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Naseer Ahmed Chandio Wednesday, December 13, 2006 09:40 AM

Economics an overview
 
[B][FONT='Times New Roman']Economics[/FONT][/B]

[FONT=Times New Roman][SIZE=3]Buyers bargain for good prices while sellers put forth their best front in [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Chichicastenango"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Chichicastenango[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] Market, [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Guatemala"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Guatemala[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman].[/FONT][/SIZE]
[SIZE=3][FONT=Times New Roman][B]Economics[/B] is a [URL="http://en.wikipedia.org/wiki/Social_sciences"][COLOR=windowtext]social science[/COLOR][/URL] seeking to analyze and describe the production, distribution, and consumption of goods and services.[URL="http://en.wikipedia.org/wiki/Economics#_note-0#_note-0"][COLOR=windowtext][1][/COLOR][/URL] That is, economics studies how individuals and societies seek to satisfy needs and wants. [URL="http://en.wikipedia.org/wiki/Alfred_Marshall"][COLOR=windowtext]Alfred Marshall[/COLOR][/URL] informally described economics as "the study of man in the ordinary business of life" in the late 19th century; the vast number of topics to which the methods of economic theory have been applied suggests to some that economics is simply "that which economists do."[/FONT][/SIZE]
[FONT=Times New Roman][SIZE=3]The word "economics" is from the [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Greek_language"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Greek[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] words [/SIZE][/FONT][SIZE=3][FONT=Times New Roman]ο[/FONT][FONT=Tahoma]ἶ[/FONT][FONT='Times New Roman']κο[/FONT][FONT=Times New Roman]ς [[I]oikos[/I]], meaning "family, household, estate," and νόμος [[I]nomos[/I]], or "custom, law," and hence means "household management" or "management of the state." An [URL="http://en.wikipedia.org/wiki/Economist"][COLOR=windowtext]economist[/COLOR][/URL] is a person using economic concepts and data in the course of employment, or someone who has earned a university [URL="http://en.wikipedia.org/wiki/Academic_degree"][COLOR=windowtext]degree[/COLOR][/URL] in the subject.[/FONT][/SIZE]
[FONT=Times New Roman][SIZE=3]Economics has two broad branches: [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Microeconomics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]microeconomics[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], where the unit of analysis is the individual agent, such as a household or firm, and [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Macroeconomics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]macroeconomics[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], where the unit of analysis is an economy as a whole. Another division of the subject distinguishes [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Positive_%28social_sciences%29"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]positive[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] economics, which seeks to predict and explain economic phenomena, from [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Normative"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]normative[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] economics, which orders choices and actions by some criterion; such orderings necessarily involve [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Subjective"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]subjective[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman] value judgments.[/FONT][/SIZE]
[FONT=Times New Roman][SIZE=3]Economic reasoning has in recent decades been increasingly applied to social situations where there is no monetary consideration, such as [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Public_choice_theory"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]politics[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Law"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]law[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Experimental_economics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]psychology[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Economic_history"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]history[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Religion"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]religion[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Marriage"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]marriage[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman] and family life, and other social interactions.[/FONT][/SIZE]
[FONT=Times New Roman][SIZE=3]The approach to economics that is dominant today is usually referred to as [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Mainstream_economics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]mainstream economics[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3]. The more specific definition this approach implies was accurately captured by [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Lionel_Robbins"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Lionel Robbins[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] in 1932: "the science which studies human behaviour as a relation between scarce means having 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 [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Economic_problem"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]economic problem[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3]. [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Heterodox_economics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Heterodox economics[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], including [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Institutional_economics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]institutional economics[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Marxist_economics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Marxist economics[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Socialism"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]socialism[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], and [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Green_economics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]green economics[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman], sometimes make other grounding assumptions, such as that economics primarily deals with the exchange of value, and that labour (human effort) is the source of all value.[/FONT][/SIZE]
[B][FONT=Times New Roman]Areas of study in economics[/FONT][/B]

[SIZE=3][FONT=Times New Roman]Economics is usually divided into two main branches:[/FONT][/SIZE][LIST][*][B][URL="http://en.wikipedia.org/wiki/Microeconomics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Microeconomics[/SIZE][/FONT][/COLOR][/URL][/B][SIZE=3][FONT=Times New Roman] examines the economic behaviour of individual units such as businesses and households in face of scarcity and government interactions, as well as the economic consequences of these decisions on other actors. [/FONT][/SIZE][*][B][URL="http://en.wikipedia.org/wiki/Macroeconomics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Macroeconomics[/SIZE][/FONT][/COLOR][/URL][/B][FONT=Times New Roman][SIZE=3] examines an economy as a whole with a view to understanding the interaction between economic aggregates such as [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Measures_of_national_income_and_output"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]national income[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Employment"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]employment[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] and [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Inflation"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]inflation[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3]. Note that [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/General_equilibrium"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]general equilibrium[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman] theory combines concepts of a macro-economic view of the economy, but does so from a strictly constructed microeconomic viewpoint. [/FONT][/SIZE][/LIST][FONT=Times New Roman][SIZE=3]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. A few authors (for example, [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Kurt_Dopfer"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Kurt Dopfer[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] and [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Stuart_Holland"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Stuart Holland[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3]) also argue that '[/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Mesoeconomics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]mesoeconomics[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3]', which considers the intermediate level of economic organization such as [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Market"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]markets[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] and other [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Institutional"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]institutional[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman] arrangements, should be considered a third branch of economic study.[/FONT][/SIZE]
[FONT=Times New Roman][SIZE=3]Economics can also be divided into numerous subdisciplines that do not always fit neatly into the macro-micro categorization. These subdisciplines include: [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/International_economics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]international economics[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Development_economics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]development economics[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Industrial_organization"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]industrial organization[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Public_finance"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]public finance[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Economic_psychology"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]economic psychology[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Economic_sociology"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]economic sociology[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Institutional_economics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]institutional economics[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] and [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Economic_geography"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]economic geography[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman].[/FONT][/SIZE]
[SIZE=3][FONT=Times New Roman]There are also methodologies used by economists whose underlying theories are important.[/FONT][/SIZE][LIST][*][FONT=Times New Roman][SIZE=3]The most significant example may be [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Econometrics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]econometrics[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], which applies statistical techniques to the study of [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Economic_data"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]economic data[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3]. [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Computational_economics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Computational economics[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman] relies on mathematical methods, including econometrics. [/FONT][/SIZE][*][FONT=Times New Roman][SIZE=3]Another trend which is more recent, and closer to microeconomics, is to use [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Social_psychology"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]social psychology[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] concepts ([/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Behavioural_economics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]behavioural economics[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3]) and methods ([/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Experimental_economics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]experimental economics[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman]) to understand deviations from the predictions of neoclassical economics. [/FONT][/SIZE][*][URL="http://en.wikipedia.org/wiki/Evolutionary_economics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Evolutionary economics[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman] often deals with the otherwise difficult questions related to the role of 'routines' and 'capabilities' in explaining heterogeneity in firm outcomes. [/FONT][/SIZE][/LIST][URL="http://en.wikipedia.org/wiki/Finance"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Finance[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman] 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.[/FONT][/SIZE]
[FONT=Times New Roman][SIZE=3]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 – [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Education"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]education[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Marriage"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]marriage[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Health"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]health[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], etc. [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Public_choice_theory"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Public choice theory[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] 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 [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Political_science"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]political science[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] and [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Sociology"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]sociology[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3]. The most prevalent political economy is loosely called [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Capitalism"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]capitalism[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman].[/FONT][/SIZE]
[B][FONT=Times New Roman]Economic language and reasoning[/FONT][/B]

[SIZE=3][FONT=Times New Roman]Economics relies on rigorous styles of argument. Economic methodology has several interacting parts:[/FONT][/SIZE][LIST][*][SIZE=3][FONT=Times New Roman]Collection of economic data. These data consist of measurable values of price and changes in price, for measurable commodities. For example: the cost to hire a worker for a week, or the cost of a particular commodity, and how much is typically used. [/FONT][/SIZE][/LIST][LIST][*][FONT=Times New Roman][SIZE=3]Formulation of [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Model_%28economics%29"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]models[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] of economic relationships, for example, the relationship between the general level of prices and the general level of employment. This includes observable forms of economic activity, such as [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Money"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]money[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], consumption, preferences, buying, selling, and prices. Some of the models are simple [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Accounting"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]accounting[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] models, while others postulate specific kinds of economic behaviour, such as utility or profit maximization. An example of a model that illustrates both of these aspects is the classical mathematical formulation of the [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Keynesian"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Keynesian[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] system involving the [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Consumption_function"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]consumption function[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] and the [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/National_income"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]national income[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] identity. This article will refer to such models as [I]formal models[/I], although they are not formal in the sense of [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Formal_logic"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]formal logic[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman]. Economists often formulate very simple models in order to define the impact of just one variant changing. This is called the "ceteris paribus"-assumption (All others equal), meaning that all other things are assumed not to change during the period of observation. Example: "If the price of movie tickets rises, ceteris paribus the demand for popcorn falls." [/FONT][/SIZE][/LIST][LIST][*][SIZE=3][FONT=Times New Roman]Production of economic statistics. Taking the data collected, and applying the model being used to produce a representation of economic activity. For example, the "general price level" is a theoretical idea common to macroeconomic models. The specific inflation rate involves taking measurable prices, and a model of how people consume, and calculating what the "general price level" is from the data within the model. For example, suppose that diesel fuel costs 1 euro a litre: To calculate the price level would require a model of how much diesel an average person uses, and what fraction of their income is devoted to this —but it also requires having a model of how people use diesel, and what other goods they might substitute for it. [/FONT][/SIZE][/LIST][LIST][*][FONT=Times New Roman][SIZE=3]Reasoning within economic models. This process of reasoning (see the articles on [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Informal_logic"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]informal logic[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Logical_argument"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]logical argument[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Fallacy"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]fallacy[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3]) sometimes involves advanced mathematics. For instance, an established (though possibly unexamined) tradition among economists is to reason about economic variables in two-dimensional graphs in which curves representing relations between the axis variables are parameterized by various indices. A good example of this type of reasoning is exhibited by [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Paul_Krugman"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Paul Krugman[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3]'s online essay, [I]There's something about macro[/I].[URL="http://en.wikipedia.org/wiki/Economics#_note-1#_note-1"][COLOR=windowtext][2][/COLOR][/URL] See also the article [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/IS/LM_model"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]IS/LM model[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3]. One critical analysis of economic reasoning is studied in [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Paul_Samuelson"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Paul Samuelson[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3]'s thesis, [I]Foundations of Economic Analysis[/I]: he identifies a class of assertions called [I]operationally meaningful theorems[/I] which are those that can be meaningfully formulated within an economic model.[URL="http://en.wikipedia.org/wiki/Economics#_note-2#_note-2"][COLOR=windowtext][3][/COLOR][/URL] As usual in science, the conclusions obtained by reasoning have a [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Predictive_power"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]predictive[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman] as well as confirmative (or dismissive) value. An example of the predictive value of economic theory is a prediction as to the effect of current deficits on interest rates 10 years into the future. An example of the confirmative value of economic theory would be confirmation (or dismissal) of theories concerning the relation between marginal tax rates and the deficit. [/FONT][/SIZE][/LIST][FONT=Times New Roman][SIZE=3]Formal modelling, which has been adapted to some extent by all branches of economics, is motivated by general principles of consistency and completeness. It is not identical to what is often referred to as [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Mathematical_economics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]mathematical economics[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3]; this includes, but is not limited to, an attempt to set [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Microeconomics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]microeconomics[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], in particular general equilibrium, on solid [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Mathematics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]mathematical[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] foundations. Some reject mathematical economics: The [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Austrian_School"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Austrian School[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman] of economics believes that anything beyond simple logic is often unnecessary and inappropriate for economic analysis. In fact, the entire empirical-deductive framework sketched in this section may be rejected outright by that school. However, the framework sketched here accurately represents the current predominant view of economics.[/FONT][/SIZE]
[B][FONT=Times New Roman]Schools of economic thought[/FONT][/B]
[LIST][*][SIZE=3][FONT=Times New Roman][B]Modern 'mainstream' economics:[/B] [/FONT][/SIZE][/LIST][FONT=Times New Roman][SIZE=3]Mainstream economics begins with the premise that resources are scarce and that it is necessary to choose between competing alternatives. That is, economics deals with [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Tradeoff"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]tradeoffs[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3]. With scarcity, choosing one alternative implies forgoing another alternative—the [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Opportunity_cost"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]opportunity cost[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3]. The opportunity cost creates an implicit price relationship between competing alternatives. In addition, in both market oriented and planned economies, scarcity is often explicitly quantified by [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Price"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]price[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman] relationships.[/FONT][/SIZE]
[FONT=Times New Roman][SIZE=3]Understanding choices by individuals and groups is central. Economists believe that incentives and desires play an important role in shaping [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Decision_making"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]decision making[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3]. Concepts from the [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Utilitarianism"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Utilitarian[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] school of [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Philosophy"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]philosophy[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] are used as analytical concepts within economics, though economists appreciate that society may not adopt utilitarian objectives. One example of this is the idea of a [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Utility_function"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]utility function[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], which is assumed to represent how economic agents rank the choices given to them. Then the utility function ranks available choices from best to worst, and the agent gradually learns to choose the best-ranked choice in the [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Feasible_set"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]feasible set[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman] of his alternatives.[/FONT][/SIZE]
[FONT=Times New Roman][SIZE=3]On a microeconomic level, some economists extend economic analysis to all personal decisions. An alternative can be thought of as a [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Vector_space"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]vector[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman] where the entries are answers not only to questions like "How many eggs should I buy?", but also "How many hours should I spend with my kids?", and "How long should I spend brushing my teeth?".[/FONT][/SIZE]
[FONT=Times New Roman][SIZE=3]Modern mainstream economics builds on earlier work, but perhaps primarily that of the neoclassical economists. Neoclassical economic developed beginning in the late 19th century and includes models based on choice under scarcity deemed applicable to a wide range of activities, including the very long term and the non-economic. Mainstream economics also acknowledges the existence of [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Market_failure"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]market failure[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] and some insights from [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Keynesian_economics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Keynesian economics[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3]. It looks to [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Game_theory"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]game theory[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] and [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Asymmetric_information"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]asymmetric information[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] to solve problems on a microeconomic level. Many important insights on collective behaviour (for example, [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Emergence"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]emergence[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] of [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Organization"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]organizations[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3]) have been incorporated from [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Institutional_economics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]institutional economics[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] via [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/New_institutionalism"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]new institutionalism[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman].[/FONT][/SIZE][LIST][*][SIZE=3][FONT=Times New Roman][B]Alternative approaches:[/B] [/FONT][/SIZE][LIST][*][SIZE=3][FONT=Times New Roman][B]Post-Keynesian economics[/B]: An alternative school - one of the successors to the Keynesian tradition with a focus on [URL="http://en.wikipedia.org/wiki/Macroeconomics"][COLOR=windowtext]macroeconomics[/COLOR][/URL]. They concentrate on macroeconomic rigidities and adjustment processes, and research microfoundations for their models based on real-life practices rather than simple optimizing models. Generally associated with [URL="http://en.wikipedia.org/wiki/Cambridge%2C_England"][COLOR=windowtext]Cambridge, England[/COLOR][/URL] and the work of [URL="http://en.wikipedia.org/wiki/Joan_Robinson"][COLOR=windowtext]Joan Robinson[/COLOR][/URL]. (see [URL="http://en.wikipedia.org/wiki/Post-Keynesian_economics"][COLOR=windowtext]Post-Keynesian economics[/COLOR][/URL]) [/FONT][/SIZE][*][SIZE=3][FONT=Times New Roman][B]New-Keynesian economics[/B]: The other school associated with developments in the Keynesian fashion. These researchers tend to share with other [URL="http://en.wikipedia.org/wiki/Neoclassical"][COLOR=windowtext]Neoclassical[/COLOR][/URL] economists the emphasis on models based on microfoundations and optimizing behaviour but focus more narrowly on standard Keynesian themes such as price and wage rigidity. These are usually made to be endogenous features of these models, rather than simply assumed as in older style Keynesian ones. (see [URL="http://en.wikipedia.org/wiki/New-Keynesian_economics"][COLOR=windowtext]New-Keynesian economics[/COLOR][/URL]) [/FONT][/SIZE][*][SIZE=3][FONT=Times New Roman][B]Other alternatives[/B]: There are many types of economist, and many of them are considerably outside the mainstream. [URL="http://en.wikipedia.org/wiki/Marxian_economics"][COLOR=windowtext]Marxian economics[/COLOR][/URL], [URL="http://en.wikipedia.org/wiki/Socialist_economics"][COLOR=windowtext]Socialist economics[/COLOR][/URL], [URL="http://en.wikipedia.org/wiki/Green_economics"][COLOR=windowtext]green economics[/COLOR][/URL], [URL="http://en.wikipedia.org/wiki/Austrian_economics"][COLOR=windowtext]Austrian economics[/COLOR][/URL], and [I]Old [URL="http://en.wikipedia.org/wiki/Keynesian"][COLOR=windowtext]Keynesian[/COLOR][/URL][/I] economics still have many voices in academia. [/FONT][/SIZE][*][SIZE=3][FONT=Times New Roman][B]Eclectic Economists[/B]: The term 'eclectic' means selecting and using what seems best from various sources, systems or schools of thought. Eclectic economists tend to economize to get an optimal result for the problem at hand. The assumption of utility can for example be used, not to imply that people really have such a utility, but as an efficient approximation. Such economists might be 'main stream' or neoclassical in one publication and do political economy in another publication. [/FONT][/SIZE][/LIST][/LIST][SIZE=3][FONT=Times New Roman]Famous schools or trends of thought referring to a particular style of economics practiced at and disseminated from well-defined groups of academicians that have become known worldwide, may be generally summarized as follows:[/FONT][/SIZE][LIST][*][URL="http://en.wikipedia.org/wiki/Austrian_School"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Austrian School[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman] [/FONT][/SIZE][*][URL="http://en.wikipedia.org/wiki/Chicago_school_%28economics%29"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Chicago School[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman] [/FONT][/SIZE][*][URL="http://en.wikipedia.org/wiki/Freiburg_School"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Freiburg School[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman] [/FONT][/SIZE][*][URL="http://en.wikipedia.org/wiki/Keynesian_economics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Keynesian economics[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman] [/FONT][/SIZE][*][URL="http://en.wikipedia.org/wiki/Post-Keynesian_economics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Post-Keynesian economics[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman] [/FONT][/SIZE][*][URL="http://en.wikipedia.org/wiki/School_of_Lausanne"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]School of Lausanne[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman] [/FONT][/SIZE][*][URL="http://en.wikipedia.org/wiki/Stockholm_school_%28economics%29"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Stockholm school[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman] [/FONT][/SIZE][/LIST][B][FONT=Times New Roman]Alternative definitions of economics[/FONT][/B]

[SIZE=3][FONT=Times New Roman]This section extends the discussion of the definition of Economics at the beginning of the article.[/FONT][/SIZE]
[SIZE=3][FONT=Times New Roman]Economics is the study of human choice behaviour. All of economics whether represented through articulation or empirically through mathematical means is essentially an analysis of the behaviour choices of human beings.[/FONT][/SIZE]
[B][FONT=Times New Roman]Wealth definition[/FONT][/B]

[FONT=Times New Roman][SIZE=3]The earliest definitions of political economy were simple, elegant statements defining it as the study of wealth. The first scientific approach to the subject was inaugurated by [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Aristotle"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Aristotle[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], whose influence is still recognised today by the [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Austrian_School"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Austrian School[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], among others. [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Adam_Smith"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Adam Smith[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman], author of the seminal work [I][URL="http://en.wikipedia.org/wiki/The_Wealth_of_Nations"][COLOR=windowtext]The Wealth of Nations[/COLOR][/URL][/I] and regarded by some as the "father of modern economics," defines economics simply as "The science of wealth." Smith offered another definition, "The Science relating to the laws of production, distribution and exchange." Wealth was defined as the specialization of labour which allowed a nation to produce more with its supply of labour and resources. This definition divided Smith and Hume from previous definitions which defined wealth as gold. Hume argued that gold without increased activity simply serves to raise prices.[/FONT][/SIZE]
[URL="http://en.wikipedia.org/wiki/John_Stuart_Mill"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]John Stuart Mill[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman] defined economics as "The practical science of production and distribution of wealth"; this definition was adopted by the [I][URL="http://en.wikipedia.org/wiki/Concise_Oxford_English_Dictionary"][COLOR=windowtext]Concise Oxford English Dictionary[/COLOR][/URL][/I] even though it does not include the vital role of consumption. For Mill, wealth is defined as the stock of useful things. [/FONT][/SIZE]
[FONT=Times New Roman][SIZE=3]Definitions in terms of wealth emphasize production and consumption. The accounting measures usually used measure the pay received for work and the price paid for goods, and do not deal with the economic activities of those not significantly involved in buying and selling (for example, retired people, beggars, peasants). For economists of this period, they are considered non-productive, and non-productive activity is considered a kind of cost on society. This interpretation gave economics a narrow focus that was rejected by many as placing wealth in the forefront and man in the background; [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/John_Ruskin"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]John Ruskin[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman] referred to political economy as a "Bastard science, the science of getting riches." [/FONT][/SIZE]
[B][FONT=Times New Roman]Welfare definition[/FONT][/B]

[FONT=Times New Roman][SIZE=3]Later definitions evolved to include human activity, advocating a shift toward the modern view of economics as primarily a study of man and of human welfare, not of money. [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Alfred_Marshall"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Alfred Marshall[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman] in his 1890 book [I]Principles of Economics[/I] wrote, "Political Economy or Economics is a study of mankind in the ordinary business of Life; it examines the part of the individual and social action which is most closely connected with the attainment and with the use of material requisites of well-being." [/FONT][/SIZE]
[FONT=Times New Roman][SIZE=3]The welfare definition was still criticized as too narrowly materialistic. It ignores, for example, the non-material aspects of the services of a doctor or a dancer. A theory of wages which ignored all those sums paid for immaterial services was incomplete. Welfare could not be quantitatively measured, because the [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Marginal_value"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]marginal[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] significance of money differs from rich to the poor (that is, $100 is relatively more important to the well-being of a poor person than to that of a wealthy person). Moreover, the activities of production and distribution of goods such as alcohol and tobacco may not be conducive to human welfare, but these scarce [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Good_%28economics%29"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]goods[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman] do satisfy innate human wants and desires.[/FONT][/SIZE]
[URL="http://en.wikipedia.org/wiki/Marxist"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Marxist[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman] economics still focuses on a welfare definition. In addition, several critiques of mainstream economics begin from the argument that current economic practice does not adequately measure welfare, but only monetized activity, which is an inadequate approximation of welfare.[/FONT][/SIZE]
[B][FONT=Times New Roman] [/FONT][/B]

[B][FONT=Times New Roman]Scarcity definition[/FONT][/B]

[FONT=Times New Roman][SIZE=3]This definition allowed a potentially broader field of study, but it, too, has its critics. It is most amenable to those who consider economics a pure science, but others object that it reduces economics merely to a valuation theory. It ignores how values are fixed, prices are determined and national income is generated. It also ignores unemployment and other problems arising due to abundance. This definition cannot apply to such [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/John_Maynard_Keynes"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Keynesian[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] concerns as cyclical instability, [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Full_employment"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]full employment[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], and [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Economic_growth"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]economic growth[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman].[/FONT][/SIZE]
[FONT=Times New Roman][SIZE=3]The focus on scarcity continues to dominate [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Neoclassical_economics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]neoclassical economics[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], which, in turn, predominates in most academic economics departments. It has been criticized in recent years from a variety of quarters, including [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Institutional_economics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]institutional economics[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] and [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Evolutionary_economics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]evolutionary economics[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman].[/FONT][/SIZE]
[B][FONT=Times New Roman]Economic assumptions[/FONT][/B]

[B][FONT=Times New Roman]Value[/FONT][/B]

[SIZE=3][FONT=Times New Roman]It could be argued that beneath an economic theory is a theory of value. Value can be defined as the underlying activity which economics describes and measures. It is what is "really" happening.[/FONT][/SIZE]
[URL="http://en.wikipedia.org/wiki/Representative_money"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Representative money[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] like this 1922 [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/United_States"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]US[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] $100 gold note could be exchanged by the bearer for its face value in [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Gold"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]gold[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman].[/FONT][/SIZE]
[FONT=Times New Roman][SIZE=3]Adam Smith defined "labour" as the underlying source of value,[URL="http://en.wikipedia.org/wiki/Economics#_note-smith#_note-smith"][COLOR=windowtext][4][/COLOR][/URL] and "the [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Labour_theory_of_value"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]labour theory of value[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3]" underlies the work of [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Karl_Marx"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Karl Marx[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/David_Ricardo"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]David Ricardo[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] and many other classical economists. The "labour theory of value" argues that a good or service is worth the labour that it takes to produce. For most, this value determines a commodity's price. This labour theory of price and the closely related [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Cost-of-production_theory_of_value"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]cost-of-production theory of value[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] dominates the work of most classical economists, but those theories are far from the only accepted basis for "value". For example, [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Neoclassical_economics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]neoclassical[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] economists and [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Austrian_School"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Austrian School[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] economists prefer the [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Marginal_theory_of_value"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]marginal theory of value[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman].[/FONT][/SIZE]
[SIZE=3][FONT=Times New Roman]"Market theory" argues that there is no "value" separate from price, that the market incorporates all available information into price, and that so long as markets are open, that price and the value are one and the same. This theory rests on the idea of the "rational economic actor". This was originally asserted by Mill.[[URL="http://en.wikipedia.org/wiki/Wikipedia:Citing_sources"][I][COLOR=windowtext]citation needed[/COLOR][/I][/URL]][/FONT][/SIZE]
[FONT=Times New Roman][SIZE=3]Another set of theories rests on the idea that there is a basic external scarcity, and that "value" represents the relationship to that basic scarcity (or lack thereof). These theories include those based on economics being limited by energy or based on a "[/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Gold_standard"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]gold standard[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman]".[/FONT][/SIZE]
[URL="http://en.wikipedia.org/wiki/Robert_A._Heinlein"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Robert A. Heinlein[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman] said that the value of an object is what an object is worth to each person, and that the value of any object varies from person to person.[/FONT][/SIZE]
[SIZE=3][FONT=Times New Roman]All of these value theories are used in current economic work with varying degrees of acceptance.[/FONT][/SIZE]
[B][FONT=Times New Roman]Supply and demand[/FONT][/B]

[FONT=Times New Roman][SIZE=3]The [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Supply_and_demand"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]supply and demand[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman] model describes how prices vary as a result of a balance between product availability and demand. The graph depicts an increase in demand from D1 to D2 along with the consequent increase in price and quantity required to reach a new equilibrium point on the supply curve (S).[/FONT][/SIZE]
[FONT=Times New Roman][SIZE=3]In [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Microeconomics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]microeconomic[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Theory"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]theory[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] [B]supply and demand[/B] attempts to describe, explain, and predict the [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Price"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]price[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] and quantity of goods sold in perfectly competitive [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Market"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]markets[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3]. It is one of the most fundamental economic [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Model_%28economics%29"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]models[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman], ubiquitously used as a basic building block in a wide range of more detailed economic models and theories.[/FONT][/SIZE]
[FONT=Times New Roman][SIZE=3]To define, [B]demand[/B] is the quantity of a product that a consumer or buyer would be willing and able to buy at any given price in a given period of time. Demand is often represented as a table or a graph relating price and quantity demanded. Most economic models assume that consumers make rational choices about how much to buy in order to maximize their [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Utility"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]utility[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman] - they spend their income on the products that will give them the most happiness at the least cost. The [B]law of demand[/B] states that, in general, price and quantity demanded are inversely related. In other words, the higher the price of a product, the less of it consumers will buy.[/FONT][/SIZE]
[SIZE=3][FONT=Times New Roman][B]Supply[/B] is the quantity of goods that a producer or a supplier is willing to bring into the market for the purpose of sale at any given price in a given period of time. Supply is often represented as a table or a graph relating price and quantity supplied. Like consumers, producers are assumed to be [URL="http://en.wikipedia.org/wiki/Utility"][COLOR=windowtext]utility[/COLOR][/URL]-maximizing, attempting to produce the amount of goods that will bring them the greatest possible profit. The [B]law of supply[/B] states that price and quantity supplied are directly proportional. In other words, the higher the price of a product, the more of it producers will create.[/FONT][/SIZE]
[FONT=Times New Roman][SIZE=3]The theory of supply and demand is crucial to explaining the [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Market_economy"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]market economy[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman] in that it explains the mechanisms by which prices and levels of production are set.[/FONT][/SIZE]
[B][FONT=Times New Roman]Price [/FONT][/B]

[FONT=Times New Roman][SIZE=3]In order to measure the ebb and flow of supply and demand, a measurable value is needed. The oldest and most commonly used is [I]price[/I], or the going rate of exchange between buyers and sellers in a market. Price theory, therefore, charts the movement of measurable quantities over time, and the relationship between price and other measurable variables. In [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Adam_Smith"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Adam Smith[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3]'s [I][URL="http://en.wikipedia.org/wiki/Wealth_of_Nations"][COLOR=windowtext]Wealth of Nations[/COLOR][/URL][/I], this was the trade-off between price and convenience. A great deal of economic theory is based around prices and the theory of [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Supply_and_demand"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]supply and demand[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman]. In economic theory, the most efficient form of communication comes about when changes to an economy occur through price, such as when an increase in supply leads to a lower price, or an increase in demand leads to a higher price.[/FONT][/SIZE]
[URL="http://en.wikipedia.org/wiki/Exchange_rate"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Exchange rates[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] are determined by the relative supply and demand of different [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Currency"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]currencies[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] — an important issue in [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/International_trade"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]international trade[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman].[/FONT][/SIZE]
[SIZE=3][FONT=Times New Roman]In many practical economic models, some form of "price stickiness" is incorporated to model the fact that prices do not move fluidly in many markets. Economic policy often revolves around arguments about the cause of "economic friction", or price stickiness, and which is, therefore, preventing the supply and demand from reaching equilibrium.[/FONT][/SIZE]
[FONT=Times New Roman][SIZE=3]Another area of economic controversy is about whether price measures the value of a good correctly. In mainstream market economics, where there are significant scarcities not factored into price, there is said to be an [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Externality"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]externalization[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], which is a cost or benefit to actors other than the buyer and seller, of which many examples exist, including pollution (a cost to others) and education (a benefit to others). Market economics predicts that scarce goods which are under-priced because of externalities are over-consumed (See [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Social_cost"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]social cost[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3]), and that scarce goods that are over-priced are under-consumed. This leads into [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Public_good"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]public goods[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman] theory. Governments often tax and otherwise restrict the sale of goods that have negative externalities and subsidize or otherwise promote the purchase of goods that have positive externalities in an effort to correct the distortion in price caused by these externalities.[/FONT][/SIZE]
[B][FONT=Times New Roman]Scarcity[/FONT][/B]

[FONT=Times New Roman][SIZE=3]Economic analysis is fundamentally about the maximization of something (leisure time, wealth, health, happiness - all commonly reduced to the concept of [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Utility"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]utility[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman]) subject to constraints. These constraints - or scarcity - inevitably define a trade-off. For example, one can have more money by working harder, but less time (there are only so many hours in a day, so time is scarce). One can have more radishes only at the expense of, for example, fewer carrots (you only have so much land on which to grow food - land is scarce).[/FONT][/SIZE]
[SIZE=3][FONT=Times New Roman][B]All economies in the world face scarcity.[/B][/FONT][/SIZE]
[SIZE=3][FONT=Times New Roman]Scarcity is defined as: when the price is zero, the quantity demanded exceeds the quantity supplied. Price is a measure of relative scarcity. If all other market variables are held constant; When the price is rising, this indicates the commodity is becoming relatively more scarce. When the price is falling, this indicates the commodity is becoming relatively less scarce.[/FONT][/SIZE]
[SIZE=3][FONT=Times New Roman]Adam Smith considered, for example, the trade-off between time, or convenience, and money. He discussed how a person could live near town, and pay more for rent of his home, or live farther away and pay less, "paying the difference out of his convenience".[URL="http://en.wikipedia.org/wiki/Economics#_note-smith#_note-smith"][COLOR=windowtext][4][/COLOR][/URL][/FONT][/SIZE]
[URL="http://en.wikipedia.org/wiki/Trade"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Trades[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] on the floor of the [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/New_York_Stock_Exchange"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]New York Stock Exchange[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] always involve a face-to-face interaction. There is one podium/desk on the trading floor for each of the exchange's three thousand or so [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Stock"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]stocks[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman].[/FONT][/SIZE]
[B][FONT=Times New Roman]Marginalism[/FONT][/B]

[FONT=Times New Roman][SIZE=3]In [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Marginalism"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]marginalist economic theory[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], the price level is determined by the [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Marginal_cost"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]marginal cost[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] and [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Marginal_utility"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]marginal utility[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3]. The price of all goods will be the cost of making the last one that people will purchase, and the price of all the employees in a company will be the cost of hiring the last one the business needs. Marginalism looks at decisions based on "the margins", what the cost to produce the next unit is, versus how much it is expected to return in profit. When the marginal return of an action reaches zero, the action stops. Marginal utility is how much more happiness or use a person receives from a purchase in contrast with buying less. Marginal rewards are often subject to [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Diminishing_returns"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]diminishing returns[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman]: Less reward is obtained from more production or consumption. For example, the 10th bar of chocolate that a person consumes does not taste as good as the first, and so brings less marginal utility.[/FONT][/SIZE]
[FONT=Times New Roman][SIZE=3]Marginalism became increasingly important in economic theory in the late 19th century, and is a tool which is used to analyze how economic systems will react. Marginal cost of production divides [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Cost"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]costs[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman] into "fixed" costs which must be paid regardless of how many of a commodity are produced, and "variable costs". The marginal cost is the variable cost of the last unit. Marginalism states that when the profit from the next unit will be zero, that unit will not be produced.[/FONT][/SIZE]
[SIZE=3][FONT=Times New Roman]The marginalist theory of price level runs counter to the classical theory of price being determined by the amount of labour congealed in a commodity.[/FONT][/SIZE]
[B][FONT=Times New Roman]Development of economic thought[/FONT][/B]

[URL="http://en.wikipedia.org/wiki/Adam_Smith"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Adam Smith[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman], generally regarded as the Father of Economics, author of [I]An Inquiry into the Nature and Causes of the Wealth of Nations[/I], commonly known as [I][URL="http://en.wikipedia.org/wiki/The_Wealth_of_Nations"][COLOR=windowtext]The Wealth of Nations[/COLOR][/URL][/I].[/FONT][/SIZE]
[FONT=Times New Roman][SIZE=3]The term [I]economics[/I] was coined around 1870 and popularized by influential "neoclassical" economists such as [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Alfred_Marshall"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Alfred Marshall[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] ([/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Welfare_definition"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Welfare definition[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3]), as a substitute for the earlier term [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Political_economy"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]political economy[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], which referred to "the economy of polities" – competing [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/State"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]states[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3].[[URL="http://en.wikipedia.org/wiki/Wikipedia:Citing_sources"][I][COLOR=windowtext]citation needed[/COLOR][/I][/URL]] The term [I]political economy[/I] was used through the 18th and 19th centuries, with [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Adam_Smith"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Adam Smith[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/David_Ricardo"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]David Ricardo[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] and [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Karl_Marx"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Karl Marx[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] as its main thinkers and which today is frequently referred to as the "classical" economic theory. Both "economy" and "economics" are derived from the [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Greek_language"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Greek[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman] [I]oikos-[/I] for "house" or "settlement", and [I]nomos[/I] for "laws" or "norms".[/FONT][/SIZE]
[FONT=Times New Roman][SIZE=3]Economic thought may be roughly divided into three phases: Premodern ([/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Ancient_Greece"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Greek[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Ancient_Rome"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Roman[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Arab"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Arab[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3]), Early modern ([/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Mercantilist"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]mercantilist[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Physiocrats"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]physiocrats[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3]) and Modern (since [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Adam_Smith"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Adam Smith[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] in the late 18th century). Systematic economic theory has been developed mainly since the birth of the [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Modern_era"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]modern era[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3]. [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Joseph_Schumpeter"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Joseph Schumpeter[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] specifically credits the development of the scientific study of economics to the Late [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Scholastics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Scholastics[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], particularly those of 15th and 16th century [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Spain"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Spain[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman] (see his [I]History of Economic Analysis[/I]).[/FONT][/SIZE]
[FONT=Times New Roman][SIZE=3]There have been different and competing schools of economic thought pertaining to capitalism from the late 18th century to the present day. Important schools of thought are [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Mercantilism"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Mercantilism[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Kameralism"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Kameralism[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Physiocracy"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Physiocracy[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Classical_economics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Classical economics[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Manchester_school"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Manchester school[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Austrian_School"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Austrian School[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Marxian_economics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Marxian economics[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Chicago_school_%28economics%29"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Chicago School[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman].[/FONT][/SIZE]
[FONT=Times New Roman][SIZE=3]Within macroeconomics there is [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Keynesian_economics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Keynesian economics[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Post-Keynesian_economics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Post-Keynesian economics[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Monetarism"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Monetarism[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/New_classical_economics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]New classical economics[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] and [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Supply-side_economics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Supply-side economics[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3]. New alternative developments include [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Evolutionary_economics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Evolutionary economics[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Dependency_theory"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Dependency theory[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/World_systems_theory"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]World systems theory[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] and [/SIZE][/FONT][URL="http://en.wikipedia.org/w/index.php?title=Associative_economics&action=edit"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Associative economics[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman].[/FONT][/SIZE]
[B][FONT=Times New Roman]Economics and other disciplines[/FONT][/B]

[URL="http://en.wikipedia.org/wiki/Econophysics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Econophysics[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] is an interdisciplinary research field, applying theories and methods originally developed within [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Physics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Physics[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] in order to solve problems in Economics, usually those including uncertainties or [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Stochastic"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]stochastic[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] elements and [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Nonlinear_dynamics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]nonlinear dynamics[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman].[/FONT][/SIZE]
[FONT=Times New Roman][SIZE=3]There is some tension between economics and theories of [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Ethics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]ethics[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], historically a branch of philosophy, which emphasizes how people ought to conduct ourselves and balances of [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Rights"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]rights[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] and [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Duties"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]duties[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3]. Modern economics deals with this tension explicitly: According to some thinkers such as [/SIZE][/FONT][URL="http://en.wikipedia.org/w/index.php?title=John_Syko&action=edit"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]John Syko[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], a theory of economics is also, or implies also, a theory of [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Moral_reasoning"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]moral reasoning[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3]. One way economists deal with this is to qualify discussions of [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Economic_choice"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]economic choice[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] by noting the qualifier [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Ceteris_paribus"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]ceteris paribus[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman] ("all other things held constant...") referring to moral or social factors that are (for the sake of argument) held equivalent for all choices that one might make.[/FONT][/SIZE]
[I][FONT=Times New Roman][SIZE=3]For exploration of this issue, see the [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Moral_purchasing"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]moral purchasing[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] article.[/SIZE][/FONT][/I]
[FONT=Times New Roman][SIZE=3]Another premise is that economics fits within a finite ecosystem where there are at least some abundant resources. For instance, when fuelling a fire, people are usually concerned with finding the wood, and not with finding the air to burn it with. Economics explicitly does not deal with free abundant inputs – one criticism is that it often conflicts with [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Ecological_economics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]ecology's[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] view of what affects what. Human beings are, according to ecologists, merely one species participating in a vast [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Energy_economics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]energy system[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman] on this planet – economy is a subset of ecology that deals with just one species' habits and wants.[/FONT][/SIZE]
[I][FONT=Times New Roman][SIZE=3]See [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Nature%27s_services"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]nature's services[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] for the economic view of ecology and [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Green_economics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]green economics[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] for the view in which economics is a subset of ecology.[/SIZE][/FONT][/I]
[FONT=Times New Roman][SIZE=3]A third premise is that economics suggests [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Market_form"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]market forms[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] and other means of distribution of scarce goods that affect not just "desires and wants" but also "needs" and "habits". Much of so-called economic "choice" is involuntary, certainly given the [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Conditioning"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]conditioning[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] that people have to expect certain [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Quality_of_life"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]quality of life[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3]. This leads to one of the most hotly debated areas in economic policy: namely, the effect and efficacy of welfare policies. [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Libertarians"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Libertarians[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] view this as a failure to respect economic reasoning. They argue that redistribution of wealth is morally and economically wrong. And [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Socialists"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]socialists[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] view it as a failure of economics to respect society. They argue that disparities of wealth should not have been allowed in the first place. This led to both 19th century [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Labour_economics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]labour economics[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] and 20th century [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Welfare_economics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]welfare economics[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] before being subsumed into [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Human_development_theory"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]human development theory[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman].[/FONT][/SIZE]
[URL="http://en.wikipedia.org/wiki/Information_theory"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Information theory[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] has been applied to economics since the work of [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Ronald_Coase"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Ronald Coase[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] in the 1930s. However, with [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Herbert_Simon"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Herbert Simon[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] and [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/John_von_Neumann"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]John von Neumann[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] in the 1950s, it gathered a more specific [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Formalism"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]formalism[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] as part of [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Game_theory"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]game theory[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman]. This emphasizes that the decision-making process itself is costly.[/FONT][/SIZE]
[FONT=Times New Roman][SIZE=3]The older term for economics, [I][URL="http://en.wikipedia.org/wiki/Political_economy"][COLOR=windowtext]political economy[/COLOR][/URL][/I], is still often used [I]instead of[/I] [B]economics[/B], especially by certain economists such as [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Marxists"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Marxists[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3]. Use of this term often signals a basic disagreement with the terminology or paradigm of market economics. Political economy explicitly brings political considerations into economic analysis and is therefore openly [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Normative"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]normative[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], although this can be said of many economic recommendations as well, despite claims to being [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Positive"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]positive[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3]. Some mainstream universities (such as the [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/University_of_Toronto"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]University of Toronto[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] and many in the [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/United_Kingdom"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]United Kingdom[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman]) have a "political economy" department rather than an "economics" department.[/FONT][/SIZE]
[SIZE=3][FONT=Times New Roman]Marxist economics generally denies the trade-off of time for money. In the Marxist view, concentrated control over the means of production is the basis for the allocation of resources among classes. Scarcity of any particular physical resource is subsidiary to the central question of power relationships embedded in the means of production.[/FONT][/SIZE]
[B][FONT=Times New Roman]Criticism and contrarian perspectives[/FONT][/B]

[B][FONT=Times New Roman]Is economics a science?[/FONT][/B]

[FONT=Times New Roman][SIZE=3]One of the marks of a [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Science"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]science[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] is the use of the [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Scientific_method"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]scientific method[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] and the ability to establish [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Hypothesis"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]hypothesis[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] and make [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Predictions"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]predictions[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] which can then be tested with data. Unlike [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Natural_sciences"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]natural scientists[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] and in a way similar to what happens in other [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Social_sciences"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]social sciences[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], economists are generally unable to test their theories due to its impracticality. Unlike the natural sciences, economics yields no natural laws or universal constants, so this has led some critics to argue that economics is not a science, or at best, is just a [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Soft_science"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]soft science[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3]. [URL="http://en.wikipedia.org/wiki/Economics#_note-7#_note-7"][COLOR=windowtext][9][/COLOR][/URL] Economists in general reply that while this aspect presents serious difficulties, they in fact do test their hypothesis using [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Statistical_methods"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]statistical methods[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] such as [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Econometrics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]econometrics[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], using the data generated in the real world. [URL="http://en.wikipedia.org/wiki/Economics#_note-8#_note-8"][COLOR=windowtext][10][/COLOR][/URL] The field of [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Experimental_economics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]experimental economics[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] has also seen efforts to test at least some predictions of economic theories in a simulated laboratory setting – an endeavour which earned [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Vernon_Smith"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Vernon Smith[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] the [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Bank_of_Sweden_Prize_in_Economic_Sciences_in_Memory_of_Alfred_Nobel"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] in [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/2002"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]2002[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman].[/FONT][/SIZE]
[B][FONT=Times New Roman]Criticisms of economic theory and practice[/FONT][/B]

[SIZE=3][FONT=Times New Roman]Economics has been persistently criticized for its heavy reliance on unrealistic, unobservable, or unverifiable assumptions. Some people reply to this criticism by saying that the unrealistic assumptions of economics result from abstraction from unimportant details, and abstraction is necessary for knowledge of a complex real world. So, far from unrealistic assumptions detracting from the epistemic worth of economics, such assumptions are essential for economic knowledge. Denominating this explanation the [I]abstractionist defence[/I], and after clarifying abstraction, unrealistic assumptions and kindred notions, at least one study have shown that this [I]abstractionist defence[/I] does not successfully rebut the position of those who criticize economics for its unrealistic assumptions. [/FONT][/SIZE]
[FONT=Times New Roman][SIZE=3]Economics is a field of study with [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Economics#Schools_of_economic_thought"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]various schools and currents of thought[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman]. As a result, as in many other fields, there exists a considerable distribution of opinions, approaches and theories. Some of these reach opposite conclusions or, due to the differences in underlying assumptions, contradict each other.[/FONT][/SIZE]
[FONT=Times New Roman][SIZE=3]Criticism on several topics in economics can be found elsewhere, in both general and specialized literature (for example, [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/General_equilibrium#Unresolved_problems_in_general_equilibrium"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]General equilibrium[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Pareto_efficiency#Criticisms"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Pareto efficiency[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Marginalism#Criticism_of_marginalism"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Marginalism[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Behavioral_economics#Criticisms_of_behavioral_finance"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Behavioral finance[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Behavioral_economics#Criticisms_of_behavioral_economics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Behavioral economics[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Keynesian_economics#Critique"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Keynesian economics[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Monetarism#The_current_state_of_monetary_theory"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Monetarism[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Endogenous_growth_theory#Critics"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Endogenous growth theory[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Comparative_advantage#Critical_Analysis_of_Ricardo.27s_theory"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Comparative advantage[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Kuznets_curve#Criticism_of_Kuznets_Curve"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Kuznets curve[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3], [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Laffer_curve#Critiques_of_the_Laffer_Curve"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Laffer curve[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Et_al."][COLOR=windowtext][FONT=Times New Roman][SIZE=3]et al.[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman]).[/FONT][/SIZE]
[B][FONT=Times New Roman]McCloskey critique[/FONT][/B]

[FONT=Times New Roman][SIZE=3]Although the conventional way of connecting the economic model with the world is through [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Econometric"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]econometric[/SIZE][/FONT][/COLOR][/URL][FONT=Times New Roman][SIZE=3] analysis, Professor [/SIZE][/FONT][URL="http://en.wikipedia.org/wiki/Deirdre_McCloskey"][COLOR=windowtext][FONT=Times New Roman][SIZE=3]Deirdre McCloskey[/SIZE][/FONT][/COLOR][/URL][SIZE=3][FONT=Times New Roman] cites many examples in which professors of econometrics were able to use the same data to both prove and disprove the applicability of a model's conclusions. She argues that the vast efforts expended by economists on analytical equations is essentially wasted effort.[/FONT][/SIZE]


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