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Economics, Economics

It included such notables as Thomas Malthus, David Ricardo, and John Stuart Mill writing from about 1770 to 1870. Blaug, Mark (1987). "Classical Economics", A Dictionary of Economics, v. 1, pp. 43435. Blaug notes less widely used datings and uses of 'classical economics', including those of Marx and Keynes.

In macroeconomics it is reflected in an early and lasting neoclassical synthesis with Keynesian macroeconomics. Hicks, J.R. (1937). "Mr. Keynes and the 'Classics': A Suggested Interpretation," Econometrica , 5(2), p p. 147159.

Modern mainstream economics builds on neoclassical economics but with many refinements that either supplement or generalize earlier analysis, such as econometrics, game theory, analysis of market failure and imperfect competition, and the neoclassical model of economic growth for analyzing long-run variables affecting national income.

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. Such terms as "revolutionary" have been applied to the book in its impact on economic analysis. Tarshis, L. (1987). "Keynesian Revolution", The New Palgrave: A Dictionary of Economics , v. 3, pp. 4750.

It is generally associated with the University of Cambridge and the work of Joan Robinson. Harcourt, G.C.(1987). "Post-Keynesian Economics", The New Palgrave: A Dictionary of Economics , v. 3, pp. 4750.

It is an economic process that uses resources to create a commodity that is suitable for exchange. This can include manufacturing, warehousing, shipping, and packaging. Some economists define production broadly as all economic activity other than consumption. They see every commercial activity other than the final purchase as some form of production. Production is a process, and as such it occurs through time and space. Because it is a flow concept, production is measured as a "rate of output per period of time". There are three aspects to production processes, including the quantity of the commodity produced, the form of the good created and the temporal and spatial distribution of the commodity produced. Opportunity cost expresses the idea that for every choice, the true economic cost is the next best opportunity. Choices must be made between desirable yet mutually exclusive actions. It has been described as expressing "the basic relationship between scarcity and choice.". James M. Buchanan (1987). "Opportunity Cost", A Dictionary of Economics , v. 3, pp. 71821.

While one country may have an absolute advantage in every area over other countries, it could nonetheless specialize in the area which it has a relative comparative advantage, and thereby gain from trading with countries which have no absolute advantages. For example, a country may specialize in the production of high-tech knowledge products, as developed countries do, and trade with developing nations for goods produced in factories, where labor is cheap and plentiful. According to theory, in this way more total products and utility can be achieved than if countries produced their own high-tech and low-tech products. The theory of comparative advantage is largely the basis for the typical economist's belief in the benefits of free trade. This concept applies to individuals, farms, manufacturers, service providers, and economies. Among each of these production systems, there may be a corresponding division of labour with each worker having a distinct occupation or doing a specialized task as part of the production effort, or correspondingly different types of capital equipment and differentiated land uses. Groenewegen, Peter (1987). "Division of Labour", The New Palgrave: A Dictionary of Economics , v. 1, pp. 90105.

Demand and supply can also be generalized to explain variables applying to the whole economy, for example, quantity of total output and the general price level, studied in macroeconomics.

But tracing the effects of factors predicted to change supply and demandand through them, price and quantityis a standard exercise in applied microeconomics and macroeconomics. Economic theory can specify under what circumstances price serves as an efficient communication device to regulate quantity. Jordan, J.S. (1982). "The Competitive Allocation Process Is Informationally Efficient Uniquely." Journal of Economic Theory , 28(1), p. 118.

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 subsidize or otherwise promote the purchase of goods that have positive externalities in an effort to correct the price distortions caused by these externalities. Laffont, J.J. (1987). "Externalities", The New Palgrave: A Dictionary of Economics , v. 2, p. 26365.

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 hypothesized long-run equilibrium. Examples of such price stickiness in particular markets include wage rates in labour markets and posted prices in markets deviating from perfect competition.

Much environmental economics concerns externalities or "public bads". Policy options include regulations that reflect cost-benefit analysis or market solutions that change incentives, such as emission fees or redefinition of property rights. Kneese, Allen K., and Clifford S. Russell (1987). "Environmental Economics", The New Palgrave: A Dictionary of Economics , v. 2, pp. 15964.

Thus, its focus is on the operation of financial markets, the pricing of financial instruments, and the financial structure of companies. Ross, Stephen A. (1987). "Finance", The New Palgrave: A Dictionary of Economics , v. 2, pp. 32226.

The subject addresses such matters as tax incidence (who really pays a particular tax), cost-benefit analysis of government programs, 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 behavior analogously to microeconomics, involving interactions of self-interested voters, politicians, and bureaucrats. Musgrave, R.A. (1987). "Public Finance", The New Palgrave: A Dictionary of Economics , v. 3, pp. 105560.

Normative economics seeks to identify what is economically good and bad.

It attempts to measure social welfare by examining the economic activities of the individuals that comprise society. Feldman, Allan M. (1987). "Welfare Economics", The New Palgrave: A Dictionary of Economics , v. 4, pp. 88995.

For this reason, management of the money supply is a key aspect of monetary policy. Milton Friedman (1987). "Quantity Theory of Money", The New Palgrave: A Dictionary of Economics , v. 4, pp. 1519.

The national accounts are double-entry accounting systems that provide detailed underlying measures of such information. These include the national income and product accounts (NIPA), which provide estimates for the money value of output and income per year or quarter. NIPA allows for tracking the performance of an economy and its components through business cycles or over longer periods. Price data may permit distinguishing nominal from real amounts, that is, correcting money totals for price changes over time. Usher, D. (1987), "Real Income", The New Palgrave: A Dictionary of Economics , v. 4, p. 104.

Increased trade in goods, services and capital between countries is a major effect of contemporary globalization. Anderson, James E. (2008). "International Trade Theory", The New Palgrave Dictionary of Economics, 2nd Edition.

Friedman Milton (1953). "The Methodology of Positive Economics," Essays in Positive Economics , University of Chicago Press, p. 10.

The aforementioned microeconomic concepts play a major part in macroeconomic models for instance, in monetary theory, the quantity theory of money predicts that increases in the money supply increase inflation, and inflation is assumed to be influenced by rational expectations. In development economics, slower growth in developed nations has been sometimes predicted because of the declining marginal returns of investment and capital, and this has been observed in the Four Asian Tigers. Sometimes an economic hypothesis is only qualitative , not quantitative . Quirk, James (1987). "Qualitative Economics", The New Palgrave: A Dictionary of Economics , v. 4, pp. 13.

KeuzenkampPublished by Cambridge University Press, 2000ISBN 0521553598, 9780521553599312 pages, page 13: "...in economics, controlled experiments are rare and reproducible controlled experiments even more so..." , and instead broad data is observationally studied; this type of testing is typically regarded as less rigorous than controlled experimentation, and the conclusions typically more tentative. The number of laws discovered by the discipline of economics is relatively very low compared to the physical sciences. 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 hypothesized 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 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 sets, and prior beliefs.

In behavioral economics, psychologists Daniel Kahneman and Amos Tversky have won Nobel Prizes in economics for their empirical discovery of several cognitive biases and 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. Fehr, Ernst, and Urs Fischbacher (2003). "The Nature of Human Altruism," Nature 425, October 23, pp. 785791.

In strategic games, agents choose strategies that will maximize their payoff, given the strategies the other agents choose. It provides a formal modeling approach to social situations in which decision makers interact with other agents. Game theory generalizes maximization approaches developed to analyze markets such as the supply and demand model. The field dates from the 1944 classic Theory of Games and Economic Behavior by John von Neumann and Oskar Morgenstern. It has found significant applications in many areas outside economics as usually construed, including formulation of nuclear strategies, ethics, political science, and evolutionary theory. Aumann, R.J. (1987). "Game Theory", A Dictionary of Economics , v. 2, pp. 46082.

The Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel (colloquially, the Nobel Prize in Economics) is a prize awarded to economists each year for outstanding intellectual contributions in the field. 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 Bureau of Statistics.

It includes the use of economic concepts to explain the effects of legal rules, to assess which legal rules are economically efficient, and to predict what the legal rules will be. Friedman, David (1987). "Law and Economics," The New Palgrave: A Dictionary of Economics , v. 3, p. 144.

Many economists consider normative choices and value judgments, like what needs or wants, or what is good for society, to be political or personal questions outside the scope of economics. Once a person or government has established a set of goals, however, economics can provide insight as to how they might best be achieved.

It is often stated that Carlyle gave economics the nickname "dismal science" as a response to the late 18th century writings of The Reverend Thomas Robert Malthus, who grimly predicted that starvation would result, as projected population growth exceeded the rate of increase in the food supply. The teachings of Malthus eventually became known under the umbrella phrase "Malthus' Dismal Theorem". His predictions were forestalled by unanticipated dramatic improvements in the efficiency of food production in the 20th century; yet the bleak end he proposed remains as a disputed future possibility, assuming human innovation fails to keep up with population growth.

He notes that some of the topics highlighted by heterodox economists, such as the importance of institutions or uncertainty, are now being studied in the mainstream through mathematical models without mention of the work done by the heterodox economists. New institutional economics, for example, examines institutions mathematically without much relation to the largely heterodox field of institutional economics.

Source: Wikipedia > Economics