Content:
1. Introduction
1.1. In the beginning
1.2. Areas of economics
1.3. Related fields, other distinctions, and classifications
1.4. Mathematical and quantitative methods
1.5. Agricultural economics
1.6. Development and growth economics
1.7. Economic systems
1.8. Environmental economics
1.9. Industrial organization
1.10. International economics
1.11. Labor economics
1.12. Law and economics
1.13. Managerial economics
1.14. Public finance
1.15. History and school of economics
Summary
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1.1. In the beginning
Adam Smith, author of
The Wealth of Nations
(1776), generally regarded as initiating modern
economics.
Although discussions about production and distribution have a long history, economics in its
modern sense as a separate discipline is conventionally dated from the publication of Adam
Smith's
The Wealth of Nations
in 1776. In this work, describes the subject in these practical and
exacting terms:
Political economy, considered as a branch of the science of a statesman or legislator,
proposes two distinct objects: first, to supply a plentiful revenue or product for the
people, or, more properly, to enable them to provide such a revenue or subsistence for
themselves; and secondly, to supply the state or commonwealth with revenue sufficient
for the public services. It proposes to enrich both the people and the sovereign
.
Smith referred to the subject as 'political economy', but that term has been replaced in general
usage to Classical economics.
Smith notably discusses the benefits of the division of labor as well as the subject of resource
allocation. Just how individuals can best apply their own labor or any other resource is a central
subject in the first book of the series. Smith claimed that an individual would invest a resource,
for example, land or labor, so as to earn the highest possible return on it. Consequently, all uses
of the resource must yield an equal rate of return (adjusted for the relative riskiness of each
enterprise). Otherwise reallocation would result. This idea, wrote George Stigler, is the central
proposition of economic theory. French economist Turgot had made the same point in 1766.
1.2. Areas of economics
Areas of economics may be classified in various ways, but an economy is usually analyzed by
use of
microeconomics
or
macroeconomics
.
Microeconomics
Microeconomics examines the economic behavior of agents (including individuals and firms)
and their interactions through individual markets, given scarcity and government regulation. A
given market might be for a
product
, say fresh corn, or the
services of a factor of production
, say
bricklaying. The theory considers aggregates of
quantity demanded
by buyers and
quantity
supplied
by sellers at each possible price per unit. It weaves these together to describe how the
market may reach equilibrium as to price and quantity or respond to market changes over time.
This is broadly termed demand-and-supply analysis. Market structures, such as perfect
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competition and monopoly, are examined as to implications for behavior and economic
efficiency. Analysis often proceeds from the simplifying assumption that behavior in other
markets remains unchanged, that is, partial-equilibrium analysis. General-equilibrium theory
allows for changes in different markets and aggregates across
all
markets, including their
movements and interactions toward equilibrium.
Macroeconomics examines the economy as a whole "top down" to explain broad aggregates and
their interactions. Such aggregates include national income and output, the unemployment rate,
and price inflation and sub aggregates 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 characterized by further integration as to micro-based modeling of
sectors, including rationality of players, efficient use of market information, and imperfect
competition. This has addressed a long-standing concern about inconsistent developments of the
same subject. Macroeconomic analysis also considers factors affecting the long-term level and
growth of national income. Such factors include capital accumulation, technological change and
labor force growth.
1.3.
Related fields, other distinctions, and classifications
Recent developments closer to microeconomics include behavioral economics and experimental
economics. Fields bordering on other social sciences include economic geography, economic
history, public choice, cultural economics, and institutional economics.
Another division of the subject distinguishes two types of economics. Positive economics ("what
is") seeks to explain economic phenomena or behavior. Normative economics ("what ought to
be," often as to public policy) prioritizes choices and actions by some set of criteria; such
priorities reflect value judgments, including selection of the criteria.
Another distinction is between
mainstream economics
and
heterodox economics
. One broad
characterization describes mainstream economics as dealing with the "rationality-individualism-
equilibrium nexus" and heterodox economics as defined by a "institutions-history-social
structure nexus."
The JEL classification codes of the Journal of Economic Literature provide a comprehensive,
detailed way of classifying and searching for economics articles by subject matter. An alternative
classification of often-detailed entries by mutually-exclusive categories and subcategories is
The
New Palgrave: A Dictionary of Economics
.
1.4. Mathematical and quantitative methods
Economics as an academic subject often uses geometric methods, in addition to literary methods.
Other general mathematical and quantitative methods are also often used for rigorous analysis of
the economy or areas within economics. Such methods include the following.
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