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Wednesday, April 09, 2008
Economics
Face-to-face trading
interactions on the New York Stock Exchange trading floor. Financial
decisions can be one of many economic choices people make. Economics is
the social science that studies the production, distribution, and
consumption of goods and services. The term economics comes from the
Greek for oikos (house) and nomos (custom or law), hence "rules of the
house (hold)."
A definition that captures much of modern economics is that of Lionel
Robbins in a 1932 essay: "the science which studies human behavior as a
relationship between ends and scarce means which have alternative uses."
Scarcity means that available resources are insufficient to satisfy all
wants and needs. Absent scarcity and alternative uses of available
resources, there is no economic problem. The subject thus defined
involves the study of choices as they are affected by incentives and
resources.
Areas of economics may be divided or classified into various types,
including:
Microeconomics and macroeconomics
Positive economics ("what is") and normative economics ("what ought to
be")
Mainstream economics and heterodox economics
One of the uses of economics is
to explain how economies, as economic systems, work and what the
relations are between economic players (agents) in the larger society.
Methods of economic analysis have been increasingly applied to fields
that involve people (officials included) making choices in a social
context, such as crime, education, the family, health, law, politics,
religion, social institutions, and war.
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 a 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 was gradually replaced in general usage by 'economics' after 1870.
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