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What Is Economics All About

By Tanvir-Romi Apr 11, 2015 1030 Words
What is economics all about?
Economics is the study of how people choose to use resources. Resources include the time and talent, people, the land, buildings, equipment, and other tools on hand, and the knowledge of how to combine them to create useful products and services. We make all kinds of choices every day. Economics is about making choices. Many people hear the word "economics" and think it is all about money. Economics is not just about money. It is about weighing different choices or alternatives. Some of those important choices involve money, but not all. Most of our daily, monthly, or life choices have nothing to do with money, yet they are still the subject of economics. Important choices involve how much time to devote to work and to leisure, how much money to spend and how much to save, how to combine resources to produce goods and services, and how to vote and shape the level of taxes and the role of government.

Some people might also think economics is all about being efficient--not making foolish or wasteful choices about how we spend or budget your time and money. That is certainly part of what economics is about. But Economics is even more than that. We all know that we can save money or time by being more efficient in our planning. But we sometimes don't choose the most efficient options. Why not? Economics is also about plumbing the depths of why we sometimes do and sometimes don't make what seem like the economical choices.

In short, economics includes the study of labor, land, and investments, of money, income, and production, and of taxes and government expenditures. Economists seek to measure well-being, to learn how well-being may increase over time, and to evaluate the well-being of the rich and the poor. From its beginnings in the moral philosophy of the 18th and 19th century, Economics soon became a science, and although it seems that many issues have basically not changed a lot, the methodology has become much more complex and technical. The Science of Economics gained benefit from developments in other sciences, especially in Mathematics. In most cases, however, economists do not go into great mathematical detail but rather use Mathematics primarily to formalize an economic perception. Within the subject of Economics, two basic approaches have developed at an early stage, macroeconomics and microeconomics. On the one hand, macroeconomics tries to explain issues concerning the whole economy through the aggregation of separate economic units (e.g. private households or companies). Accordingly, topics such as economic growth, employment, inflation and monetary politics are usually connected with macroeconomics. On the other hand, microeconomics tries to explain and predict the behavior of individual economic units. Usually it uses its own models which take into account certain assumptions about individual behavior as well as incentives. Within macro- and microeconomics, there are numerous individual fields of research which concentrate on specific problems. Among these, probably the two best-known, are public finance and economics of financial markets. Public finance investigates the public sector and the effects of state intervention on the economy. The main focus lies on the theory and applications of taxation, public spending as well as the state deficit. The economics of financial markets includes, for example, the monetary policy of the Central Bank. Over the past few decades, the subject of econometrics has gained more and more importance.. Therefore, it is not surprising that many economists achieve successful careers at investment banks or insurance companies.

A Brief history:
Economic writings date from earlier Mesopotamian, Greek, Roman, Indian subcontinent, Chinese, Persian, and Arab civilizations. Notable writers from antiquity through to the 14th century include Aristotle, Xenophon, Chanakya (also known as Kautilya), Qin Shi Huang, Thomas Aquinas, and Ibn Khaldun. Joseph Schumpeter described Aquinas as "coming nearer than any other group to being the 'founders' of scientific economics" as to monetary, interest, and value theory within a natural-law perspective.] Two groups, later called "mercantilists" and "physiocrats", more directly influenced the subsequent development of the subject. Both groups were associated with the rise of economic nationalism and 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 cheap raw materials to be used in manufacturing goods, which could be exported, and for state regulation to impose protective tariffs on foreign manufactured goods and prohibit manufacturing in the colonies. 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. 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, which called for minimal government intervention in the economy. Adam Smith (1723–1790) was an early economic theorist. 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. Definitions of Economics from Historic Textbooks:

"Economics is the study of people in the ordinary business of life." -- Alfred Marshall, Principles of economics; an introductory volume (London: Macmillan, 1890) "Economics is the science which studies human behavior as a relationship between given ends and scarce means which have alternative uses." -- Lionel Robbins, An Essay on the Nature and Significance of Economic Science (London: MacMillan, 1932) Economics is the "study of how societies use scarce resources to produce valuable commodities and distribute them among different people." -- Paul A. Samuelson, Economics (New York: McGraw-Hill, 1948)

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