The earlier term for the discipline was "political economy", but since the late 19th century, it has commonly been called "economics".[22] The term is ultimately derived fromAncient Greekοἰκονομία (oikonomia) which is a term for the "way (nomos) to run a household (oikos)", or in other words the know-how of anοἰκονομικός (oikonomikos), or "household or homestead manager". Derived terms such as "economy" can therefore often mean "frugal" or "thrifty".[23][24][25][26] By extension then, "political economy" was the way to manage apolis or state.
There are a variety of moderndefinitions of economics; some reflect evolving views of the subject or different views among economists.[27][28]Scottish philosopherAdam Smith (1776) defined what was then calledpolitical economy as "an inquiry into the nature and causes of the wealth of nations", in particular as:
a branch of the science of a statesman or legislator [with the twofold objectives of providing] a plentiful revenue or subsistence for the people ... [and] to supply the state or commonwealth with a revenue for the public services.[29]
The science which traces the laws of such of the phenomena of society as arise from the combined operations of mankind for the production of wealth, in so far as those phenomena are not modified by the pursuit of any other object.[32]
Economics is a study of man in the ordinary business of life. It enquires how he gets his income and how he uses it. Thus, it is on the one side, the study of wealth and on the other and more important side, a part of the study of man.[33]
Lionel Robbins (1932) developed implications of what has been termed "[p]erhaps the most commonly accepted current definition of the subject":[28]
Economics is the science which studieshuman behaviour as a relationship between ends and scarce means which have alternative uses.[34]
Robbins described the definition as notclassificatory in "pick[ing] out certainkinds of behaviour" but ratheranalytical in "focus[ing] attention on a particularaspect of behaviour, the form imposed by the influence ofscarcity."[35] He affirmed that previous economists have usually centred their studies on the analysis of wealth: how wealth is created (production), distributed, and consumed; and how wealth can grow.[36] But he said that economics can be used to study other things, such as war, that are outside its usual focus. This is because war has as the goal winning it (as a sought-afterend), generates both cost and benefits; and,resources (human life and other costs) are used to attain the goal. If the war is not winnable or if the expected costs outweigh the benefits, the decidingactors (assuming they are rational) may never go to war (adecision) but rather explore other alternatives. Economics cannot be defined as the science that studies wealth, war, crime, education, and any other field economic analysis can be applied to; but, as the science that studies a particular common aspect of each of those subjects (they all use scarce resources to attain a sought-after end).
Some subsequent comments criticised the definition as overly broad in failing to limit its subject matter to analysis of markets. From the 1960s, however, such comments abated as the economic theory of maximizing behaviour andrational-choice modellingexpanded the domain of the subject to areas previously treated in other fields.[37] There are other criticisms as well, such as in scarcity not accounting for themacroeconomics of high unemployment.[38]
Gary Becker, a contributor to the expansion of economics into new areas, described the approach he favoured as "combin[ing the] assumptions of maximizing behaviour, stablepreferences, andmarket equilibrium, used relentlessly and unflinchingly."[39] One commentary characterises the remark as making economics an approach rather than a subject matter but with great specificity as to the "choice process and the type ofsocial interaction that [such] analysis involves." The same source reviews a range of definitions included in principles of economics textbooks and concludes that the lack of agreement need not affect the subject-matter that the texts treat. Among economists more generally, it argues that a particular definition presented may reflect the direction toward which the author believes economics is evolving, or should evolve.[28]
Many economists including Nobel Prize winnersJames M. Buchanan andRonald Coase reject the method-based definition of Robbins and continue to prefer definitions like those of Say, in terms of its subject matter.[37]Ha-Joon Chang has for example argued that the definition of Robbins would make economics very peculiar because all other sciences define themselves in terms of the area of inquiry or object of inquiry rather than the methodology. In the biology department, it is not said that all biology should be studied with DNA analysis. People study living organisms in many different ways, so some people will perform DNA analysis, others might analyse anatomy, and still others might build game theoretic models of animal behaviour. But they are all called biology because they all study living organisms. According to Ha Joon Chang, this view that the economy can and should be studied in only one way (for example by studying only rational choices), and going even one step further and basically redefining economics as a theory of everything, is peculiar.[40]
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From antiquity through the physiocrats
A 1638 painting of a French seaport during the heyday ofmercantilism
Questions regarding distribution of resources are found throughout the writings of theBoeotian poetHesiod and several economic historians have described him as the "first economist".[41] However, the Greek wordoikos was used for issues regarding how to manage a household (which was understood to be the landowner, his family, and his slaves)[42] rather than to refer to some normative societal system of distribution of resources, which is a far more recent phenomenon.[43][44][45] AlthoughXenophon, the author of theOeconomicus, is credited byphilologues as the source of the word "economy", modern scholarship often creditsAristotle as the first author writing on economics proper in some scattered passages, particularly in theNicomachean Ethics, where the topic ofuse value vsexchange value is discussed.[46][47]Joseph Schumpeter described 16th and 17th centuryscholastic writers, includingTomás de Mercado,Luis de Molina, andJuan de Lugo, as "coming nearer than any other group to being the 'founders' of scientific economics" as tomonetary,interest, andvalue theory within anatural-law perspective.[48]
Two groups, who later were called "mercantilists" and "physiocrats", more directly influenced the subsequent development of the subject. Both groups were associated with the rise ofeconomic nationalism andmodern 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 inexpensive raw materials to be used in manufacturing goods, which could be exported, and for state regulation to impose protectivetariffs on foreign manufactured goods and prohibit manufacturing in the colonies.[49]
Physiocrats, a group of 18th-century French thinkers and writers, developed the idea of the economy as acircular 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.[50] 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 oflaissez-faire,[51] which called for minimal government intervention in the economy.[52]
Adam Smith (1723–1790) was an early economic theorist.[53] 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.[54]
The publication ofAdam Smith'sThe Wealth of Nations in 1776 is considered to be the first formalisation of economic thought.
The publication ofAdam Smith'sThe Wealth of Nations in 1776, has been described as "the effective birth of economics as a separate discipline."[55] The book identified land, labour, and capital as the three factors of production and the major contributors to a nation's wealth, as distinct from the physiocratic idea that only agriculture was productive.
Smith discusses potential benefits of specialisation bydivision of labour, including increasedlabour productivity andgains from trade, whether between town and country or across countries.[56] His "theorem" that "the division of labor is limited by the extent of the market" has been described as the "core of atheory of the functions of firm andindustry" and a "fundamental principle of economic organization."[57] To Smith has also been ascribed "the most important substantive proposition in all of economics" and foundation ofresource-allocation theory—that, undercompetition, resource owners (of labour, land, and capital) seek their most profitable uses, resulting in an equal rate of return for all uses inequilibrium (adjusted for apparent differences arising from such factors as training and unemployment).[58]
In an argument that includes "one of the most famous passages in all economics,"[59] Smith represents every individual as trying to employ any capital they might command for their own advantage, not that of the society,[a] and for the sake of profit, which is necessary at some level for employing capital in domestic industry, and positively related to the value of produce.[61] In this:
He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.[62]
TheReverendThomas Robert Malthus (1798) used the concept ofdiminishing returns to explain low living standards.Human population, he argued, tended to increase geometrically, outstripping the production of food, which increased arithmetically. The force of a rapidly growing population against a limited amount of land meant diminishing returns to labour. The result, he claimed, was chronically low wages, which prevented the standard of living for most of the population from rising above the subsistence level.[63][non-primary source needed] EconomistJulian Simon has criticised Malthus's conclusions.[64]
While Adam Smith emphasised production and income,David Ricardo (1817) focused on the distribution of income among landowners, workers, and capitalists. Ricardo saw an inherent conflict between landowners on the one hand and labour and capital on the other. He posited that the growth of population and capital, pressing against a fixed supply of land, pushes up rents and holds down wages and profits. Ricardo was also the first to state and prove the principle ofcomparative advantage, according to which each country should specialise in producing and exporting goods in that it has a lowerrelative cost of production, rather relying only on its own production.[65] It has been termed a "fundamental analytical explanation" forgains from trade.[66]
Coming at the end of the classical tradition,John Stuart Mill (1848) parted company with the earlier classical economists on the inevitability of the distribution of income produced by the market system. Mill pointed to a distinct difference between the market's two roles: allocation of resources and distribution of income. The market might be efficient in allocating resources but not in distributing income, he wrote, making it necessary for society to intervene.[67]
Value theory was important in classical theory. Smith wrote that the "real price of every thing ... is the toil and trouble of acquiring it". Smith maintained that, with rent and profit, other costs besides wages also enter the price of a commodity.[68] Other classical economists presented variations on Smith, termed the 'labour theory of value'. Classical economics focused on the tendency of any market economy to settle in a finalstationary state made up of a constant stock of physical wealth (capital) and a constant population size.
Marxist (later, Marxian) economics descends from classical economics and it derives from the work ofKarl Marx. The first volume of Marx's major work,Das Kapital, was published in 1867. Marx focused on thelabour theory of value andtheory of surplus value. Marx wrote that they were mechanisms used by capital to exploit labour.[69] The labour theory of value held that the value of an exchanged commodity was determined by the labour that went into its production, and the theory of surplus value demonstrated how workers were only paid a proportion of the value their work had created.[70]
At its inception as a social science,economics was defined and discussed at length as the study of production, distribution, and consumption of wealth by Jean-Baptiste Say in hisTreatise on Political Economy or, The Production, Distribution, and Consumption of Wealth (1803). These three items were considered only in relation to the increase or diminution of wealth, and not in reference to their processes of execution.[b] Say's definition has survived in part up to the present, modified by substituting the word "wealth" for "goods and services" meaning that wealth may include non-material objects as well. One hundred and thirty years later,Lionel Robbins noticed that this definition no longer sufficed,[c] because many economists were making theoretical and philosophical inroads in other areas of human activity. In hisEssay on the Nature and Significance of Economic Science, he proposed a definition of economics as a study of human behaviour, subject to and constrained by scarcity,[d] which forces people to choose, allocate scarce resources to competing ends, and economise (seeking the greatest welfare while avoiding the wasting of scarce resources). According to Robbins: "Economics is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses".[35] Robbins' definition eventually became widely accepted by mainstream economists, and found its way into current textbooks.[71] Although far from unanimous, most mainstream economists would accept some version of Robbins' definition, even though many have raised serious objections to the scope and method of economics, emanating from that definition.[72]
A body of theory later termed "neoclassical economics" formed from about 1870 to 1910. The term "economics" was popularised by such neoclassical economists asAlfred Marshall andMary Paley Marshall as a concise synonym for "economic science" and a substitute for the earlier "political economy".[25][26] This corresponded to the influence on the subject of mathematical methods used in thenatural sciences.[73]
Neoclassical economics systematically integratedsupply and demand as joint determinants of both price and quantity in market equilibrium, influencing the allocation of output and income distribution. It rejected the classical economics'labour theory of value in favour of amarginal utility theory of value on the demand side and a more comprehensive theory of costs on the supply side.[74] In the 20th century, neoclassical theorists departed from an earlier idea that suggested measuring total utility for a society, opting instead forordinal utility, which posits behaviour-based relations across individuals.[75][76]
Inmicroeconomics, neoclassical economics represents incentives and costs as playing a pervasive role in shapingdecision making. An immediate example of this is theconsumer theory of individual demand, which isolates how prices (as costs) and income affect quantity demanded.[75] Inmacroeconomics it is reflected in an early and lastingneoclassical synthesis with Keynesian macroeconomics.[77][75]
Neoclassical economics studies the behaviour ofindividuals,households, andorganisations (called economic actors, players, or agents), when they manage or usescarce resources, which have alternative uses, to achieve desired ends. Agents are assumed to act rationally, have multiple desirable ends in sight, limited resources to obtain these ends, a set of stable preferences, a definite overall guiding objective, and the capability of making a choice. There exists an economic problem, subject to study by economic science, when adecision (choice) is made by one or more players to attain the best possible outcome.[78]
Keynesian economics derives fromJohn Maynard Keynes, in particular his bookThe General Theory of Employment, Interest and Money (1936), which ushered in contemporarymacroeconomics as a distinct field.[79] The book focused on determinants of national income in the short run when prices are relatively inflexible. Keynes attempted to explain in broad theoretical detail why high labour-market unemployment might not be self-correcting due to low "effective demand" and why even price flexibility and monetary policy might be unavailing. The term "revolutionary" has been applied to the book in its impact on economic analysis.[80]
Immediately after World War II, Keynesian was the dominant economic view of the United States establishment and its allies, Marxian economics was the dominant economic view of the Soviet Union nomenklatura and its allies.
Monetarism appeared in the 1950s and 1960s, its intellectual leader beingMilton Friedman. Monetarists contended that monetary policy and other monetary shocks, as represented by the growth in the money stock, was an important cause of economic fluctuations, and consequently that monetary policy was more important than fiscal policy forpurposes of stabilisation.[82][83] Friedman was also skeptical about the ability of central banks to conduct a sensible active monetary policy in practice, advocating instead using simple rules such as a steady rate of money growth.[84]
Monetarism rose to prominence in the 1970s and 1980s, when several major central banks followed a monetarist-inspired policy, but was later abandoned because the results were unsatisfactory.[85][86]
During the 1980s, a group of researchers appeared being calledNew Keynesian economists, including among othersGeorge Akerlof,Janet Yellen,Gregory Mankiw andOlivier Blanchard. They adopted the principle of rational expectations and other monetarist or new classical ideas such as building upon models employing micro foundations and optimizing behaviour, but simultaneously emphasised the importance of variousmarket failures for the functioning of the economy, as had Keynes.[88] Not least, they proposed various reasons that potentially explained the empirically observed features ofprice and wage rigidity, usually made to be endogenous features of the models, rather than simply assumed as in older Keynesian-style ones.
After decades of often heated discussions between Keynesians, monetarists, new classical and new Keynesian economists, a synthesis emerged by the 2000s, often given the namethenew neoclassical synthesis. It integrated the rational expectations and optimizing framework of the new classical theory with a new Keynesian role for nominal rigidities and other market imperfections likeimperfect information in goods, labour and credit markets. The monetarist importance of monetary policy in stabilizing[89] the economy and in particular controlling inflation was recognised as well as the traditional Keynesian insistence that fiscal policy could also play an influential role in affectingaggregate demand. Methodologically, the synthesis led to a new class of applied models, known asdynamic stochastic general equilibrium or DSGE models, descending from real business cycles models, but extended with several new Keynesian and other features. These models proved useful and influential in the design of modern monetary policy and are now standard workhorses in most central banks.[90]
After the 2008 financial crisis
After the2008 financial crisis, macroeconomic research has put greater emphasis on understanding and integrating the financial system into models of the general economy and shedding light on the ways in which problems in the financial sector can turn into major macroeconomic recessions. In this and other research branches, inspiration frombehavioural economics has started playing a more important role in mainstream economic theory.[91] Also,heterogeneity among the economic agents, e.g. differences in income, plays an increasing role in recent economic research.[92]
Beside themainstream development of economic thought, various alternative orheterodox economic theories have evolved over time, positioning themselves in contrast to mainstream theory.[96] These include:[96]
Austrian School, emphasizinghuman action,property rights and the freedom to contract and transact to have a thriving and successful economy.[97] It also emphasises that the state should play as small role as possible (if any role) in the regulation of economic activity between two transacting parties.[98]Friedrich Hayek andLudwig von Mises are the two most prominent representatives of the Austrian school.
Ecological economics likeenvironmental economics studies the interactions between human economies and the ecosystems in which they are embedded,[100] but in contrast to environmental economics takes an oppositional position towards general mainstream economic principles. A major difference between the two subdisciplines is their assumptions about thesubstitution possibilities between human-made andnatural capital.[101]
Feminist economics emphasises the role that gender plays in economies, challenging analyses that render gender invisible or support gender-oppressive economic systems.[103] The goal is to create economic research and policy analysis that is inclusive and gender-aware to encourage gender equality and improve the well-being of marginalised groups.
Mainstream economic theory relies upon analyticaleconomic models. When creating theories, the objective is to find assumptions which are at least as simple in information requirements, more precise in predictions, and more fruitful in generating additional research than prior theories.[104] Whileneoclassical economic theory constitutes both the dominant or orthodox theoretical as well asmethodological framework, economic theory can also take the form of otherschools of thought such as inheterodox economic theories.
Sometimes an economic hypothesis is onlyqualitative, notquantitative.[107]
Expositions of economic reasoning often use two-dimensional graphs to illustrate theoretical relationships. At a higher level of generality,mathematical economics is the application ofmathematical methods to represent theories and analyse problems in economics.Paul Samuelson's treatiseFoundations of Economic Analysis (1947) exemplifies the method, particularly as to maximizing behavioural relations of agents reaching equilibrium. The book focused on examining the class of statements calledoperationally meaningful theorems in economics, which aretheorems that can conceivably be refuted by empirical data.[108]
Economic theories are frequently testedempirically, largely through the use ofeconometrics usingeconomic data.[109] The controlled experiments common to thephysical sciences are difficult and uncommon in economics,[110] and instead broad data isobservationally studied; this type of testing is typically regarded as less rigorous than controlled experimentation, and the conclusions typically more tentative. However, the field ofexperimental economics is growing, and increasing use is being made ofnatural experiments.
Statistical methods such asregression analysis are common. Practitioners use such methods to estimate the size, economic significance, andstatistical significance ("signal strength") of the hypothesised relation(s) and to adjust for noise from other variables. By such means, a hypothesis may gain acceptance, although in a probabilistic, rather than certain, sense. Acceptance is dependent upon thefalsifiable hypothesis surviving tests. Use of commonly accepted methods need not produce a final conclusion or even a consensus on a particular question, given different tests,data sets, and prior beliefs.
Inbehavioural economics, psychologistDaniel Kahneman won the Nobel Prize in economics in 2002 for his andAmos Tversky's empirical discovery of severalcognitive biases andheuristics. Similar empirical testing occurs inneuroeconomics. Another example is the assumption of narrowly selfish preferences versus a model that tests for selfish, altruistic, and cooperative preferences.[112] These techniques have led some to argue that economics is a "genuine science".[113]
Microeconomics examines how entities, forming amarket structure, interact within amarket to create amarket system. These entities include private and public players with various classifications, typically operating under scarcity of tradable units andregulation. The item traded may be a tangibleproduct such as apples or aservice such as repair services, legal counsel, or entertainment.
Various market structures exist. Inperfectly competitive markets, no participants are large enough to have themarket power to set the price of a homogeneous product. In other words, every participant is a "price taker" as no participant influences the price of a product. In the real world, markets often experienceimperfect competition.
Forms of imperfect competition includemonopoly (in which there is only one seller of a good),duopoly (in which there are only two sellers of a good), oligopoly (in which there are few sellers of a good),monopolistic competition (in which there are many sellers producing highly differentiated goods),monopsony (in which there is only one buyer of a good), andoligopsony (in which there are few buyers of a good). Firms under imperfect competition have the potential to be "price makers", which means that they can influence the prices of their products.
Inpartial equilibrium method of analysis, it is assumed that activity in the market being analysed does not affect other markets. This method aggregates (the sum of all activity) in only one market.General-equilibrium theory studies various markets and their behaviour. It aggregates (the sum of all activity) acrossall markets. This method studies both changes in markets and their interactions leading towards equilibrium.[114]
In microeconomics,production is the conversion ofinputs intooutputs. It is an economic process that uses inputs to create acommodity or a service forexchange or direct use. Production is aflow and thus a rate of output per period of time. Distinctions include such production alternatives as forconsumption (food, haircuts, etc.) vs.investment goods (new tractors, buildings, roads, etc.),public goods (national defence, smallpox vaccinations, etc.) orprivate goods, and"guns" vs "butter".
Inputs used in the production process include such primaryfactors of production aslabour services,capital (durable produced goods used in production, such as an existing factory), andland (including natural resources). Other inputs may includeintermediate goods used in production of final goods, such as the steel in a new car.
Economic efficiency measures how well a system generates desired output with a given set of inputs and availabletechnology. Efficiency is improved if more output is generated without changing inputs. A widely accepted general standard isPareto efficiency, which is reached when no further change can make someone better off without making someone else worse off.
Theproduction–possibility frontier (PPF) is an expository figure for representing scarcity, cost, and efficiency. In the simplest case, aneconomy can produce just two goods (say "guns" and "butter"). The PPF is a table or graph (as at the right) that shows the different quantity combinations of the two goods producible with a given technology and total factor inputs, which limit feasible total output. Each point on the curve showspotential total output for the economy, which is the maximum feasible output of one good, given a feasible output quantity of the other good.
Scarcity is represented in the figure by people being willing but unable in the aggregate to consumebeyond the PPF (such as atX) and by the negative slope of the curve.[115] If production of one goodincreases along the curve, production of the other gooddecreases, aninverse relationship. This is because increasing output of one good requires transferring inputs to it from production of the other good, decreasing the latter.
Theslope of the curve at a point on it gives thetrade-off between the two goods. It measures what an additional unit of one good costs in units forgone of the other good, an example of areal opportunity cost. Thus, if one more Gun costs 100 units of butter, the opportunity cost of one Gun is 100 Butter.Along the PPF, scarcity implies that choosingmore of one good in the aggregate entails doing withless of the other good. Still, in amarket economy, movement along the curve may indicate that thechoice of the increased output is anticipated to be worth the cost to the agents.
By construction, each point on the curve showsproductive efficiency in maximizing output for given total inputs. A pointinside the curve (as atA), is feasible but representsproduction inefficiency (wasteful use of inputs), in that output ofone or both goods could increase by moving in a northeast direction to a point on the curve. Examples cited of such inefficiency include highunemployment during abusiness-cyclerecession or economic organisation of a country that discourages full use of resources. Being on the curve might still not fully satisfyallocative efficiency (also calledPareto efficiency) if it does not produce a mix of goods that consumers prefer over other points.
Muchapplied economics inpublic policy is concerned with determining how the efficiency of an economy can be improved. Recognizing the reality of scarcity and then figuring out how to organise society for the most efficient use of resources has been described as the "essence of economics", where the subject "makes its unique contribution."[116]
Specialisation is considered key to economic efficiency based on theoretical andempirical considerations. Different individuals or nations may have different real opportunity costs of production, say from differences instocks ofhuman capital per worker orcapital/labour ratios. According to theory, this may give acomparative advantage in production of goods that make more intensive use of the relatively more abundant, thusrelatively cheaper, input.
Even if one region has anabsolute advantage as to the ratio of its outputs to inputs in every type of output, it may still specialise in the output in which it has a comparative advantage and thereby gain from trading with a region that lacks any absolute advantage but has a comparative advantage in producing something else.
It has been observed that a high volume of trade occurs among regions even with access to a similar technology and mix of factor inputs, including high-income countries. This has led to investigation of economies ofscale andagglomeration to explain specialisation in similar but differentiated product lines, to the overall benefit of respective trading parties or regions.[117][118]
The general theory of specialisation applies to trade among individuals, farms, manufacturers,service providers, andeconomies. Among each of these production systems, there may be a correspondingdivision of labour with different work groups specializing, or correspondingly different types ofcapital equipment and differentiatedland uses.[119]
An example that combines features above is a country that specialises in the production of high-tech knowledge products, as developed countries do, and trades with developing nations for goods produced in factories where labour is relatively cheap and plentiful, resulting in different in opportunity costs of production. More total output and utility thereby results from specializing in production and trading than if each country produced its own high-tech and low-tech products.
Theory and observation set out the conditions such that marketprices of outputs and productive inputs select an allocation of factor inputs by comparative advantage, so that (relatively)low-cost inputs go to producing low-cost outputs. In the process, aggregate output may increase as aby-product or bydesign.[120] Such specialisation of production creates opportunities forgains from trade whereby resource owners benefit fromtrade in the sale of one type of output for other, more highly valued goods. A measure of gains from trade is theincreased income levels that trade may facilitate.[121]
Thesupply and demand 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 and the resulting increase in price and quantity required to reach a new equilibrium point on the supply curve (S).
Prices and quantities have been described as the most directly observable attributes of goods produced and exchanged in amarket economy.[122] The theory of supply and demand is an organizing principle for explaining how prices coordinate the amounts produced and consumed. Inmicroeconomics, it applies to price and output determination for a market withperfect competition, which includes the condition of no buyers or sellers large enough to have price-settingpower.
For a given market of acommodity,demand is the relation of the quantity that all buyers would be prepared to purchase at each unit price of the good. Demand is often represented by a table or a graph showing price and quantity demanded (as in the figure).Demand theory describes individual consumers asrationally choosing the most preferred quantity of each good, given income, prices, tastes, etc. A term for this is "constrained utility maximisation" (with income andwealth as theconstraints on demand). Here,utility refers to the hypothesised relation of each individual consumer for ranking different commodity bundles as more or less preferred.
Thelaw of demand states that, in general, price and quantity demanded in a given market are inversely related. That is, the higher the price of a product, the less of it people would be prepared to buy (other thingsunchanged). As the price of a commodity falls, consumers move toward it from relatively more expensive goods (thesubstitution effect). In addition,purchasing power from the price decline increases ability to buy (theincome effect). Other factors can change demand; for example an increase in income will shift the demand curve for anormal good outward relative to the origin, as in the figure. All determinants are predominantly taken as constant factors of demand and supply.
Supply is the relation between the price of a good and the quantity available for sale at that price. It may be represented as a table or graph relating price and quantity supplied. Producers, for example business firms, are hypothesised to beprofit maximisers, meaning that they attempt to produce and supply the amount of goods that will bring them the highest profit. Supply is typically represented as a function relating price and quantity, if other factors are unchanged.
That is, the higher the price at which the good can be sold, the more of it producers will supply, as in the figure. The higher price makes it profitable to increase production. Just as on the demand side, the position of the supply can shift, say from a change in the price of a productive input or a technical improvement. The "Law of Supply" states that, in general, a rise in price leads to an expansion in supply and a fall in price leads to a contraction in supply. Here as well, the determinants of supply, such as price of substitutes, cost of production, technology applied and various factors inputs of production are all taken to be constant for a specific time period of evaluation of supply.
Market equilibrium occurs where quantity supplied equals quantity demanded, the intersection of the supply and demand curves in the figure above. At a price below equilibrium, there is a shortage of quantity supplied compared to quantity demanded. This is posited to bid the price up. At a price above equilibrium, there is a surplus of quantity supplied compared to quantity demanded. This pushes the price down. Themodel of supply and demand predicts that for given supply and demand curves, price and quantity will stabilise at the price that makes quantity supplied equal to quantity demanded. Similarly, demand-and-supply theory predicts a new price-quantity combination from a shift in demand (as to the figure), or in supply.
People frequently do not trade directly on markets. Instead, on the supply side, they may work in and produce throughfirms. The most obvious kinds of firms arecorporations,partnerships andtrusts. According toRonald Coase, people begin to organise their production in firms when the costs of doing business becomes lower than doing it on the market.[123] Firms combine labour and capital, and can achieve far greatereconomies of scale (when the average cost per unit declines as more units are produced) than individual market trading.
Inperfectly competitive markets studied in the theory of supply and demand, there are many producers, none of which significantly influence price.Industrial organisation generalises from that special case to study the strategic behaviour of firms that do have significant control of price. It considers the structure of such markets and their interactions. Common market structures studied besides perfect competition include monopolistic competition, various forms of oligopoly, and monopoly.[124]
Managerial economics appliesmicroeconomic analysis to specific decisions in business firms or other management units. It draws heavily from quantitative methods such asoperations research and programming and from statistical methods such asregression analysis in the absence of certainty and perfect knowledge. A unifying theme is the attempt tooptimise business decisions, including unit-cost minimisation and profit maximisation, given the firm's objectives and constraints imposed by technology and market conditions.[125]
Uncertainty in economics is an unknown prospect of gain or loss, whether quantifiable asrisk or not. Without it, household behaviour would be unaffected by uncertain employment and income prospects,financial andcapital markets would reduce to exchange of a singleinstrument in each market period, and there would be nocommunications industry.[126] Given its different forms, there are various ways of representing uncertainty and modelling economic agents' responses to it.[127]
Game theory is a branch ofapplied mathematics that considersstrategic interactions between agents, one kind of uncertainty. It provides a mathematicalfoundation ofindustrial organisation, discussed above, to model different types of firm behaviour, for example in a solipsistic industry (few sellers), but equally applicable to wage negotiations,bargaining,contract design, and any situation where individual agents are few enough to have perceptible effects on each other. Inbehavioural economics, it has been used to model the strategiesagents choose when interacting with others whose interests are at least partially adverse to their own.[128]
Some market organisations may give rise to inefficiencies associated with uncertainty. Based onGeorge Akerlof's "Market for Lemons" article, theparadigm example is of a dodgy second-hand car market. Customers without knowledge of whether a car is a "lemon" depress its price below what a quality second-hand car would be.[136]Information asymmetry arises here, if the seller has more relevant information than the buyer but no incentive to disclose it. Related problems in insurance areadverse selection, such that those at most risk are most likely to insure (say reckless drivers), andmoral hazard, such that insurance results in riskier behaviour (say more reckless driving).[137]
Both problems may raise insurance costs and reduce efficiency by driving otherwise willing transactors from the market ("incomplete markets"). Moreover, attempting to reduce one problem, say adverse selection by mandating insurance, may add to another, say moral hazard.Information economics, which studies such problems, has relevance in subjects such as insurance,contract law,mechanism design,monetary economics, andhealth care.[137] Applied subjects include market and legal remedies to spread or reduce risk, such as warranties, government-mandated partial insurance,restructuring orbankruptcy law, inspection, andregulation for quality and information disclosure.[138][139][140][141][142]
Pollution can be a simple example of market failure; ifcosts of production are not borne by producers but are by the environment, accident victims or others, then prices are distorted.Anenvironmental scientist sampling water
The term "market failure" encompasses several problems which may undermine standard economic assumptions. Although economists categorise market failures differently, the following categories emerge in the main texts.[e]
Information asymmetries andincomplete markets may result in economic inefficiency but also a possibility of improving efficiency through market, legal, and regulatory remedies, as discussed above.
Natural monopoly, or the overlapping concepts of "practical" and "technical" monopoly, is an extreme case offailure of competition as a restraint on producers. Extremeeconomies of scale are one possible cause.
Public goods are goods which are under-supplied in a typical market. The defining features are that people can consume public goods without having to pay for them and that more than one person can consume the good at the same time.
Externalities occur where there are significant social costs or benefits from production or consumption that are not reflected in market prices. For example, air pollution may generate a negative externality, and education may generate a positive externality (less crime, etc.). Governments often tax and otherwise restrict the sale of goods that have negative externalities and subsidise or otherwise promote the purchase of goods that have positive externalities in an effort to correct the pricedistortions caused by these externalities.[143] Elementary demand-and-supply theory predicts equilibrium but not the speed of adjustment for changes of equilibrium due to a shift in demand or supply.[144]
In many areas, some form ofprice stickiness is postulated to account for quantities, rather than prices, adjusting in the short run to changes on the demand side or the supply side. This includes standard analysis of thebusiness cycle inmacroeconomics. Analysis often revolves around causes of such price stickiness and their implications for reaching a hypothesised long-run equilibrium. Examples of such price stickiness in particular markets include wage rates in labour markets and posted prices in marketsdeviating fromperfect competition.
Welfare economics uses microeconomics techniques to evaluatewell-being fromallocation ofproductive factors as to desirability andeconomic efficiency within aneconomy, often relative to competitivegeneral equilibrium.[146] It analysessocialwelfare, howevermeasured, in terms of economic activities of the individuals that compose the theoretical society considered. Accordingly, individuals, with associated economic activities, are thebasic units for aggregating to social welfare, whether of a group, a community, or a society, and there is no "social welfare" apart from the "welfare" associated with its individual units.
Macroeconomics, another branch of economics, examines the economy as a whole to explain broad aggregates and their interactions "top down", that is, using a simplified form ofgeneral-equilibrium theory.[147] Such aggregates includenational income and output, theunemployment rate, and priceinflation and subaggregates like total consumption and investment spending and their components. It also studies effects ofmonetary policy andfiscal policy.
Since at least the 1960s, macroeconomics has been characterised by further integration as tomicro-based modelling of sectors, includingrationality of players,efficient use of market information, andimperfect competition.[148] This has addressed a long-standing concern about inconsistent developments of the same subject.[149]
Macroeconomic analysis also considers factors affecting the long-term level andgrowth of national income. Such factors includecapital accumulation, technological change andlabour force growth.[150]
Growth economics studies factors that explaineconomic growth – the increase in outputper capita of a country over a long period of time. The same factors are used to explain differences in thelevel of outputper capitabetween countries, in particular why some countries grow faster than others, and whether countriesconverge at the same rates of growth.
He therefore advocated active policy responses by thepublic sector, includingmonetary policy actions by thecentral bank andfiscal policy actions by the government, to stabilize output over thebusiness cycle.[152] Thus, a central conclusion of Keynesian economics is that, in some situations, no strong automatic mechanism moves output and employment towardsfull employment levels.John Hicks'IS/LM model has been the most influential interpretation ofThe General Theory.
Over the years, the understanding of thebusiness cycle has branched into variousresearch programs, mostly related to or distinct from Keynesianism. Theneoclassical synthesis refers to the reconciliation of Keynesian economics withclassical economics, stating that Keynesianism is correct in theshort run but qualified by classical-like considerations in the intermediate andlong run.[77]
In contrast, thenew Keynesian approach retains the rational expectations assumption; however, it assumes a variety ofmarket failures. In particular, New Keynesians assume prices and wages are "sticky", which means they do not adjust instantaneously to changes in economic conditions.[106]
Thus, the new classical economists assume that prices and wages adjust automatically to attain full employment. In contrast, the new Keynesians see full employment as being automatically achieved only in the long run. Hence, government and central-bank policies are needed because the "long run" may be very long.
The amount of unemployment in an economy is measured by the unemployment rate, the percentage of workers without jobs in the labour force. The labour force only includes workers actively looking for jobs. People who are retired, pursuing education, ordiscouraged from seeking work by a lack of job prospects are excluded from the labour force. Unemployment can be generally broken down into several types that are related to different causes.[155]
Classical models of unemployment occurs when wages are too high for employers to be willing to hire more workers. Consistent with classical unemployment, frictional unemployment occurs when appropriate job vacancies exist for a worker, but the length of time needed to search for and find the job leads to a period of unemployment.[155]
Structural unemployment covers a variety of possible causes of unemployment including a mismatch between workers' skills and the skills required for open jobs.[156] Large amounts of structural unemployment can occur when an economy is transitioning industries and workers find their previous set of skills are no longer in demand. Structural unemployment is similar to frictional unemployment since both reflect the problem of matching workers with job vacancies, but structural unemployment covers the time needed to acquire new skills not just the short term search process.[157]
While some types of unemployment may occur regardless of the condition of the economy, cyclical unemployment occurs when growth stagnates.Okun's law represents the empirical relationship between unemployment and economic growth.[158] The original version of Okun's law states that a 3% increase in output would lead to a 1% decrease in unemployment.[159]
Money is ameans of final payment for goods in mostprice system economies, and is theunit of account in which prices are typically stated. Money has general acceptability, relative consistency in value, divisibility, durability, portability, elasticity in supply, and longevity with mass public confidence. It includes currency held by the nonbank public and checkable deposits. It has been described as asocial convention, like language, useful to one largely because it is useful to others. In the words ofFrancis Amasa Walker, a well-known 19th-century economist, "Money is what money does" ("Money isthat money does" in the original).[160]
As amedium of exchange, money facilitates trade. It is essentially a measure of value and more importantly, a store of value being a basis for credit creation. Its economic function can be contrasted withbarter (non-monetary exchange). Given a diverse array of produced goods and specialised producers, barter may entail a hard-to-locate doublecoincidence of wants as to what is exchanged, say apples and a book. Money can reduce thetransaction cost of exchange because of its ready acceptability. Then it is less costly for the seller to accept money in exchange, rather than what the buyer produces.[161]
Monetary policy is the policy that central banks conduct to accomplish their broader objectives. Most central banks in developed countries followinflation targeting,[162] whereas the main objective for many central banks in development countries is to uphold afixed exchange rate system.[163] The primary monetary tool is normally the adjustment of interest rates,[164] either directly via administratively changing the central bank's own interest rates or indirectly viaopen market operations.[165] Via themonetary transmission mechanism, interest rate changes affectinvestment,consumption andnet export, and henceaggregate demand,output and employment, and ultimately the development of wages and inflation.
Governments implement fiscal policy to influence macroeconomic conditions by adjusting spending and taxation policies to alter aggregate demand. When aggregate demand falls below the potential output of the economy, there is anoutput gap where some productive capacity is left unemployed. Governments increase spending and cut taxes to boost aggregate demand. Resources that have been idled can be used by the government.
For example, unemployed home builders can be hired to expand highways. Tax cuts allow consumers to increase their spending, which boosts aggregate demand. Both tax cuts and spending havemultiplier effects where the initial increase in demand from the policy percolates through the economy and generates additional economic activity.
The effects of fiscal policy can be limited bycrowding out. When there is no output gap, the economy is producing at full capacity and there are no excess productive resources. If the government increases spending in this situation, the government uses resources that otherwise would have been used by the private sector, so there is no increase in overall output. Some economists think that crowding out is always an issue while others do not think it is a major issue when output is depressed.
Sceptics of fiscal policy also make the argument ofRicardian equivalence. They argue that an increase in debt will have to be paid for with future tax increases, which will cause people to reduce their consumption and save money to pay for the future tax increase. Under Ricardian equivalence, any boost in demand from tax cuts will be offset by the increased saving intended to pay for future higher taxes.
Research has linked economic inequality to political and social instability, includingrevolution, democratic breakdown and civil conflict.[169][170][171][172] Research suggests that greater inequality hinders economic growth and macroeconomic stability, and that land andhuman capital inequality reduce growth more than inequality of income.[169][173] Inequality is at the centre stage ofeconomic policy debate across the globe, as government tax and spending policies have significant effects on income distribution.[169] In advanced economies, taxes and transfers decrease income inequality by one-third, with most of this being achieved via public social spending (such as pensions and family benefits.)[169]
Public economics is the field of economics that deals with economic activities of apublic sector, usually government. The subject addresses such matters astax incidence (who really pays a particular tax), cost–benefit analysis of government programmes, effects oneconomic efficiency andincome distribution of different kinds of spending and taxes, and fiscal politics. The latter, an aspect ofpublic choice theory, models public-sector behaviour analogously to microeconomics, involving interactions of self-interested voters, politicians, and bureaucrats.[174]
Much of economics ispositive, seeking to describe and predict economic phenomena.Normative economics seeks to identify what economies ought to be like.
Welfare economics is a normative branch of economics that usesmicroeconomic techniques to simultaneously determine theallocative efficiency within an economy and the incomedistribution associated with it. It attempts to measuresocial welfare by examining the economic activities of the individuals that comprise society.[175]
International trade studies determinants of goods-and-services flows across international boundaries. It also concerns the size and distribution ofgains from trade. Policy applications include estimating the effects of changingtariff rates and trade quotas.International finance is a macroeconomic field which examines the flow of capital across international borders, and the effects of these movements onexchange rates. Increased trade in goods, services and capital between countries is a major effect of contemporaryglobalisation.[176]
Labour economics seeks to understand the functioning and dynamics of themarkets forwage labour.Labour markets function through the interaction of workers and employers. Labour economics looks at the suppliers of labour services (workers), the demands of labour services (employers), and attempts to understand the resulting pattern of wages, employment, and income. In economics,labour is a measure of the work done by human beings. It is conventionally contrasted with such otherfactors of production asland andcapital. There are theories which have developed a concept calledhuman capital (referring to the skills that workers possess, not necessarily their actual work), although there are also counter posing macro-economic system theories that think human capital is a contradiction in terms.[citation needed]
Law and economics, or economic analysis of law, is an approach to legal theory that applies methods of economics to law. It includes the use of economic concepts to explain the effects of legal rules, to assess which legal rules areeconomically efficient, and to predict what the legal rules will be.[178] A seminal article byRonald Coase published in 1961 suggested that well-defined property rights could overcome the problems ofexternalities.[179]
Political economy is the interdisciplinary study that combines economics, law, andpolitical science in explaining how political institutions, the political environment, and the economic system (capitalist,socialist, mixed) influence each other. It studies questions such as how monopoly,rent-seeking behaviour, andexternalities should impact government policy.[180][181]Historians have employedpolitical economy to explore the ways in the past that persons and groups with common economic interests have used politics to effect changes beneficial to their interests.[182]
Gary Becker in 1974 presented an economic theory of social interactions, whose applications included thefamily, charity,merit goods and multiperson interactions, and envy and hatred.[186] He andKevin Murphy authored a book in 2001 that analysed market behaviour in a social environment.[187]
The professionalisation of economics, reflected in the growth of graduate programmes on the subject, has been described as "the main change in economics since around 1900".[188] Most majoruniversities and many colleges have a major, school, or department in whichacademic degrees are awarded in the subject, whether in theliberal arts, business, or for professional study. SeeBachelor of Economics andMaster of Economics.
There are dozens of prizes awarded to economists each year for outstanding intellectual contributions to the field, the most prominent of which is theNobel Memorial Prize in Economic Sciences, though it is not aNobel Prize.
Contemporary economics uses mathematics. Economists draw on the tools ofcalculus,linear algebra,statistics,game theory, andcomputer science.[189] Professional economists are expected to be familiar with these tools, while a minority specialise in econometrics and mathematical methods.
Women's authorship share in prominent economic journals reduced from 1940 to the 1970s, but has subsequently risen, with different patterns of gendered coauthorship.[191] Women remain globally under-represented in the profession (19% of authors in theRePEc database in 2018), with national variation.[192]
Socioeconomics – Branch of sociologyPages displaying short descriptions of redirect targets
Solidarity economy – Model of organization emphasizing cooperation and social health over profit
Notes
^"Capital" in Smith's usage includesfixed capital andcirculating capital. The latter includes wages and labour maintenance, money, and inputs from land, mines, and fisheries associated with production.[60]
^"This science indicates the cases in which commerce is truly productive, where whatever is gained by one is lost by another, and where it is profitable to all; it also teaches us to appreciate its several processes, but simply in their results, at which it stops. Besides this knowledge, the merchant must also understand the processes of his art. He must be acquainted with the commodities in which he deals, their qualities and defects, the countries from which they are derived, their markets, the means of their transportation, the values to be given for them in exchange, and the method of keeping accounts. The same remark is applicable to the agriculturist, to the manufacturer, and to the practical man of business; to acquire a thorough knowledge of the causes and consequences of each phenomenon, the study of political economy is essentially necessary to them all; and to become expert in his particular pursuit, each one must add thereto a knowledge of its processes." (Say 1803, p. XVI)
^"And when we submit the definition in question to this test, it is seen to possess deficiencies which, so far from being marginal and subsidiary, amount to nothing less than a complete failure to exhibit either the scope or the significance of the most central generalisations of all." (Robbins 2007, p. 5)
^"The conception we have adopted may be described as analytical. It does not attempt to pick out certain kinds of behaviour, but focuses attention on a particular aspect of behaviour, the form imposed by the influence of scarcity. (Robbins 2007, p. 17)
^Compare withNicholas Barr (2004), whose list of market failures is melded with failures of economic assumptions, which are (1) producers as price takers (i.e. presence of oligopoly or monopoly; but why is this not a product of the following?) (2) equal power of consumers (what labour lawyers call an imbalance of bargaining power) (3) complete markets (4) public goods (5) external effects (i.e. externalities?) (6) increasing returns to scale (i.e. practical monopoly) (7) perfect information (inThe Economics of the Welfare State (4th ed.). Oxford University Press. 2004. pp. 72–79.ISBN978-0-19-926497-1.). •Joseph E. Stiglitz (2015) classifies market failures as from failure of competition (includingnatural monopoly),information asymmetries,incomplete markets,externalities,public good situations, andmacroeconomic disturbances (in"Chapter 4: Market Failure".Economics of the Public Sector (4th International Student ed.). W.W. Norton & Company. 2015. pp. 81–100.ISBN978-0-393-93709-1.).
^Backhouse, Roger (2002).The Penguin history of economics.Penguin.ISBN0-14-026042-0.OCLC59475581.The boundaries of what constitutes economics are further blurred by the fact that economic issues are analysed not only by 'economists' but also by historians, geographers, ecologists, management scientists, and engineers.
^Nordhaus WD (2002)."The Economic Consequences of a War with Iraq"(PDF). In Kaysen C, Miller SE, Malin MB, Nordhaus WD, Steinbruner JD (eds.).War with Iraq: Costs, Consequences, and Alternatives. Cambridge, Massachusetts: American Academy of Arts and Sciences. pp. 51–85.ISBN978-0-87724-036-5. Archived fromthe original(PDF) on 2 February 2007. Retrieved21 October 2007.
^The terms derive ultimately fromοἶκος (oikos "house") andνόμος (nomos, "custom" or "law").Harper, Douglas (February 2007)."Economy".Online Etymology Dictionary.Archived from the original on 12 May 2013. Retrieved27 October 2007.
^Lowry, S. Todd (1998).Xenophons Oikonomikos, Über einen Klassiker der Haushaltsökonomie (in German).Düsseldorf: Verlag Wirtschaft und Finanzen. p. 77.ISBN3-87881-127-6.
^Deardorff, Alan V. (2016)."Division of labor".Deardorffs' Glossary of International Economics. University of Michigan.Archived from the original on 16 March 2020. Retrieved1 March 2012.
^Stigler, George J. (December 1976). "The Successes and Failures of Professor Smith".Journal of Political Economy.84 (6):1199–1213.doi:10.1086/260508.JSTOR1831274.S2CID41691663. Also published asThe Successes and Failures of Professor Smith(PDF).Selected Papers, No. 50 (Report). Graduate School of Business, University of Chicago.Archived(PDF) from the original on 25 August 2016. Retrieved16 August 2010.
^Smith (1776), Bk. IV: Of Systems of political Œconomy, ch. II, "Of Restraints upon the Importation from Foreign Countries of such Goods as can be Produced at Home", IV.2.3 para. 3–5 and 8–9.
^Smith (1776), Bk. IV: Of Systems of political Œconomy, ch. II, "Of Restraints upon the Importation from Foreign Countries of such Goods as can be Produced at Home", para. 9.
^Backhouse & Medema (2007), p. 223: "There remained division over whether economics was defined by a method or a subject matter but both sides in that debate could increasingly accept some version of the Robbins definition."
^Black, R.D. Collison (2008)."Utility". In Durlauf, Steven N.; Blume, Lawrence E. (eds.).The New Palgrave Dictionary of Economics (2nd ed.). Palgrave Macmillan UK. pp. 577–581.doi:10.1057/9780230226203.1781.ISBN978-0-333-78676-5.Archived from the original on 28 October 2017. Retrieved27 October 2017.
^Woodford, Michael (2009). "Convergence in Macroeconomics: Elements of the New Synthesis".American Economic Journal: Macroeconomics.1 (1):267–279.doi:10.1257/mac.1.1.267.ISSN1945-7707.JSTOR25760267.
Boland, Lawrence A. (1987)."Methodology". In Eatwell, John; Milgate, Murray; Newman, Peter (eds.).The New Palgrave Dictionary of Economics. Vol. III. Palgrave Macmillan. pp. 455–458.doi:10.1057/9780230226203.3083.ISBN978-0-333-78676-5.Archived from the original on 24 October 2017. Retrieved23 October 2017.
Frey, Bruno S.; Pommerehne, Werner W.; Schneider, Friedrich; Gilbert, Guy (December 1984). "Consensus and Dissension among Economists: An Empirical Inquiry".The American Economic Review.74 (5):986–994.ISSN0002-8282.JSTOR557.
^Hashem, M. Pesaren (1987)."Econometrics". In Eatwell, John; Milgate, Murray; Newman, Peter (eds.).The New Palgrave: A Dictionary of Economics. Vol. II. Palgrave Macmillan UK. p. 8.doi:10.1057/9780230226203.2430.ISBN978-0-333-78676-5.Archived from the original on 24 October 2017. Retrieved23 October 2017.
^Montani, Guido (1987)."Scarcity". In Eatwell, John; Milgate, Murray; Newman, Peter (eds.).The New Palgrave Dictionary of Economics.The New Palgrave: A Dictionary of Economics. pp. 1–4.doi:10.1057/9780230226203.3485.ISBN978-0-333-78676-5.Archived from the original on 5 October 2017. Retrieved4 October 2017.
^Samuelson & Nordhaus (2010), ch. 1, p. 5 (quotation) and sect. C, "The Production-Possibility Frontier", pp. 9–15; ch. 2, "Efficiency" sect.; ch. 8, sect. D, "The Concept of Efficiency.
Johnson, Paul M. (2005)."Specialization".A Glossary of Political Economy Terms. Department of Political Science,Auburn University.Archived from the original on 29 January 2013. Retrieved27 March 2008.
^Wakker, Peter P. (2008)."Uncertainty". In Durlauf, Steven N.; Blume, Lawrence E. (eds.).The New Palgrave Dictionary of Economics (second ed.). Palgrave Macmillan UK. pp. 428–439.doi:10.1057/9780230226203.1753.ISBN978-0-333-78676-5.Archived from the original on 30 December 2010. Retrieved2 March 2011.
Samuelson & Nordhaus (2010), ch. 11, "Uncertainty and Game Theory" and [end] Glossary of Terms, "Economics of information", "Game theory", and "Regulation".
^Aumann, R. J. (2008)."Game Theory". In Durlauf, Steven N.; Blume, Lawrence E. (eds.).The New Palgrave Dictionary of Economics (2nd ed.).Archived from the original on 29 December 2010. Retrieved2 March 2011.
^Samuelson & Nordhaus (2010), ch. 11, "Uncertainty and Game Theory" and [end] Glossary of Terms, "Economics of information", "Game theory", and "Regulation"
^Durlauf, Steven N.; Blume, Lawrence E., eds. (2008).The New Palgrave Dictionary of Economics (2nd ed.). Palgrave Macmillan.
^Wilson, Charles.Adverse Selection.Archived from the original on 16 October 2017. Retrieved2 March 2011.
^Kotowitz, Y.Moral Hazard.Archived from the original on 17 October 2017. Retrieved2 March 2011.
^Deardorff, Alan V. (2016) [2006]."Welfare economics".Deardorffs' Glossary of International Economics. Archived fromthe original on 20 March 2017 – via Alan Deardorff at University of Michigan.
^Neves, Pedro Cunha; Afonso, Óscar; Silva, Sandra Tavares (2016). "A Meta-Analytic Reassessment of the Effects of Inequality on Growth".World Development.78:386–400.doi:10.1016/j.worlddev.2015.10.038.
Frank, Robert H. (1992). "Melding Sociology and Economics: James Coleman's Foundations of Social Theory".Journal of Economic Literature.30 (1):147–170.JSTOR2727881.
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