Economics: Difference between revisions

From Citizendium
Jump to navigation Jump to search
imported>Nick Gardner
mNo edit summary
 
(69 intermediate revisions by 6 users not shown)
Line 1: Line 1:
{{subpages}}
{{subpages}}
{| align="center" border="1"
| style="background:lightblue"|
<font face="Gill Sans MT">
This is a 'portal' article that is intended to serve as a reference point for economics graduates and undergraduate students, and for graduate-level laymen who are readers of economics articles in the media. It provides  in-text links (blue font) to the available economics articles.<br>
Access to the  articles is also provided by a  [[/Addendum|'''taxonomic index''']] of  articles, and an [[/Related Articles|'''alphabetical index''']], of both articles and  topics within the articles.<br>
Definitions of the terms used in the articles  are provided in the [[/Glossary|'''glossary subpage''']].<br>
Prospective contributors to economics articles are invited to start by visiting the '''[[CZ:Economics Workgroup]]''' page.</font>
|}''
{{TOC|right}}


The term '''economics'''  refers both to an intellectual discipline and to a profession. The intellectual discipline of economics is an attempt to gain an  understanding of  the processes that govern the production, distribution  and consumption of wealth, and to use that understanding to assist in the prediction of the consequences of economic activities. It uses the methodology of science  and can be considered to be a science insofar as it produces testable propositions <ref> See the Tutorials subpage for a discussion of this point. </ref>. The profession of economics includes academics who construct, develop and teach economic theory,  and practitioners use economic theory  to make forecasts or to advise upon political, commercial and regulatory decisions.
The term '''economics'''  refers both to an intellectual discipline and to a profession.  


The main articles on economics are intended for use by non-economists, and there is supplementary material on the subpages for use by students of economics.
The intellectual discipline of economics is an attempt to gain an  understanding of the processes that govern the production, distribution  and consumption of [[wealth (economics)|wealth]], and to use that understanding to assist in the prediction of the consequences of economic activities. It uses the methodology of [[science]] and can be considered to be a science insofar as it produces testable propositions (see [[/Tutorials#Economics as a science|economics as a science]]), although some branches of the subject are widely considered to be normative (see [[/Tutorials#Normative economics|normative economics]]). Like other sciences, it is subject to a continuing process of revision.


==The practice of economics==
The profession of economics includes academics<ref>For a light-hearted look at the life of an academic economist, see Axel Leijonhufvud's ''Life among the Econs''[http://www.kysq.org/diss/LifeamongtheEcon.pdf]</ref>  who construct, develop and teach economic theory,  and practitioners who use economic theory  to make forecasts or to advise upon political, commercial and regulatory decisions. Its most influential application is to the management of the economy. Mistaken decisions in that context can do more damage than in most others.


===The work of economists===
==Economic Theory==
The services provided by practitioners of economics include economic forecastingadvice to company executives concerning the consequences for sales and profits of alternative courses of action, advice to investors concerning the  performance of particular markets, advice to regulatory authorities concerning the impact of regulations upon the economy, and advice to governments concerning the effects of alternative policy actions upon  economic efficiency, prices, output and economic stability .
===The methodology of economics===
The traditional methodology of economics has been first to formulate a theory, and then to examine how far it provides operationally useful conclusions. Its pioneers have often adopted an  [[instrumentalism|instrumentalist]] approach:  basing  a theory on arbitrary axioms - such as consistently rational human behaviour - and then advocating its acceptance solely  on the grounds that it had  provided  operationally useful results. That methodology has proved to be vulnerable to changing conditions, however, and there  has recently been a tendency to move away  from an exclusively axiom-based  approach  towards a greater recognition  of observed behaviour.  Among the  techniques that have been coming into use for that purpose are those of [[Philosophy of economics#Behavioural economics|behavioural economics]] and [[neuroeconomics]].


===Economists' tools===
===Economists' tools===
 
Economists normally combine the use of a range of concepts - such as [[utility]], [[economic equilibrium |equilibrium]], [[supply and demand]], and [[opportunity cost]] - with quantitative observations including [[economic statistics]] and other survey-based data, using the techniques of [[applied statistics#Statistical inference|statistical inference]], [[mathematics#Applied mathematics|applied mathematics]] and [[econometrics]].  Since the use of that combination of tools does not provide an explanation of some observed occurrences such as [[herding (banking)|herding]], [[asset price bubble]]s, [[risk aversion]] or [[panic (banking)|banking panics]], it has recently been augmented by experiments on human behaviour in contrived situations, including those of [[behavioural economics]], [[neuroeconomics]] and [[prospect theory]].
The raw material employed by mainstream economists  - apart from some behavioural axioms - is recorded information about economic activity, including '''[[economic statistics]], [[national accounts]]''', and '''[[economic and social survey]]s'''. Economists apply  the tools of '''[[statistical inference]]''' and '''[[econometrics]]''' to that raw  material, to  generate explanations, advice and forecasts - and  seek to improve ability to do so by ability by building '''[[economic  model]]s'''. The work of economists outside the mainstream has included attempts to replace behavioural axioms by  observations and measurements, using the techniques of '''[[experimental economics]]''' and '''[[neuroeconomics]]'''.
 
==Economic Theory==
 
===The methodology of economic theory===
Economic theory has   been developed  by formulating  hypothetical  "models" of reality, and then by examining how far they reflect what happens in the real world. The objective of the process has not necessarily  been  to develop realistic assumptions about economic conduct, but rather to make better predictions of its outcomes.
 
Economics has changed from its early axiom-based deductive methodology towards a greater use of inductive logic (as noted in the article on the [[history of economic thought]]). Current methodology generally adopts  an  instrumental "[[open-systems]]" approach (as explained in the article on the [[philosophy of economics]]). The claims that economics is a science, and that some branches of economics must be considered to be normative are discussed on the tutorials subpage of this article.


===The categories of economic theory===
===The categories of economic theory===
The techniques of economics have been applied to many different activities, leading to the development of  a wide range of sub-disciplines. However, the principal categories of economics that are of interest to the general reader are microeconomics, macroeconomics, welfare economics, financial economics, and international economics.
The techniques of economics have been applied to many different activities, leading to the development of  a wide range of sub-disciplines. However, the principal categories of economics that are of interest to the general reader are microeconomics, macroeconomics, welfare economics, financial economics, and international economics.


*'''[[Microeconomics]]''' is about the use of  the resources of [[land]], [[capital]] and labour, their allocation to the production of particular goods and services, their relative prices,  and how they are distributed among consumers. It examines those issues by considering transactions between consumers and producers, acting singly or in groups. Many of its theorems were developed by deductive reasoning in the late nineteenth and early twentieth centuries and most of them are now considered by economists to be uncontroversial.
====Main disciplines====
*'''[[Microeconomics]]''' is about the use of  the resources of [[land]], [[capital]] and [[labour (economy)|labour]], their allocation to the production of particular [[goods (economics)|goods]] and [[services (economics)|services]], their relative prices,  and how they are distributed among consumers. It examines those issues by considering transactions between consumers and producers, acting singly or in groups. Many of its theorems were developed by [[deduction|deductive inference]] in the late nineteenth and early twentieth centuries and most of them are now considered by economists to be uncontroversial.


*'''[[Welfare economics]]''' is about the impact of decisions upon the economic well-being of those affected. It provides the theoretical basis for the practice of [[cost/benefit analysis]]. Its methodology is derived from that of microeconomics and most of its theorems are also considered to be uncontroversial.
*'''[[Welfare economics]]''' is about the impact of decisions upon the economic well-being of those affected. Its theorems concerning  the measurement and comparison of welfare provide the theoretical basis for the practice of [[cost-benefit analysis]]. Its methodology is derived from that of microeconomics,  using formally-defined axioms that are often remote from observed circumstances.


*'''[[Macroeconomics]]'''  is about such economy-wide quantities as national income, the general level of prices, and the unemployment rate. It examines the behaviour of  the economy as a unified system of interacting activities. It is a twentieth-century development that has had a major influence upon the political history of that century. Many of its theorems are considered to be controversial, and the subject is still under development.
*'''[[Macroeconomics]]'''  is about such economy-wide quantities as [[gross domestic product|national income]], [[inflation]] and [[unemployment]]. It examines the behaviour of  the [[economy]] as a [[complex interactive system]]. It is a twentieth-century development that has had a major influence upon [[fiscal policy]], and [[monetary policy]]. Many of its theorems are considered to be controversial, and the subject is still under development.


*'''[[Financial economics]]''' treats the financial system as an open interactive system dealing both in claims upon future goods and services, and in the allocation of the risks that are associated with such claims. It is concerned with the investment choices made by individuals, with the financing choices made by corporations, with the conduct of financial institutions that act as financial intermediaries between individuals and corporations; and with the regulation of those institutions. Regulatory issues, in particular, are under review.
*'''[[Financial economics]]''' treats the [[financial system]] as a [[complex interactive system]] dealing both in claims upon future [[goods (economics)|goods]] and [[services (economics)|services]], and in the allocation of the risks that are associated with such claims. It is concerned with the [[Financial economics#The choices facing investors|decisions made by investors]], [[Financial economics#The financing choices facing corporations| corporations]], [[Financial economics#The problems  facing the financial intermediaries|financial institutions]], and with the [[financial regulation|regulation]] of those institutions. The practical usefulness of some of its theorems has been questioned following the [[Great Recession]] and previously accepted [[Financial regulation|regulatory policies]]  are under review.


*'''[[International economics]]''' is about such matters as [[import restrictions]], exchange rate regimes, international capital flows and the impact of trade policies upon developing countries. Its methodology was initially derived in the nineteenth century from the methodology  of microeconomics, but it now has much in common with that of macroeconomics. Its principal theorems are widely accepted among professional economists but have been hotly contested by others.
*'''[[International economics]]''' is about such matters as [[tariff]]s, [[International economics#Exchange rates and  capital mobility|exchange rates and international capital flows]] and the effects of [[International economics#Trade policies|trade policy]]. Its methodology was initially derived in the nineteenth century from the methodology  of microeconomics, but it now has much in common with that of macroeconomics. Its principal theorems are widely accepted among professional economists but have been hotly contested by others.
 
====Sub-disciplines====
The sub-disciplines of economics combine one or more of its main disciplines with the disciplines of other fields. They include agricultural economics, demographic economics, development economics, energy economics, environmental economics, health economics, labour economics, industrial economics, regulatory economics and  transport economics. They typically involve the application of cost-benefit analysis and of the above-mentioned economists' tools to the assessment of alternative policies and practices. Some sub-disciplines draw upon a wider range of economics disciplines: for example, development economics - which is the economic assessment of policies toward developing countries - calls also upon macroeconomics and international economics.


==The uses of economics==
==The uses of economics==
Economics makes its own contribution to the sum of scientific knowledge and it makes  particular contributions to the understanding of the subjects of  [[history]], [[geography]], and  [[politics]].  Its findings are  essential to the practice of [[business management]],  [[financial management]],  [[accountancy]] and  [[commercial law]]. In fact the value of economics to the community arises from its practice rather than its theory. As the eminent economist, Ben Bernanke has put it "... although it has its own esoterica known only to initiates, it is at bottom a craft whose value lies primarily in its practical application"<ref> Speech by Ben Bernanke
{|align="right" cellpadding="10" style="background:lightgray; width:35%; border: 1px solid #aaa; margin:20px; font-size: 92%;"
At the 2009 Commencement of the Boston College School of Law, Newton, Massachusetts
|''"... although it has its own esoterica known only to initiates, it is at bottom a craft whose value lies primarily in its practical application"''  - Ben Bernanke<ref> Speech by Ben Bernanke At the 2009 Commencement of the Boston College School of Law, Newton, Massachusetts May 22, 2009 [http://www.federalreserve.gov/newsevents/speech/bernanke20090522a.htm]</ref>
May 22, 2009 [http://www.federalreserve.gov/newsevents/speech/bernanke20090522a.htm]</ref>.
|}
Economics makes its own contribution to the sum of [[science|scientific knowledge]] and it makes  particular contributions to the understanding of the subjects of  [[history]], [[geography]], and  [[politics]].  Its findings are  essential to the practice of business [[management]],  [[financial management]],  [[accounting]] and  [[commercial law]]. They are also essential to the practice of national economic management, for the purpose of which economic forecasters use computerised  [[economic model|models]] based upon observed behaviour, as reflected in [[economic statistics]] and surveys.


Unlike most other sciences, economics is often  the subject of  strongly-held opinions by laymen, and one of the functions of  economists is to counter damaging, popular fallacies <ref> Alan Budd "What do Economists Know?" in ''World Economics'' Vol 5 Number 3 September 2004[http://www.world-economics-journal.com/Contents/ArticleOverview.aspx?ID=177] (Subscription required)</ref> <ref>David Henderson ''Innocence and Design:  The Influence of Economic Ideas on Policy'' 1985 Reith Lecture Basil Blackwell 1986</ref>.
==The practice of economics==
 
{|align="right" cellpadding="10" style="background:lightgray; width:35%; border: 1px solid #aaa; margin:20px; font-size: 92%;"
==The economics articles==
| ''"Economics is a difficult and technical subjectbut nobody will believe it"'' - J M Keynes
 
|}
===Subject groups===
 
There are articles in seven  main subject groups:
 
*'''Economic methodology'''; including the [[philosophy of economics]], the [[history of economic thought]], [[neuroeconomics]], [[experimental economics]], [[economic model]] and [[econometrics]];
 
*'''Economic theory'''; including [[financial economics]], [[international economics]], [[microeconomics]], [[macroeconomics]],  [[welfare economics]];
 
*'''Economic theories'''; including [[Capital Asset Pricing Model]], [[Diamond-Dybvig model]], [[Keynesianism]], [[IS-LM model]], [[monetarism]],
 
*'''Economic concepts'''; including [[agency problem]], [[arbitrage]], [[asset price bubble]], [[balance of payments]], [[balance of trade]], [[capital (economics)]], [[capital (economics)]], [[competition]], [[deflation]], [[discount rate]], [[discounted cash flow]], [[economic efficiency]], [[elasticity (economics)]], [[employment]], [[exchange rate]], [[factors of production]], [[Gross Domestic Product]], [[Human Development Index]], [[inflation]], [[interest]], [[labour]], [[land]], [[market]], [[money supply]], [[moral hazard]], [[multiplier effect]], [[national debt]], [[net present value]],  [[opportunity cost]], [[production function]], [[price index]],  [[public goods]], [[recession (economics)]], [[social capital]], [[supply and demand]], [[terms of trade]], [[unemployment]], [[utility]]
 
*'''Economics-related policies, techniques and institutions'''; including [[antitrust]], [[applied statistics]], [[bank failures and rescues]], [[banking]], [[Bank for International Settlements]], [[bond (finance)]], [[central bank]], [[competition policy]], [[cost-benefit analysis]], [[credit rating agency]], [[EU competition policy]], [[Euro]], [[Federal Reserve System]], [[Financial regulation]], [[Financial Stability Forum]], [[financial system]], [[fiscal policy]], [[gold standard]], [[International Monetary Fund]], [[monetary policy]], [[National Recovery Administration]], [[option]], [[public expenditure]], [[taxation]], [[World Bank]],
 
*'''Economic events'''; including [[bank failures and rescues]], [[crash of 1929]], [[crash of 2008]], [[G20 summit]], [[Great Depression]], [[Great Depression in the United States]], [[Great Recession]], [[New Deal]], [[Paulson Plan]], [[recession of 2009]], [[sovereign default]], [[subprime mortgage crisis]],
 
*'''Economists''', including [[ William Beveridge]], [[Irving Fisher]], [[Milton Friedman]], [[Alvin Hansen]], [[Friedrich Hayek]], [[John Maynard Keynes]], [[(Thomas) Robert Malthus]], [[Alfred Marshall]], [[Harry Markowitz]], [[Elinor Ostrom]], [[Vilfredo Pareto]], [[David Ricardo]], [[Paul Samuelson]],  [[Adam Smith]], [[Joseph E. Stiglitz]], [[Thorstein Veblen]],
 
===Article format===
Articles are in up to five parts.
*'''The main article''', which is intended to be accessible to readers with no training in economics and no familiarity with mathematics, and consequently contains no equations or charts, and in which technical terms are shown in italics, indicating that definitions are available on the related articles subpage.
*'''The related articles subpage''', which contains a link to the index of topics; lists of parent articles, subtopics and related topics; and a glossary of the terms shown in italics on the main page.
*'''A tutorials subpage''' (for some articles) containing mathematical equations and charts and material suitable for reference by economists and students of economics.
*'''A timelines subpage''' (for some articles) listing events in chronological order, the main purpose of which is to provide links to contemporary news reports.
*'''An addendum subpage''' (for some articles) containing material that is more detailed than is considered appropriate to the main article.
 
===Index===
The [[/Related Articles#Index|economics index]] provides a link to every individual concept or topic that is referred to in the economics articles.
 
===Timelines===
A list of the timelines appearing as subpages to economics articles is on the [[/Timelines|timelines]] subpage of this article.


===Glossaries===
The  services provided by practitioners of economics include  economic forecasting,  advice to company executives concerning the consequences for sales and profits of alternative courses of action, advice to investors concerning the  performance of particular markets, advice to regulatory
The [[/Glossary|economics glossary]] contains definitions of terms that are in general use by economists, and   more specialised terms are included in the [[Financial system/Related Articles#Glossary|finance glossary]] and the [[Banking/Related Articles#Glossary|banking glossary]].
authorities concerning the impact of regulations upon the economy,  and advice to governments
concerning the effects of alternative policy actions upon  [[economic efficiency]], [[inflation]], output and [[fiscal stability]]  
Unlike most other sciences, economics is often  the subject of  strongly-held opinions by laymen, and one of the functions of  economists is to counter damaging popular fallacies <ref> Alan Budd "What do Economists Know?" in ''World Economics'' Vol 5 Number 3 September 2004[http://www.world-economics-journal.com/Contents/ArticleOverview.aspx?ID=177] (Subscription required)</ref> <ref>David Henderson ''Innocence and Design:  The Influence of Economic Ideas on Policy'' 1985 Reith Lecture Basil Blackwell 1986</ref>.


==References==
==References==
<references/>
{{reflist|2}}[[Category:Suggestion Bot Tag]]

Latest revision as of 07:00, 10 August 2024

This article has a Citable Version.
Main Article
Discussion
Related Articles  [?]
Bibliography  [?]
External Links  [?]
Citable Version  [?]
Catalogs [?]
Timelines [?]
Tutorials [?]
Addendum [?]
Glossary [?]
 
This editable Main Article has an approved citable version (see its Citable Version subpage). While we have done conscientious work, we cannot guarantee that this Main Article, or its citable version, is wholly free of mistakes. By helping to improve this editable Main Article, you will help the process of generating a new, improved citable version.

This is a 'portal' article that is intended to serve as a reference point for economics graduates and undergraduate students, and for graduate-level laymen who are readers of economics articles in the media. It provides in-text links (blue font) to the available economics articles.
Access to the articles is also provided by a taxonomic index of articles, and an alphabetical index, of both articles and topics within the articles.
Definitions of the terms used in the articles are provided in the glossary subpage.
Prospective contributors to economics articles are invited to start by visiting the CZ:Economics Workgroup page.

The term economics refers both to an intellectual discipline and to a profession.

The intellectual discipline of economics is an attempt to gain an understanding of the processes that govern the production, distribution and consumption of wealth, and to use that understanding to assist in the prediction of the consequences of economic activities. It uses the methodology of science and can be considered to be a science insofar as it produces testable propositions (see economics as a science), although some branches of the subject are widely considered to be normative (see normative economics). Like other sciences, it is subject to a continuing process of revision.

The profession of economics includes academics[1] who construct, develop and teach economic theory, and practitioners who use economic theory to make forecasts or to advise upon political, commercial and regulatory decisions. Its most influential application is to the management of the economy. Mistaken decisions in that context can do more damage than in most others.

Economic Theory

The methodology of economics

The traditional methodology of economics has been first to formulate a theory, and then to examine how far it provides operationally useful conclusions. Its pioneers have often adopted an instrumentalist approach: basing a theory on arbitrary axioms - such as consistently rational human behaviour - and then advocating its acceptance solely on the grounds that it had provided operationally useful results. That methodology has proved to be vulnerable to changing conditions, however, and there has recently been a tendency to move away from an exclusively axiom-based approach towards a greater recognition of observed behaviour. Among the techniques that have been coming into use for that purpose are those of behavioural economics and neuroeconomics.

Economists' tools

Economists normally combine the use of a range of concepts - such as utility, equilibrium, supply and demand, and opportunity cost - with quantitative observations including economic statistics and other survey-based data, using the techniques of statistical inference, applied mathematics and econometrics. Since the use of that combination of tools does not provide an explanation of some observed occurrences such as herding, asset price bubbles, risk aversion or banking panics, it has recently been augmented by experiments on human behaviour in contrived situations, including those of behavioural economics, neuroeconomics and prospect theory.

The categories of economic theory

The techniques of economics have been applied to many different activities, leading to the development of a wide range of sub-disciplines. However, the principal categories of economics that are of interest to the general reader are microeconomics, macroeconomics, welfare economics, financial economics, and international economics.

Main disciplines

  • Microeconomics is about the use of the resources of land, capital and labour, their allocation to the production of particular goods and services, their relative prices, and how they are distributed among consumers. It examines those issues by considering transactions between consumers and producers, acting singly or in groups. Many of its theorems were developed by deductive inference in the late nineteenth and early twentieth centuries and most of them are now considered by economists to be uncontroversial.
  • Welfare economics is about the impact of decisions upon the economic well-being of those affected. Its theorems concerning the measurement and comparison of welfare provide the theoretical basis for the practice of cost-benefit analysis. Its methodology is derived from that of microeconomics, using formally-defined axioms that are often remote from observed circumstances.

Sub-disciplines

The sub-disciplines of economics combine one or more of its main disciplines with the disciplines of other fields. They include agricultural economics, demographic economics, development economics, energy economics, environmental economics, health economics, labour economics, industrial economics, regulatory economics and transport economics. They typically involve the application of cost-benefit analysis and of the above-mentioned economists' tools to the assessment of alternative policies and practices. Some sub-disciplines draw upon a wider range of economics disciplines: for example, development economics - which is the economic assessment of policies toward developing countries - calls also upon macroeconomics and international economics.

The uses of economics

"... although it has its own esoterica known only to initiates, it is at bottom a craft whose value lies primarily in its practical application" - Ben Bernanke[2]

Economics makes its own contribution to the sum of scientific knowledge and it makes particular contributions to the understanding of the subjects of history, geography, and politics. Its findings are essential to the practice of business management, financial management, accounting and commercial law. They are also essential to the practice of national economic management, for the purpose of which economic forecasters use computerised models based upon observed behaviour, as reflected in economic statistics and surveys.

The practice of economics

"Economics is a difficult and technical subject, but nobody will believe it" - J M Keynes

The services provided by practitioners of economics include economic forecasting, advice to company executives concerning the consequences for sales and profits of alternative courses of action, advice to investors concerning the performance of particular markets, advice to regulatory authorities concerning the impact of regulations upon the economy, and advice to governments concerning the effects of alternative policy actions upon economic efficiency, inflation, output and fiscal stability Unlike most other sciences, economics is often the subject of strongly-held opinions by laymen, and one of the functions of economists is to counter damaging popular fallacies [3] [4].

References

  1. For a light-hearted look at the life of an academic economist, see Axel Leijonhufvud's Life among the Econs[1]
  2. Speech by Ben Bernanke At the 2009 Commencement of the Boston College School of Law, Newton, Massachusetts May 22, 2009 [2]
  3. Alan Budd "What do Economists Know?" in World Economics Vol 5 Number 3 September 2004[3] (Subscription required)
  4. David Henderson Innocence and Design: The Influence of Economic Ideas on Policy 1985 Reith Lecture Basil Blackwell 1986