attempting to reduce one problem, say adverse selection by mandating insurance, may add to another, say moral hazard. [[Information economics]], which studies such problems, has relevance in subjects such as insurance, [[contract theory|contract law]], [[mechanism design]], [[monetary economics]], and [[health economics|health care]].<ref name="sciencedirect" /> Applied subjects include market and legal remedies to spread or reduce risk, such as warranties, government-mandated partial insurance, [[restructuring]] or [[bankruptcy law]], inspection, and [[Regulatory economics|regulation]] for quality and information disclosure.<ref>{{harvp|Samuelson|Nordhaus|2010|loc=ch. 11, "Uncertainty and Game Theory" and [end] Glossary of Terms, "Economics of information", "Game theory", and "Regulation"}}</ref><ref>{{cite book |title=The New Palgrave Dictionary of Economics |editor-first1=Steven N. |editor-last1=Durlauf |editor-first2=Lawrence E. |editor-last2=Blume |publisher=Palgrave Macmillan |edition=2nd |date=2008}}</ref><ref>{{cite encyclopedia |last=Wilson |first=Charles |title=Adverse Selection |url=http://www.dictionaryofeconomics.com/article?id=pde2008_A000040 |access-date=2 March 2011 |archive-date=16 October 2017 |archive-url=https://web.archive.org/web/20171016225939/http://www.dictionaryofeconomics.com/article?id=pde2008_A000040 |url-status=live }}</ref><ref>{{cite encyclopedia |last=Kotowitz |first=Y. |title=Moral Hazard |url=http://www.dictionaryofeconomics.com/article?id=pde2008_M000259 |access-date=2 March 2011 |archive-date=17 October 2017 |archive-url=https://web.archive.org/web/20171017041859/http://www.dictionaryofeconomics.com/article?id=pde2008_M000259 |url-status=live }} </ref><ref>{{cite encyclopedia |author-link=Roger B. Myerson |last=Myerson |first=Roger B. |title=Revelation Principle |url=http://www.dictionaryofeconomics.com/article?id=pde2008_R000137 |access-date=2 March 2011 |archive-date=29 December 2010 |archive-url=https://web.archive.org/web/20101229164407/http://www.dictionaryofeconomics.com/article?id=pde2008_R000137 |url-status=live }}</ref> === Market failure === {{Main|Market failure}} {{see also|Government failure|Information economics|Environmental economics|Ecological economics|Agricultural economics}} [[File:Smokestack in Detroit.jpg|thumb|[[Pollution]] can be a simple example of market failure; if [[costs of production]] are not borne by producers but are by the environment, accident victims or others, then prices are distorted.|alt=A smokestack releasing smoke]] [[File:Field Trip- water sampling.jpg|thumb|An [[environmental scientist]] sampling water|alt=A woman takes samples of water from a river.]] The term "[[market failure]]" encompasses several problems which may undermine standard economic assumptions. Although economists categorise market failures differently, the following categories emerge in the main texts.{{efn|Compare with [[Nicholas Barr]] (2004), whose list of market failures is melded with failures of economic assumptions, which are (1) producers as price takers (i.e. presence of oligopoly or monopoly; but why is this not a product of the following?) (2) equal power of consumers (what labour lawyers call an imbalance of bargaining power) (3) complete markets (4) public goods (5) external effects (i.e. externalities?) (6) increasing returns to scale (i.e. practical monopoly) (7) perfect information (in {{cite book |title=The Economics of the Welfare State |url=https://books.google.com/books?id=gWxfQgAACAAJ&pg=PP1 |edition=4th |year=2004 |publisher=Oxford University Press |isbn=978-0-19-926497-1 |pages=72–79}}).<br /> • [[Joseph E. Stiglitz]] (2015) classifies market failures as from failure of competition (including [[natural monopoly]]), [[information asymmetries]], [[incomplete markets]], [[externalities]], [[Public good (economics)|public good]] situations, and [[macroeconomic]] disturbances (in {{cite book |title=Economics of the Public Sector |chapter-url=https://books.google.com/books?id=miPeCgAAQBAJ&pg=PP1 |edition=4th International Student |year=2015 |publisher=W.W. Norton & Company |isbn=978-0-393-93709-1 |pages=81–100 |chapter=Chapter 4: Market Failure}}).}} [[Information asymmetries]] and [[incomplete markets]] may result in economic inefficiency but also a possibility of improving efficiency through market, legal, and regulatory remedies, as discussed above. [[Natural monopoly]], or the overlapping concepts of "practical" and "technical" monopoly, is an extreme case of ''failure of competition'' as a restraint on producers. Extreme [[economies of scale]] are one possible cause. [[Public goods]] are goods which are under-supplied in a typical market. The defining features are that people can consume public goods without having to pay for them and that more than one person can consume the good at the same time. [[Externalities]] occur where there are significant social costs or benefits from production or consumption that are not reflected in market prices. For example, air pollution may generate a negative externality, and education may generate a positive externality (less crime, etc.). Governments often tax and otherwise restrict the sale of goods that have negative externalities and subsidise or otherwise promote the purchase of goods that have positive externalities in an effort to correct the price [[distortions (economics)|distortions]] caused by these externalities.<ref>{{cite encyclopedia |author-link=Jean-Jacques Laffont |last=Laffont |first=J.J. |date=1987 |dictionary=The New Palgrave Dictionary of Economics |edition= |editor-first1=John |editor-last1=Eatwell |editor-first2=Murray |editor-last2=Milgate |editor-first3=Peter |editor-last3=Newman |pages=263–265 |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde1987_X000773 |doi=10.1057/9780230226203.2520 |isbn=978-0-333-78676-5 |chapter=Externalities |access-date=16 October 2017 |archive-date=16 October 2017 |archive-url=https://web.archive.org/web/20171016230115/http://www.dictionaryofeconomics.com/article?id=pde1987_X000773 |url-status=live }}</ref> Elementary demand-and-supply theory predicts equilibrium but not the speed of adjustment for changes of equilibrium due to a shift in demand or supply.{{sfn|Blaug|2017|p=347}} In many areas, some form of [[price stickiness]] is postulated to account for quantities, rather than prices, adjusting in the short run to changes on the demand side or the supply side. This includes standard analysis of the [[business cycle]] in [[macroeconomics]]. Analysis often revolves around causes of such price stickiness and their implications for reaching a hypothesised long-run equilibrium. Examples of such price stickiness in particular markets include wage rates in labour markets and posted prices in markets [[Imperfect competition|deviating]] from [[perfect competition]]. Some specialised fields of economics deal in market failure more than others. The [[economics of the public sector]] is one example. Much [[environmental economics]] concerns externalities or "[[public bad]]s". [[Policy]] options include regulations that reflect [[cost–benefit analysis]] or market solutions that change incentives, such as [[Emissions trading|emission fees]] or redefinition of property rights.<ref>{{unbulleted list citebundle |1 = {{cite encyclopedia |last1=Kneese |first1=Allen V. |first2=Clifford S. |last2=Russell |date=1987 |dictionary=The New Palgrave Dictionary of Economics |edition= |editor-first1=John |editor-last1=Eatwell |editor-first2=Murray |editor-last2=Milgate |editor-first3=Peter |editor-last3=Newman |pages=159–164 |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde1987_X000715 |doi=10.1057/9780230226203.2480 |isbn=978-0-333-78676-5 |chapter=Environmental economics |author1-link=Allen V. Kneese |access-date=16 October 2017 |archive-date=30 December 2010 |archive-url=https://web.archive.org/web/20101230143754/http://www.dictionaryofeconomics.com/article?id=pde1987_X000715 |url-status=live |doi-access=free }} |2 = {{harvp|Samuelson|Nordhaus|2010|loc=ch. 18, "Protecting the Environment."}} }}</ref> === Welfare === {{main|Welfare economics}} Welfare economics uses microeconomics techniques to evaluate [[well-being]] from [[Allocation of resources|allocation]] of [[factors of production|productive factors]] as to desirability and [[economic efficiency]] within an [[economy]], often relative to competitive [[general equilibrium]].<ref>{{Cite encyclopedia |last=Deardorff |first=Alan V. |dictionary=Deardorffs' Glossary of International Economics |date=2016 |orig-date=2006 |title=Welfare economics |via=Alan Deardorff at University of Michigan |url=http://www-personal.umich.edu/~alandear/glossary/w.html#WelfareEconomics |archive-url=https://web.archive.org/web/20170320065124/http://www-personal.umich.edu/~alandear/glossary/w.html |archive-date=2017-03-20 }}</ref> It analyses ''social [[Well-being|welfare]]'', however [[Social welfare function|measured]], in terms of economic activities of the individuals that compose the theoretical society considered. Accordingly, individuals, with associated economic activities, are the [[methodological individualism|basic units]] for aggregating to social welfare, whether of a group, a community, or a society, and there is no "social welfare" apart from the "welfare" associated with its individual units. == Macroeconomics == {{Main|Macroeconomics}} [[File:DiagFuncMacroSyst.pdf|thumb|upright=1.4|[[Circular flow of income|The circulation of money in an economy]] in a macroeconomic model. In this model, the use of [[natural resources]] and the generation of [[waste]], such as [[greenhouse gas]]es, is not included.]] Macroeconomics, another branch of economics, examines the economy as a whole to explain broad aggregates and their interactions "top down", that is, using a simplified form of [[General equilibrium|general-equilibrium]] theory.{{sfnp|Blaug|2017|p=345}} Such aggregates include [[measures of national income and output|national income and output]], the [[unemployment rate]], and price [[inflation]] and subaggregates like total consumption and investment spending and their components. It also studies effects of [[monetary policy]] and [[fiscal policy]]. Since at least the 1960s, macroeconomics has been characterised by further integration as to [[microfoundations|micro-based]] modelling of sectors, including [[rational expectations|rationality]] of players, [[Efficient market hypothesis|efficient use]] of market information, and [[imperfect competition]].<ref>{{cite journal |title=Business Confidence and Depression Prevention: A Mesoeconomic Perspective |last=Ng |first=Yew-Kwang |author-link=Yew-Kwang Ng |journal=[[The American Economic Review]] |issn=0002-8282 |volume=82 |issue=2 |date=May 1992 |pages=365–371 |jstor=2117429}}</ref> This has addressed a long-standing concern about inconsistent developments of the same subject.<ref>{{cite encyclopedia |last1=Howitt |first1=Peter M. |date=1987 |dictionary=The New Palgrave Dictionary of Economics |edition= |editor-first1=John |editor-last1=Eatwell |editor-first2=Murray |editor-last2=Milgate |editor-first3=Peter |editor-last3=Newman |pages=273–276 |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde1987_X001367 |doi=10.1057/9780230226203.3008 |isbn=978-0-333-78676-5 |chapter=Macroeconomics: Relations with microeconomics |access-date=16 October 2017 |archive-date=17 October 2017 |archive-url=https://web.archive.org/web/20171017044005/http://www.dictionaryofeconomics.com/article?id=pde1987_X001367 |url-status=live }}</ref> Macroeconomic analysis also considers factors affecting the long-term level and [[economic growth|growth]] of national income. Such factors include [[capital accumulation]], technological change and [[labour force]] growth.{{sfnp|Blaug|2017|p=349}} === Growth === {{Main|Economic growth}} ''Growth economics'' studies factors that explain [[economic growth]] – the increase in output ''[[per capita]]'' of a country over a long period of time. The same factors are used to explain differences in the ''level'' of output ''per capita'' ''between'' countries, in particular why some countries grow faster than others, and whether countries [[catch-up effect|converge]] at the same rates of growth. Much-studied factors include the rate of [[Investment (macroeconomics)|investment]], [[population growth]], and technological change. These are represented in theoretical and [[empirical]] forms (as in the [[neoclassical growth model|neoclassical]] and [[endogenous growth model|endogenous]] growth models) and in [[growth accounting]].<ref>{{unbulleted list citebundle|{{harvp|Samuelson|Nordhaus|2010|loc=ch. 27, "The Process of Economic Growth"}}.|{{cite encyclopedia |author-link=Hirofumi Uzawa |last=Uzawa |first=H. |date=1987 |dictionary=The New Palgrave Dictionary of Economics |edition= |editor-first1=John |editor-last1=Eatwell |editor-first2=Murray |editor-last2=Milgate |editor-first3=Peter |editor-last3=Newman |pages=483–489 |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde1987_X001477 |doi=10.1057/9780230226203.3097 |isbn=978-0-333-78676-5 |chapter=Models of growth |access-date=16 October 2017 |archive-date=17 October 2017 |archive-url=https://web.archive.org/web/20171017042317/http://www.dictionaryofeconomics.com/article?id=pde1987_X001477 |url-status=live }}}}</ref> === Business cycle === {{Main|Business cycle}} {{See also|Circular flow of income|Aggregate supply|Aggregate demand|Unemployment}} [[File:Economic cycle.svg|thumb|A basic illustration of a [[business cycle]]]] The economics of a depression were the spur for the creation of "macroeconomics" as a separate discipline. During the [[Great Depression]] of the 1930s, [[John Maynard Keynes]] authored a book entitled ''[[The General Theory of Employment, Interest and Money]]'' outlining the key theories of [[Keynesian economics]]. Keynes contended that [[aggregate demand]] for goods might be insufficient during economic downturns, leading to unnecessarily high unemployment and losses of potential output. He therefore advocated active policy responses by the [[public sector]], including [[monetary policy]] actions by the [[central bank]] and [[fiscal policy]] actions by the government to stabilise output over the [[business cycle]].<ref>{{cite book |last1=O'Sullivan |first1=Arthur |author-link=Arthur O'Sullivan (economist) |first2=Steven M. |last2=Sheffrin |author-link2=Steven M. Sheffrin |title=Economics: Principles in Action |publisher=Pearson Prentice Hall |year=2003 |page=396 |isbn=978-0-13-063085-8}}</ref> Thus, a central conclusion of Keynesian economics is that, in some situations, no strong automatic mechanism moves output and employment towards [[full employment]] levels. [[John Hicks]]' [[IS/LM]] model has been the most influential interpretation of ''The General Theory''. Over the years, understanding of the [[business cycle]] has branched into various [[research program]]mes, mostly related to or distinct from Keynesianism. The [[neoclassical synthesis]] refers to the reconciliation of Keynesian economics with [[classical economics]], stating that Keynesianism is correct in the [[short run]] but qualified by classical-like considerations in the intermediate and [[long run]].<ref name="Blanchard2008">{{cite encyclopedia |author-link=Olivier J. Blanchard |last=Blanchard |first=Olivier Jean |date=2008 |editor-first1=Steven N. |editor-last1=Durlauf |editor-first2=Lawrence E. |editor-last2=Blume |edition=2nd |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde2008_N000041 |doi=10.1057/9780230226203.1172 |dictionary=The New Palgrave Dictionary of Economics |pages=896–899 |isbn=978-0-333-78676-5 |chapter=Neoclassical synthesis |access-date=17 November 2012 |archive-date=18 October 2017 |archive-url=https://web.archive.org/web/20171018013510/http://www.dictionaryofeconomics.com/article?id=pde2008_N000041 |url-status=live }}</ref> [[New classical macroeconomics]], as distinct from the Keynesian view of the business cycle, posits [[market clearing]] with [[imperfect information]]. It includes Friedman's [[permanent income hypothesis]] on consumption and "[[rational expectations]]" theory,<ref>{{cite web |url=http://www.economics.harvard.edu/files/faculty/40_Macroeconomist_as_Scientist.pdf |title=The Macroeconomist as Scientist and Engineer |first=N. Gregory |last=Mankiw |publisher=Harvard University |date=May 2006 |archive-url=https://web.archive.org/web/20120118103900/http://www.economics.harvard.edu/files/faculty/40_Macroeconomist_as_Scientist.pdf |archive-date=18 January 2012}}</ref> led by [[Robert Lucas, Jr.|Robert Lucas]], and [[real business cycle theory]].<ref>{{cite encyclopedia |author-link=Stanley Fischer |last=Fischer |first=Stanley |date=2008 |editor-first1=Steven N. |editor-last1=Durlauf |editor-first2=Lawrence E. |editor-last2=Blume |edition=2nd |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde2008_N000056 |doi=10.1057/9780230226203.1180 |dictionary=The New Palgrave Dictionary of Economics |pages=17–22 |isbn=978-0-333-78676-5 |chapter=New classical macroeconomics |access-date=17 November 2012 |archive-date=13 January 2014 |archive-url=https://web.archive.org/web/20140113071857/http://www.dictionaryofeconomics.com/article?id=pde2008_N000056 |url-status=live }}</ref> In contrast, the [[New Keynesian economics|new Keynesian]] approach retains the rational expectations assumption, however it assumes a variety of [[market failures]]. In particular, New Keynesians assume prices and wages are "[[Sticky (economics)|sticky]]", which means they do not adjust instantaneously to changes in economic conditions.<ref name="Dixon2008">{{cite encyclopedia |last=Dixon |first=Huw David |date=2008 |editor-first1=Steven N. |editor-last1=Durlauf |editor-first2=Lawrence E. |editor-last2=Blume |edition=2nd |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde2008_N000166 |doi=10.1057/9780230226203.1184 |dictionary=The New Palgrave Dictionary of Economics |pages=40–45 |isbn=978-0-333-78676-5 |chapter=New Keynesian macroeconomics |publisher=Palgrave Macmillan UK |access-date=17 November 2012 |archive-date=18 October 2017 |archive-url=https://web.archive.org/web/20171018013536/http://www.dictionaryofeconomics.com/article?id=pde2008_N000166 |url-status=live }}</ref> Thus, the new classicals assume that prices and wages adjust automatically to attain full employment, whereas the new Keynesians see full employment as being automatically achieved only in the long run, and hence government and central-bank policies are needed because the "long run" may be very long. === Unemployment === {{Main|Unemployment}} [[File:US Unemployment rate 1990 to present.png|thumb|upright=1.4|The U.S. [[unemployment]] rate from 1990 to 2022]] The amount of unemployment in an economy is measured by the unemployment rate, the percentage of workers without jobs in the labour force. The labour force only includes workers actively looking for jobs. People who are retired, pursuing education, or [[discouraged worker|discouraged from seeking work]] by a lack of job prospects are excluded from the labour force. Unemployment can be generally broken down into several types that are related to different causes.<ref name=Dwivedi443>{{cite book|last=Dwivedi|first=D. N.|title=Macroeconomics: Theory and Policy|url=https://books.google.com/books?id=P1eFyp9Iku8C&pg=PP1|year=2005|publisher=Tata McGraw-Hill Education|isbn=978-0-07-058841-7}}</ref> Classical models of unemployment occurs when wages are too high for employers to be willing to hire more workers. Consistent with classical unemployment, frictional unemployment occurs when appropriate job vacancies exist for a worker, but the length of time needed to search for and find the job leads to a period of unemployment.<ref name=Dwivedi443/> [[Structural unemployment]] covers a variety of possible causes of unemployment including a mismatch between workers' skills and the skills required for open jobs.<ref>{{cite encyclopedia |last=Freeman |first=C. |editor-first1=Steven N. |editor-last1=Durlauf |editor-first2=Lawrence E. |editor-last2=Blume |date=2008 |edition=2nd |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde2008_S000311 |doi=10.1057/9780230226203.1641 |title=The New Palgrave Dictionary of Economics |pages=64–66 |isbn=978-0-333-78676-5 |chapter=Structural unemployment |publisher=Palgrave Macmillan UK |access-date=9 September 2012 |archive-date=6 June 2013 |archive-url=https://web.archive.org/web/20130606035612/http://www.dictionaryofeconomics.com/article?id=pde2008_S000311 |url-status=live }}</ref> Large amounts of structural unemployment can occur when an economy is transitioning industries and workers find their previous set of skills are no longer in demand. Structural unemployment is similar to frictional unemployment since both reflect the problem of matching workers with job vacancies, but structural unemployment covers the time needed to acquire new skills not just the short term search process.{{sfnp|Dwivedi|2005|pp=444–445}} While some types of unemployment may occur regardless of the condition of the economy, cyclical unemployment occurs when growth stagnates. [[Okun's law]] represents the empirical relationship between unemployment and economic growth.{{sfnp|Dwivedi|2005|pp=445–446}} The original version of Okun's law states that a 3% increase in output would lead to a 1% decrease in unemployment.<ref>{{cite journal |last=Neely |first=Christopher J. |url=http://research.stlouisfed.org/publications/es/10/ES1004.pdf |title=Okun's Law: Output and Unemployment |journal=Economic Synopses |volume=4 |date=2010 |access-date=9 September 2012 |archive-date=4 December 2012 |archive-url=https://web.archive.org/web/20121204055537/http://research.stlouisfed.org/publications/es/10/ES1004.pdf |url-status=live }}</ref> === Money and monetary policy === {{Main|Monetary policy}} {{See also|Monetary economics|History of money}} [[Money]] is a ''means of final payment'' for goods in most [[price system]] economies, and is the [[unit of account]] in which prices are typically stated. Money has general acceptability, relative consistency in value, divisibility, durability, portability, elasticity in supply, and longevity with mass public confidence. It includes currency held by the nonbank public and checkable deposits. It has been described as a [[social convention]], like language, useful to one largely because it is useful to others. In the words of [[Francis Amasa Walker]], a well-known 19th-century economist, "Money is what money does" ("Money is ''that'' money does" in the original).<ref name="Walker1891">{{cite book|author=Francis Amasa Walker|author-link=Francis Amasa Walker|title=Money|url=https://books.google.com/books?id=2MJYSvaRqcwC|access-date=5 November 2017|year=1878|publisher=Henry Holt and Company|location=New York|page=405}}</ref> As a [[medium of exchange]], money facilitates trade. It is essentially a measure of value and more importantly, a store of value being a basis for credit creation. Its economic function can be contrasted with [[barter]] (non-monetary exchange). Given a diverse array of produced goods and specialised producers, barter may entail a hard-to-locate double [[coincidence of wants]] as to what is exchanged, say apples and a book. Money can reduce the [[transaction cost]] of exchange because of its ready acceptability. Then it is less costly for the seller to accept money in exchange, rather than what the buyer produces.<ref>{{cite encyclopedia |author-link=James Tobin |last=Tobin |first=James |date=1992 |chapter=Money (Money as a Social Institution and Public Good) |title=The New Palgrave Dictionary of Money and Finance |volume=2 |editor-first1=Peter K. |editor-last1=Newman |editor-first2=Murray |editor-last2=Milgate |editor-first3=John |editor-last3=Eatwell |pages=770–771 |publisher=Macmillan |isbn=978-1-5615-9041-4 |url=https://books.google.com/books?id=b0UOAQAAMAAJ&pg=PP1}}</ref> Monetary policy is the policy that central banks conduct to accomplish their broader objectives. Most central banks in developed countries follow [[inflation targeting]],<ref>{{cite web |url=http://www.imf.org/external/pubs/ft/fandd/basics/target.htm |title=Inflation Targeting: Holding the Line |last=Jahan |first=Sarwat |publisher=International Monetary Funds, Finance & Development |access-date=13 September 2023}}</ref> whereas the main objective for many central banks in development countries is to uphold a [[fixed exchange rate system]].<ref name=IMF>{{cite book |last1=Department |first1=International Monetary Fund Monetary and Capital Markets |title=Annual Report on Exchange Arrangements and Exchange Restrictions 2022 |date=26 July 2023 |publisher=International Monetary Fund |isbn=979-8-4002-3526-9 |url=https://www.elibrary.imf.org/display/book/9798400235269/9798400235269.xml?code=imf.org |access-date=13 September 2023 |language=en }}</ref> The primary monetary tool is normally the adjustment of interest rates,<ref name=RBA>{{cite web |last1=Baker |first1=Nick |last2=Rafter |first2=Sally |title=An International Perspective on Monetary Policy Implementation Systems {{!}} Bulletin – June 2022 |url=https://www.rba.gov.au/publications/bulletin/2022/jun/an-international-perspective-on-monetary-policy-implementation-systems.html |publisher=Reserve Bank of Australia |access-date=13 September 2023 |language=en-AU |date=16 June 2022}}</ref> either directly via administratively changing the central bank's own interest rates or indirectly via [[open market operation]]s.<ref>{{cite book |title=MC Compendium Monetary policy frameworks and central bank market operations |date=October 2019 |publisher=Bank for International Settlements |isbn=978-92-9259-298-1 |url=https://www.bis.org/publ/mc_compendium.pdf}}</ref> Via the [[monetary transmission mechanism]], interest rate changes affect [[investment]], [[Consumption (economics)|consumption]] and [[net export]], and hence [[aggregate demand]], [[Output (economics)|output]] and employment, and ultimately the development of wages and inflation. === Fiscal policy === {{Main|Fiscal policy|Government spending|Tax}} Governments implement fiscal policy to influence macroeconomic conditions by adjusting spending and taxation policies to alter aggregate demand. When aggregate demand falls below the potential output of the economy, there is an [[output gap]] where some productive capacity is left unemployed. Governments increase spending and cut taxes to boost aggregate demand. Resources that have been idled can be used by the government. For example, unemployed home builders can be hired to expand highways. Tax cuts allow consumers to increase their spending, which boosts aggregate demand. Both tax cuts and spending have [[Fiscal multiplier|multiplier effects]] where the initial increase in demand from the policy percolates through the economy and generates additional economic activity. The effects of fiscal policy can be limited by [[Crowding out (economics)|crowding out]]. When there is no output gap, the economy is producing at full capacity and there are no excess productive resources. If the government increases spending in this situation, the government uses resources that otherwise would have been used by the private sector, so there is no increase in overall output. Some economists think that crowding out is always an issue while others do not think it is a major issue when output is depressed. Sceptics of fiscal policy also make the argument of [[Ricardian equivalence]]. They argue that an increase in debt will have to be paid for with future tax increases, which will cause people to reduce their consumption and save money to pay for the future tax increase. Under Ricardian equivalence, any boost in demand from tax cuts will be offset by the increased saving intended to pay for future higher taxes. === Inequality === {{Main|Economic inequality}} Economic inequality includes [[income inequality]], measured using the [[distribution of income]] (the amount of money people receive), and [[wealth inequality]] measured using the [[distribution of wealth]] (the amount of wealth people own), and other measures such as consumption, land ownership, and [[human capital]]. Inequality exists at different extents between countries or states, groups of people, and individuals.<ref name="urlWealth Distribution and Income Inequality by Country 2018 | Global Finance Magazine">{{Cite web|url=https://www.gfmag.com/global-data/economic-data/wealth-distribution-income-inequality|title=World Wealth Distribution And Income Inequality 2022|first1=Luca |last1=Ventura |website=Global Finance Magazine|date=12 January 2022 }}</ref> There are [[income inequality metrics|many methods]] for measuring inequality,<ref>{{cite journal |last1=Trapeznikova |first1=Ija |title=Measuring income inequality |journal=IZA World of Labor |date=2019 |doi=10.15185/izawol.462 |url=https://wol.iza.org/articles/measuring-income-inequality|doi-access=free }}</ref> the [[Gini coefficient]] being widely used for income differences among individuals. An example measure of inequality between countries is the [[List of countries by inequality-adjusted HDI|Inequality-adjusted Human Development Index]], a composite index that takes inequality into account.<ref>Human Development Reports. [http://hdr.undp.org/en/content/inequality-adjusted-human-development-index-ihdi Inequality-adjusted Human Development Index (IHDI)] {{Webarchive |url=https://web.archive.org/web/20190712222023/http://hdr.undp.org/en/content/inequality-adjusted-human-development-index-ihdi |date=July 12, 2019}}. ''United Nations Development Programme''. Retrieved: March 3, 2019.</ref> Important concepts of equality include [[Equity (economics)|equity]], [[equality of outcome]], and [[equality of opportunity]]. Research has linked economic inequality to political and social instability, including [[revolution]], democratic breakdown and civil conflict.<ref name="MacCulloch">{{Cite web |title=Introduction to Inequality |url=https://www.imf.org/en/Topics/Inequality/introduction-to-inequality |access-date=May 9, 2022 |website=IMF |language=en}}</ref><ref>{{Cite journal |last1=MacCulloch |first1=Robert |year=2005 |title=Income Inequality and the Taste for Revolution |journal=The Journal of Law and Economics |volume=48 |issue=1 |pages=93–123 |doi=10.1086/426881 |jstor=10.1086/426881 |s2cid=154993058}}</ref><ref name="Acemoglu">{{Cite book |last1=Acemoglu |first1=Daron |url=https://www.cambridge.org/core/books/economic-origins-of-dictatorship-and-democracy/3F29DF90519971B183CAA16ED0203507 |title=Economic Origins of Dictatorship and Democracy |last2=Robinson |first2=James A. |date=2005 |publisher=Cambridge University Press |isbn=978-0521855266 |location=Cambridge |doi=10.1017/cbo9780511510809}}</ref><ref>{{Cite book |last1=Cederman|first1=Lars-Erik |last2=Gleditsch|first2=Kristian Skrede |last3=Buhaug|first3=Halvard |url=https://www.cambridge.org/core/books/inequality-grievances-and-civil-war/39F26D12EFEE2D7D621A59DF74DED496 |title=Inequality, Grievances, and Civil War |publisher=Cambridge University Press |year=2013|isbn=978-1107017429|doi=10.1017/cbo9781139084161}}</ref> Research suggests that greater inequality hinders economic growth and macroeconomic stability, and that land and [[human capital]] inequality reduce growth more than inequality of income.<ref name="MacCulloch" /><ref>{{cite journal |last1=Neves |first1=Pedro Cunha |last2=Afonso |first2=Óscar |last3=Silva |first3=Sandra Tavares |year=2016 |title=A Meta-Analytic Reassessment of the Effects of Inequality on Growth |journal=World Development |volume=78 |pages=386–400 |doi=10.1016/j.worlddev.2015.10.038}}</ref> Inequality is at the centre stage of [[economic policy]] debate across the globe, as government tax and spending policies have significant effects on income distribution.<ref name="MacCulloch" /> In advanced economies, taxes and transfers decrease income inequality by one-third, with most of this being achieved via public social spending (such as pensions and family benefits.)<ref name="MacCulloch" /> == Other branches of economics == === Public economics === {{Main|Public economics}} Public economics is the field of economics that deals with economic activities of a [[public sector]], usually government. The subject addresses such matters as [[tax incidence]] (who really pays a particular tax), cost–benefit analysis of government programmes, effects on [[economic efficiency]] and [[income distribution]] of different kinds of spending and taxes, and fiscal politics. The latter, an aspect of [[public choice theory]], models public-sector behaviour analogously to microeconomics, involving interactions of self-interested voters, politicians, and bureaucrats.<ref>{{cite encyclopedia |last1=Musgrave |first1=Richard A. |dictionary=The New Palgrave Dictionary of Economics |date=1987 |edition= |editor-first1=John |editor-last1=Eatwell |editor-first2=Murray |editor-last2=Milgate |editor-first3=Peter |editor-last3=Newman |author-link=Richard Musgrave (economist) |pages=1055–1060 |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde1987_X001795 |doi=10.1057/9780230226203.3360 |isbn=978-0-333-78676-5 |chapter=Public finance |access-date=16 October 2017 |archive-date=16 October 2017 |archive-url=https://web.archive.org/web/20171016230041/http://www.dictionaryofeconomics.com/article?id=pde1987_X001795 |url-status=live }}</ref> Much of economics is [[positive economics|positive]], seeking to describe and predict economic phenomena. [[Normative economics]] seeks to identify what economies ought to be like. Welfare economics is a normative branch of economics that uses [[microeconomics|microeconomic]] techniques to simultaneously determine the [[allocative efficiency]] within an economy and the income [[Distribution (economics)|distribution]] associated with it. It attempts to measure [[social welfare]] by examining the economic activities of the individuals that comprise society.<ref>{{cite encyclopedia |last1=Feldman |first1=Allan M. |date=1987 |dictionary=The New Palgrave Dictionary of Economics |edition= |editor-first1=John |editor-last1=Eatwell |editor-first2=Murray |editor-last2=Milgate |editor-first3=Peter |editor-last3=Newman |pages=889–095 |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde1987_X002306 |doi=10.1057/9780230226203.3785 |isbn=978-0-333-78676-5 |chapter=Welfare economics |access-date=16 October 2017 |archive-date=17 October 2017 |archive-url=https://web.archive.org/web/20171017041911/http://www.dictionaryofeconomics.com/article?id=pde1987_X002306 |url-status=live }}</ref> === International economics === {{Main|International economics}} [[File:Map of countries by GDP (PPP) per capita in 2022 by IMF.png|thumb|List of countries by [[gross domestic product]] (PPP) per capita in April 2022]] International trade studies determinants of goods-and-services flows across international boundaries. It also concerns the size and distribution of [[gains from trade]]. Policy applications include estimating the effects of changing [[tariff]] rates and trade quotas. [[International finance]] is a macroeconomic field which examines the flow of capital across international borders, and the effects of these movements on [[exchange rate]]s. Increased trade in goods, services and capital between countries is a major effect of contemporary [[globalisation]].<ref>{{unbulleted list citebundle |1 = {{cite encyclopedia |last=Anderson |first=James E. |date=2008 |edition=2nd |editor-first1=Steven N. |editor-last1=Durlauf |editor-first2=Lawrence E. |editor-last2=Blume |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde2008_I000263 |doi=10.1057/9780230226203.0839 |dictionary=The New Palgrave Dictionary of Economics |pages=516–522 |isbn=978-0-333-78676-5 |chapter=International trade theory |publisher=Palgrave Macmillan UK |access-date=6 June 2008 |archive-date=20 October 2017 |archive-url=https://web.archive.org/web/20171020033352/http://www.dictionaryofeconomics.com/article?id=pde2008_I000263 |url-status=live }} |2 = {{Cite journal |last=Venables |first=A. |date=2001 |title=International Trade: Economic Integration |journal=[[International Encyclopedia of the Social & Behavioral Sciences]] |pages=7843–7848 |doi=10.1016/B0-08-043076-7/02259-2 |isbn=978-0080430768 }} |3 = {{cite encyclopedia |last=Obstfeld |first=Maurice |date=2008 |edition=2nd |editor-first1=Steven N. |editor-last1=Durlauf |editor-first2=Lawrence E. |editor-last2=Blume |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde2008_I000169 |doi=10.1057/9780230226203.0828 |dictionary=The New Palgrave Dictionary of Economics |pages=439–451 |isbn=978-0-333-78676-5 |chapter=International finance |publisher=Palgrave Macmillan UK |s2cid=219381371 |access-date=6 June 2008 |archive-date=20 October 2017 |archive-url=https://web.archive.org/web/20171020032606/http://www.dictionaryofeconomics.com/article?id=pde2008_I000169 |url-status=live }} }}</ref> === Labour economics === {{main|Labour economics}} Labour economics seeks to understand the functioning and dynamics of the [[Market (economics)|markets]] for [[wage labour]]. ''Labour markets'' function through the interaction of workers and employers. Labour economics looks at the suppliers of labour services (workers), the demands of labour services (employers), and attempts to understand the resulting pattern of wages, employment, and income. In economics, ''labour'' is a measure of the work done by human beings. It is conventionally contrasted with such other [[factors of production]] as [[Land (economics)|land]] and [[Capital (economics)|capital]]. There are theories which have developed a concept called [[human capital]] (referring to the skills that workers possess, not necessarily their actual work), although there are also counter posing macro-economic system theories that think human capital is a contradiction in terms.{{Citation needed|reason=What is the source used to define Human Capital here? And what are the counter posing theories claiming human capital is a contradiction?|date=July 2022}} === Development economics === {{Main|Development economics}} Development economics examines economic aspects of the [[economic development]] process in relatively [[developing countries|low-income countries]] focusing on [[structural change]], [[poverty]], and [[economic growth]]. Approaches in development economics frequently incorporate social and political factors.<ref>{{unbulleted list citebundle |1 = {{cite encyclopedia |last=Bell |first=Clive |date=1987 |dictionary=The New Palgrave Dictionary of Economics |edition= |editor-first1=John |editor-last1=Eatwell |editor-first2=Murray |editor-last2=Milgate |editor-first3=Peter |editor-last3=Newman |volume=1 |pages=818–826 |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde1987_X000565 |doi=10.1057/9780230226203.2366 |isbn=978-0-333-78676-5 |chapter=Development economics |access-date=19 October 2017 |archive-date=20 October 2017 |archive-url=https://web.archive.org/web/20171020033009/http://www.dictionaryofeconomics.com/article?id=pde1987_X000565 |url-status=live }} |2 = {{harvp|Blaug|2017|p=351}} }}</ref> == Related subjects == {{Main|Law and economics|Natural resource economics|Philosophy and economics|Political economy}} Economics is one [[social science]] among several and has fields bordering on other areas, including [[economic geography]], [[economic history]], [[public choice]], [[energy economics]], [[JEL classification codes#Other special topics (economics) JEL: Z Subcategories|cultural economics]], [[family economics]] and [[institutional economics]]. Law and economics, or economic analysis of law, is an approach to legal theory that applies methods of economics to law. It includes the use of economic concepts to explain the effects of legal rules, to assess which legal rules are [[economic efficiency|economically efficient]], and to predict what the legal rules will be.<ref>{{unbulleted list citebundle |1 = {{cite encyclopedia|author-link=David D. Friedman |last=Friedman |first=David |date=1987 |publisher=Palgrave Macmillan |edition= |editor-first1=John |editor-last1=Eatwell |editor-first2=Murray |editor-last2=Milgate |editor-first3=Peter |editor-last3=Newman |volume=III |pages=1–8 |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde1987_X001281 |doi=10.1057/9780230226203.2937 |dictionary=The New Palgrave Dictionary of Economics |isbn=978-0-333-78676-5 |chapter=Law and economics |access-date=23 October 2017 |archive-date=24 October 2017 |archive-url=https://web.archive.org/web/20171024101008/http://www.dictionaryofeconomics.com/article?id=pde1987_X001281 |url-status=live }} |2 = {{cite book|last=Posner|first=Richard A.|author-link=Richard Posner|title=Economic Analysis of Law|url=https://books.google.com/books?id=ooFDAQAAIAAJ|edition=7th|year=2007|publisher=Aspen|isbn=978-0-7355-6354-4}}{{page needed|date=October 2017}} }}</ref> A seminal article by [[Ronald Coase]] published in 1961 suggested that well-defined property rights could overcome the problems of [[externalities]].<ref>{{cite journal |last=Coase |first=Ronald |title=The Problem of Social Cost |journal=[[The Journal of Law and Economics]] |volume=3 |issue=1 |date=October 1960 |pages=1–44 |jstor=724810 |doi=10.1086/466560|title-link=The Problem of Social Cost |s2cid=222331226 }}</ref> [[Political economy]] is the interdisciplinary study that combines economics, law, and [[political science]] in explaining how political institutions, the political environment, and the economic system (capitalist, [[socialist]], mixed) influence each other. It studies questions such as how monopoly, [[rent-seeking]] behaviour, and [[externalities]] should impact government policy.<ref>{{cite journal |last=Groenewegen |first=Peter |date=2008 |title=Political Economy |pages=476–480 |journal=The New Palgrave Dictionary of Economics |editor-first1=Steven N. |editor-last1=Durlauf |editor-first2=Lawrence E. |editor-last2=Blume |edition=2nd |url=http://www.dictionaryofeconomics.com/article?id=pde2008_P000114 |doi=10.1057/9780230226203.1300 |isbn=978-0-333-78676-5 |access-date=4 October 2017 |archive-date=5 October 2017 |archive-url=https://web.archive.org/web/20171005000524/http://www.dictionaryofeconomics.com/article?id=pde2008_P000114 |url-status=live |url-access=subscription }}</ref><ref>{{cite journal |author-link=Anne Osborn Krueger |last=Krueger |first=Anne O. |date=June 1974 |title=The Political Economy of the Rent-Seeking Society |journal=American Economic Review |volume=64 |issue=3 |pages=291–303 |jstor=1808883}}</ref> [[Historian]]s have employed ''political economy'' to explore the ways in the past that persons and groups with common economic interests have used politics to effect changes beneficial to their interests.<ref>{{cite book |last=McCoy |first=Drew R. |title=The Elusive Republic: Political Economy in Jeffersonian America |publisher=University of North Carolina Press |date=1980 |isbn=978-0-8078-1416-1 |url=https://books.google.com/books?id=0aDqCQAAQBAJ}}</ref> [[Energy economics]] is a broad [[science|scientific]] subject area which includes topics related to [[energy supply]] and [[energy demand]]. [[Georgescu-Roegen]] reintroduced the concept of [[entropy]] in relation to economics and energy from [[thermodynamics]], as distinguished from what he viewed as the mechanistic foundation of neoclassical economics drawn from Newtonian physics. His work contributed significantly to [[thermoeconomics]] and to [[ecological economics]]. He also did foundational work which later developed into [[evolutionary economics]].<ref>{{unbulleted list citebundle |1 = {{cite journal |last1=Cleveland |first1=Cutler J. |last2=Ruth |first2=Matthius |date=September 1997 |title=When, where, and by how much do biophysical limits constrain the economic process? A survey of Georgescu-Roegen's contribution to ecological economics |journal=[[Ecological Economics (journal)|Ecological Economics]] |volume=22 |issue=3 |pages=203–223 |doi=10.1016/S0921-8009(97)00079-7|doi-access=free }} |2 = {{cite journal |last=Daly |first=Herman E. |date=June 1995 |title=On Nicholas Georgescu-Roegen's Contributions to Economics: An Obituary essay |journal=Ecological Economics |volume=13 |issue=3 |pages=149–154 |doi=10.1016/0921-8009(95)00011-W|bibcode=1995EcoEc..13..149D }} |3 = {{cite journal |last=Mayumi |first=Kozo |date=August 1995 |title=Nicholas Georgescu-Roegen (1906–1994): an admirable epistemologist |journal=Structural Change and Economic Dynamics |volume=6 |issue=3 |pages=115–120 |doi=10.1016/0954-349X(95)00014-E|doi-access= }} |4 = {{cite book |editor-last1=Mayumi |editor-first=Kozo |editor-last2=Gowdy |editor-first2=John M. |date=1999 |title=Bioeconomics and Sustainability: Essays in Honor of Nicholas Georgescu-Roegen |publisher=Edward Elgar Publishering |isbn=978-1-85898-667-8 |url=https://books.google.com/books?id=_Hd08ju9UG4C&pg=PP1}} |5 = {{cite book |last=Mayumi |first=Kozo |date=2001 |title=The Origins of Ecological Economics: The Bioeconomics of Georgescu-Roegen |publisher=Routledge |isbn=978-0-415-23523-5 |url=https://books.google.com/books?id=mCiCAgAAQBAJ&pg=PP1}} }}</ref> The [[sociological]] subfield of [[economic sociology]] arose, primarily through the work of [[Émile Durkheim]], [[Max Weber]] and [[Georg Simmel]], as an approach to analysing the effects of economic phenomena in relation to the overarching social paradigm (i.e. [[modernity]]).<ref>{{cite book |title=Principles of Economic Sociology |first=Richard |last=Swedberg |date=2003 |publisher=Princeton University Press |isbn=978-0-691-07439-9 |url=https://books.google.com/books?id=is7NGpu93NwC&pg=PP1}}</ref> Classic works include [[Max Weber]]'s ''[[The Protestant Ethic and the Spirit of Capitalism]]'' (1905) and [[Georg Simmel]]'s ''[[The Philosophy of Money]]'' (1900). More recently, the works of [[James Samuel Coleman|James S. Coleman]],<ref>{{unbulleted list citebundle |1 = {{Cite book |author-link=James Samuel Coleman |last=Coleman |first=James S. |date=1998 |title=Foundations of Social Theory |url=https://books.google.com/books?id=2_64AAAAIAAJ |publisher=Belknap – Harvard University Press |isbn=978-0674312265 |access-date=12 October 2021 |archive-date=30 July 2022 |archive-url=https://web.archive.org/web/20220730075147/https://www.google.com/books/edition/Social_Economics/2_64AAAAIAAJ |url-status=live }} <!-- orig cite has different harvard isbn from the google books link, and the cited date (1990) was wrong for both --> |2 = {{Cite journal |author-link=Robert H. Frank |last=Frank |first=Robert H. |date=1992 |title=Melding Sociology and Economics: James Coleman's Foundations of Social Theory |journal=Journal of Economic Literature |volume=30 |issue=1 |jstor=2727881 |pages=147–170}} }}</ref> [[Mark Granovetter]], [[Peter Hedström (sociologist)|Peter Hedstrom]] and [[Richard Swedberg]] have been influential in this field. [[Gary Becker]] in 1974 presented an economic theory of social interactions, whose applications included the [[family economics|family]], charity, [[merit good]]s and multiperson interactions, and envy and hatred.<ref>{{Cite journal |author-link=Gary Becker |last=Becker |first=Gary S. |date=1974 |title=A Theory of Social Interactions |journal=Journal of Political Economy |volume=82 |issue=6 <!-- pages=1063–1093 --> |doi=10.1086/260265 |jstor=1830662 |s2cid=17052355 |at=See pp. 1074–1090 |url=http://www.uoregon.edu/~cjellis/441/Becker1.pdf |archive-url=https://web.archive.org/web/20050502153308/http://www.uoregon.edu/~cjellis/441/Becker1.pdf |archive-date=2005-05-02}}</ref> He and [[Kevin M. Murphy|Kevin Murphy]] authored a book in 2001 that analysed market behaviour in a social environment.<ref>{{Cite book |last1=Becker |first1=Gary S. |last2=Murphy |first2=Kevin M. |date=2003 |title=Social Economics: Market Behavior in a Social Environment |publisher=Belknap – Harvard University Press |isbn=978-0674011212 |url=https://books.google.com/books?id=2_64AAAAIAAJ}} <!-- again, orig cite has different isbns and dates for gbooks and harvard sites and neither match what was in the citation (2001) --></ref> == Profession == {{Main|Economist}} The professionalisation of economics, reflected in the growth of graduate programmes on the subject, has been described as "the main change in economics since around 1900".<ref>{{cite encyclopedia |title=Economics: Overview, The Profession of Economics |encyclopedia=[[International Encyclopedia of the Social & Behavioral Sciences]] |publisher=Pergamon |last=Ashenfelter |first=Orley |date=2001 |author-link=Orley Ashenfelter |editor-last1=Smelser |editor-first1=N. J. |edition= |volume=VI |page=4159 |isbn=978-0-0804-3076-8 |editor-first2=P. B. |editor-last2=Baltes}}</ref> Most major [[universities]] and many colleges have a major, school, or department in which [[academic degrees]] are awarded in the subject, whether in the [[liberal arts]], business, or for professional study. See [[Bachelor of Economics]] and [[Master of Economics]]. In the private sector, professional economists are employed as consultants and in industry, including [[banking]] and [[finance]]. Economists also work for various government departments and agencies, for example, the national [[treasury]], [[central bank]] or [[List of national and international statistical services|National Bureau of Statistics]]. See [[Economic analyst]]. There are dozens of prizes awarded to economists each year for outstanding intellectual contributions to the field, the most prominent of which is the [[Nobel Memorial Prize in Economic Sciences]], though it is not a [[Nobel Prize]]. Contemporary economics uses mathematics. Economists draw on the tools of [[calculus]], [[linear algebra]], [[statistics]], [[game theory]], and [[computer science]].<ref>{{cite encyclopedia |author-link=Gérard Debreu |last=Debreu |first=Gérard |date=1987 |dictionary=The New Palgrave Dictionary of Economics |edition= |editor-first1=John |editor-last1=Eatwell |editor-first2=Murray |editor-last2=Milgate |editor-first3=Peter |editor-last3=Newman |pages=401–403 |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde1987_X001428 |doi=10.1057/9780230226203.3059 |isbn=978-0-333-78676-5 |chapter=Mathematical economics |access-date=23 October 2017 |archive-date=24 October 2017 |archive-url=https://web.archive.org/web/20171024042819/http://www.dictionaryofeconomics.com/article?id=pde1987_X001428 |url-status=live }}</ref> Professional economists are expected to be familiar with these tools, while a minority specialise in econometrics and mathematical methods. ===Women in economics=== [[Harriet Martineau]] (1802–1876) was a widely-read populariser of classical economic thought. [[Mary Paley Marshall]] (1850–1944), the first women lecturer at a British economics faculty, wrote ''The Economics of Industry'' with her husband [[Alfred Marshall]]. [[Joan Robinson]] (1903–1983) was an important [[post-Keynesian]] economist. The economic historian [[Anna Schwartz]] (1915–2012) coauthored ''[[A Monetary History of the United States, 1867–1960]]'' with [[Milton Friedman]].<ref>{{cite web | first=Mike | last=Bird | title=13 women who transformed the world of economics | website=World Economic Forum | date=November 27, 2015 |url=https://www.weforum.org/agenda/2015/11/13-women-who-transformed-the-world-of-economics/ | archive-url=https://web.archive.org/web/20160122204258/https://www.weforum.org/agenda/2015/11/13-women-who-transformed-the-world-of-economics/ | archive-date=January 22, 2016 }}</ref> Three women have received the [[Nobel Prize in Economics]]: [[Elinor Ostrom]] (2009), [[Esther Duflo]] (2019) and [[Claudia Goldin]] (2023). Five have received the [[John Bates Clark Medal]]: [[Susan Athey]] (2007), Esther Duflo (2010), [[Amy Finkelstein]] (2012), [[Emi Nakamura]] (2019) and [[Melissa Dell]] (2020). Women's authorship share in prominent economic journals reduced from 1940 to the 1970s, but has subsequently risen, with different patterns of gendered coauthorship.<ref>{{cite journal | first1=Erin | last1=Hengel | first2=Sarah Louisa | last2=Phythian-Adams | title=A historical portrait of female economists' co-authorship networks | journal=History of Political Economy | date=August 2022 | volume=54 | pages=17–41 | doi=10.1215/00182702-10085601 | s2cid=251532686 | url=https://erinhengel.github.io/hope/hope.pdf | access-date=30 August 2022 }}</ref> Women remain globally under-represented in the profession (19% of authors in the [[RePEc]] database in 2018), with national variation.<ref>{{cite web | first1=Anne | last1=Boring | first2=Soledad | last2=Zignago | title= Economics, where are the women? | website=Banque de France | date=March 6, 2018 | url=https://blocnotesdeleco.banque-france.fr/en/blog-entry/economics-where-are-women | access-date=August 30, 2022 }}</ref> ==See also== {{Portal|Business and economics}} {{div col|colwidth=20em}} * {{annotated link|Asymmetric cointegration}} * {{annotated link|Critical juncture theory}} * {{annotated link|Democracy and economic growth}} * {{annotated link|Economic democracy}} * {{annotated link|Economic ideology}} * {{annotated link|Economic union}} * {{annotated link|Economics terminology that differs from common usage}} * {{annotated link|Free trade}} * {{annotated link|Glossary of economics}} * {{annotated link|Happiness economics}} * {{annotated link|Humanistic economics}} * {{annotated link|Index of economics articles}} * {{section link|List of academic fields|Economics}} * {{annotated link|List of economics awards}} * {{annotated link|Outline of economics}} * {{annotated link|Socioeconomics}} * {{annotated link|Solidarity economy}} {{div col end}} ==Notes== {{notelist}} ==References== {{Reflist|30em}} ===Sources=== * {{cite journal |last1=Hoover |first1=Kevin D. |first2=Mark V. |last2=Siegler |date=20 March 2008 |title=Sound and Fury: McCloskey and Significance Testing in Economics |journal=Journal of Economic Methodology |volume=15 |issue=1 |pages=1–37 |doi=10.1080/13501780801913298 |citeseerx=10.1.1.533.7658 |s2cid=216137286 }} * {{cite book | last1=Samuelson | first1=Paul A | author-link1=Paul Samuelson| last2=Nordhaus | first2=William D.| author-link2=William D. Nordhaus |title-link=Economics (textbook) |title=Economics |location=Boston |publisher=Irwin McGraw-Hill |date=2010 |oclc=751033918 |isbn=978-0073511290}} ==Further reading== * {{Cite book |last=Anderson |first=David A. |date=2019 |title=Survey of Economics |location=New York |publisher=Worth |isbn=978-1-4292-5956-9}} * {{cite book |last1=Blanchard |first1=Olivier |author-link1=Olivier Blanchard |last2=Amighini |first2=Alessia |last3=Giavazzi |first3=Francesco |author-link3=Francesco Giavazzi |title=Macroeconomics: a European perspective |date=2017 |publisher=Pearson |isbn=978-1-292-08567-8 |edition=3rd}} * {{cite book |last=Blaug |first=Mark |author-link=Mark Blaug |edition=4th |date=1985 |title=Economic Theory in Retrospect|location= Cambridge |publisher=Cambridge University Press |isbn=978-0521316446 }} * {{Cite book |last=McCann | first=Charles Robert Jr. |date=2003 |title=The Elgar Dictionary of Economic Quotations |publisher=Edward Elgar |isbn=978-1840648201}} * [[Louis F. Post|Post, Louis F.]] (1927), ''[https://www.gutenberg.org/ebooks/73475 The Basic Facts of Economics: A Common-Sense Primer for Advanced Students]''. United States: Columbian Printing Company, Incorporated. * {{librivox book | title=Economics}}. ==External links== {{Sister project links|d=Q8134}} {{Library resources box |by=no |onlinebooks=no |others=no |about=yes |label=Economics }} ===General information=== {{refbegin|35em}} * [http://www.oswego.edu/~economic/journals.htm Economic journals on the web.] {{Webarchive|url=https://web.archive.org/web/20130710110240/http://www.oswego.edu/~economic/journals.htm |date=10 July 2013 }} * [https://www.britannica.com/topic/economics Economics] {{Webarchive|url=https://web.archive.org/web/20220625153920/https://www.britannica.com/topic/economics |date=25 June 2022 }} at ''[[Encyclopædia Britannica]]'' * [https://www.economist.com/economics-a-to-z Economics A–Z.] {{Webarchive|url=https://web.archive.org/web/20220214211108/https://www.economist.com/economics-a-to-z |date=14 February 2022 }} Definitions from ''[[The Economist]]''. * [https://www.economicsonline.co.uk/ Economics Online] {{Webarchive|url=https://web.archive.org/web/20211028015205/https://www.economicsonline.co.uk/ |date=28 October 2021 }} (UK-based), with [[drop-down menu]]s at top, incl. Definitions. * [https://web.archive.org/web/20070512014346/http://www.intute.ac.uk/socialsciences/economics/ Intute: Economics]: [[Internet directory]] of UK universities. * [http://repec.org/ Research Papers in Economics (RePEc)] {{Webarchive|url=https://web.archive.org/web/20000816091515/http://repec.org/ |date=16 August 2000 }} * [http://rfe.org/ Resources For Economists] {{Webarchive|url=https://web.archive.org/web/20130511055542/http://rfe.org/ |date=11 May 2013 }}: [[American Economic Association]]-sponsored guide to 2,000+ Internet resources from "Data" to "Neat Stuff", updated quarterly. {{refend}} ===Institutions and organizations=== {{refbegin|35em}} * [http://edirc.repec.org/ Economics Departments, Institutes and Research Centers in the World] {{Webarchive|url=https://web.archive.org/web/20130430082832/http://edirc.repec.org/ |date=30 April 2013 }} * [https://web.archive.org/web/20030801073637/http://www.oecd.org/statistics/ Organization For Co-operation and Economic Development (OECD) Statistics] * [http://unstats.un.org/ United Nations Statistics Division] {{Webarchive|url=https://web.archive.org/web/20020124234652/http://unstats.un.org/ |date=24 January 2002 }} * [http://data.worldbank.org/ World Bank Data] {{Webarchive|url=https://web.archive.org/web/20190727121731/https://data.worldbank.org/ |date=27 July 2019 }} * [https://www.aeaweb.org/ American Economic Association] {{Webarchive|url=https://web.archive.org/web/20210120030415/https://www.aeaweb.org/ |date=20 January 2021 }} {{refend}} ===Study resources=== {{refbegin|35em}} * {{cite book|last1=Anderson|first1=David|last2=Ray|first2=Margaret|title=Krugman's Economics for the AP Course|date=2019|publisher=BFW|location=New York|isbn=978-1-319-11327-8|edition=3rd|url=https://www.bfwpub.com/high-school/us/product/Krugmans-Economics-for-the-AP-Course/p/1319113273|access-date=2 March 2021|archive-date=8 March 2021|archive-url=https://web.archive.org/web/20210308040106/https://www.bfwpub.com/high-school/us/product/Krugmans-Economics-for-the-AP-Course/p/1319113273|url-status=live}} * {{cite book|last=McConnell|first=Campbell R.|edition=18th|date=2009|title=Economics. Principles, Problems and Policies|url=http://www.califaxprinters.com/mba_books/EB%20McConnell%20Econ.18e.pdf|format=PDF contains full textbook|location=New York|publisher=McGraw-Hill|display-authors=etal|isbn=978-0-07-337569-4|url-status=dead|archive-url=https://web.archive.org/web/20161006014212/http://www.califaxprinters.com/mba_books/EB%20McConnell%20Econ.18e.pdf|archive-date=6 October 2016|df=dmy-all}} * [http://economics.about.com/ Economics at About.com] {{Webarchive|url=https://web.archive.org/web/20070602020408/http://economics.about.com/ |date=2 June 2007 }} * [[b:Economics|Economics textbooks]] on [[b:Main Page|Wikibooks]] * [http://www.merlot.org/merlot/materials.htm?category=2216 MERLOT Learning Materials: Economics] {{Webarchive|url=https://web.archive.org/web/20130614190857/http://www.merlot.org/merlot/materials.htm?category=2216 |date=14 June 2013 }}: US-based database of learning materials * [http://www.economicsnetwork.ac.uk/links/othertl.htm Online Learning and Teaching Materials] {{Webarchive|url=https://web.archive.org/web/20130509105953/http://www.economicsnetwork.ac.uk/links/othertl.htm |date=9 May 2013 }} UK Economics Network's database of text, slides, glossaries and other resources {{refend}} <!-- If you have an interest in the Economics and Business section of Wikipedia, drop by at [[Wikipedia:WikiProject Business and Economics]]. --> {{Economics |expanded}} {{Social sciences |collapsed}} {{Authority control}} {{Use Oxford spelling|date=August 2016}} {{Use dmy dates|date=June 2018}} [[Category:Economics| ]] [[Category:Economic theories| ]]
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