Economics

Economics (from the Greek οίκος , 'house', and νομος , 'rule', hence "household management") is a social science that studies the production, distribution, trade and consumption of goods and services. Economics is said to be positive when it tries to objectively predict and explain consequences of choices, given a set of assumptions or a set of observations. The choice of which assumptions to make in building a model as well as which observations to highlight, however, is a normative choice. Economics is also said to be normative when it recommends one choice over another, or when a subjective value judgement is made.

Areas of study in economics

Economics is usually divided into two main branches:

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• Microeconomics, which examines the economic behaviour of individual actors such as businesses, households, and individuals, with a view to understand decision making in the face of scarcity and the consequences of these decisions.
• Macroeconomics, which examines an economy as a whole with a view to understanding the interaction between economic aggregates such as national income, employment and inflation. Note that general equilibrium theory combines concepts of a macro-economic view of the economy, but does so from a strictly constructed microeconomic viewpoint.

Attempts to join these two branches or to refute the distinction between them have been important motivators in much of recent economic thought, especially in the late 1970s and early 1980s. Today, the consensus view is arguably that good macroeconomics has solid microeconomic foundations. In other words, its premises ought to have theoretical and evidential support in microeconomics.

Related Topics:
1970s - 1980s

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Economics can also be divided into numerous subdisciplines that do not always fit neatly into the macro-micro categorization. These subdisciplines include: international economics, labour economics, welfare economics, neuroeconomics, information economics, resource economics, environmental economics, managerial economics, financial economics, urban economics, rural economics, mathematical economics, development economics, industrial economics, retail economics, war economics, public finance, agricultural economics, transport economics, media economics, monetary economics, economic history, economic psychology, economic sociology, economic anthropology, economic archaeology, and economic geography.

Related Topics:
International economics - Labour economics - Welfare economics - Neuroeconomics - Information economics - Resource economics - Environmental economics - Managerial economics - Financial economics - Urban economics - Rural economics - Mathematical economics - Development economics - Industrial economics - Retail economics - War economics - Public finance - Agricultural economics - Transport economics - Media economics - Monetary economics - Economic history - Economic psychology - Economic sociology - Economic anthropology - Economic archaeology - Economic geography

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There are also methodologies used by economists whose underlying theories are important.

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• The most significant example may be econometrics, which applies statistical techniques to the study of economic data. Computational economics relies on mathematical methods, including econometrics.
• Another trend which is more recent, and closer to microeconomics, is to use social psychology concepts (behavioural economics) and methods (experimental economics) to understand deviations from the predictions of neoclassical economics. Evolutionary economics is a novel theory espoused by Nelson and Winter (1982) along these lines that seeks to understand the role of 'routines' in driving the evolution of firm behaviour.

Other subdivisions are possible. Finance has traditionally been considered a part of economics – as its body of results emerges naturally from microeconomics – but has today effectively established itself as a separate, though closely related, discipline.

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There has been an increasing trend for ideas and methods from economics to be applied in wider contexts. Since economic analysis focuses on decision making, it can be applied, with varying degrees of success, to any field where people are faced with alternatives – education, marriage, health, etc. Public choice theory studies how economic analysis can apply to those fields traditionally considered outside of economics. The areas of investigation in economics therefore overlap with other social sciences, including political science and sociology. The most prevalent political economy is loosely called capitalism.

Related Topics:
Education - Marriage - Health - Public choice theory - Political science - Sociology - Capitalism

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See political economy for the study of economics in the context of political science, and socioeconomics for the study of economics in the context of sociology.

Related Topics:
Political economy - Socioeconomics

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