Economics

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The economics (also economics or economic political science briefly Economics ) is a branch of economics . She examines relationships in the production and distribution of goods and production factors . Economics also deals with human action under economic conditions, i.e. with the questions of how human action can be justified economically and which action brings the greatest possible benefit for the individual or a community. It is used to search for laws and recommendations for action for economic policy ; Furthermore, individual economic processes are considered in the context of microeconomics and macroeconomic processes in the context of macroeconomics .

Economics is fundamentally based on the assumption of scarcity of resources to meet the needs of economic agents .

Classification of economics in the science canon

Economics is a branch of economics and is therefore a real science , as it tries to describe reality. In the vast majority of cases, economics is classified as a social science and within these, political science and sociology are related disciplines. Nevertheless, economics differs from social science in very specific points. The demarcation of economics from other disciplines causes difficulties, since economic phenomena are complex and require a lot of knowledge from other sciences such as psychology, politics, history, etc. It places particular importance on three factors that ultimately distinguish it from other social sciences:

  • The national economy uses the model of the rational individual , whose behavior is always based on the maximization calculus.
  • Economic models strictly emphasize the importance of equilibria .

The strict emphasis on equilibria results from the close intermeshing of economics and game theory . Since the applications of game theory for the most part require rational decision-makers in the sense of Homo economicus , the main application of game theory is in economics. For this reason, some authors assign game theory to economics instead of speaking of a sub-area of ​​mathematics .

Sub-areas and topics of economics

Microeconomics

Microeconomics deals with the relationships between individual economic subjects such as households and companies . Important sub-areas are:

Macroeconomics

Macroeconomics looks at the economy on an aggregated level in the overall context. It examines macroeconomic relationships. This can happen at the level of an aggregated market, a country, a community of states or the world economy as a whole.

Examples of objects of investigation are macroeconomic income , consumption and investment , labor market , price level , inflation , monetary theory , business cycle theory and economic growth .

Economic theory

Econometrics

Econometrics deals with the quantitative, usually empirical, investigation of economic activity. Mathematical methods of statistics and stochastics are used and test hypotheses are submitted.

Special disciplines

Special disciplines deal with individual economic areas under macro and microeconomic aspects.

examples are

Economic Policy Theory

The science of economic policy has as its object the design of the economic order and economic processes. Areas of economic policy are the governance (this includes competition policy ), the structural policies and the process policy , for which the fiscal policy and monetary policy are.

Finance

Public finance has as its subject the economic aspects of public budgets and state finances .

Bridging disciplines

Tools of economics

Economic models

Economics creates abstract models to describe and investigate economic structures and processes . These are bundles of assumptions that do not apply in reality, but fulfill an important cognitive function in the development of economic theories.

The most important models in economics include the perfect market and the homo oeconomicus . In the model of the perfect market, prices, and thus also the demand for goods, always depend on supply and demand (see market equilibrium ). In the model of homo oeconomicus, humans always act rationally in the sense that, among various options for action, based on the information available to them, they always choose the action that provides them with the greatest benefit .

More complex modeling approaches are, for example, partial market models , general equilibrium models , dynamic stochastic general equilibrium models ( DSGE models ), stock-flow consistent models or agent-based modeling .

In game theory , the strategic interactions between people are considered. Here the actor not only has to know the options available to him, but also has to form expectations regarding the behavior of his counterpart. This in turn is based on their expectations. Infinite recourse threatens . A fundamental concept for solving this circularity is the strategic equilibrium ( Nash equilibrium ).

The approach of limited rationality , which was largely shaped by Herbert A. Simon , assumes that human action can never be completely rational due to the limited cognitive capacities of the actors and the complexity of social events. Humans behave in a goal-oriented manner, but due to their limitations they are not always able to choose the objectively best action.

Quantitative methods

Mathematical models play an essential role in economics, as they require clear evidence and clearly defined assumptions and generally do not lead to ambiguous or "soft" interpretable results. In recent years there has been an increasing trend towards econometric work.

history

Development of doctrines and dogmas (economic theory)

The economy of people always takes place within a certain social order . The unity that is determined by the economic activity of the members of a state-ordered people and their actions is called the national economy . In many cases, however, the economic perspective is used as a perspective as opposed to the private sector . In order to rule out contradictions resulting from two different uses of the term, Heinrich Dietzel (1895) or Adolf Wagner (1907) spoke of a theoretical social economy .

Working on fundamental economic questions of a theoretical nature was generally accepted in mercantilism . However, there was no real academic debate at the time. Thomas Mun was one of the earliest economic authors and wrote, for example, about trade balances in two countries. Even Jean-Baptiste Colbert was one of the earliest writers, he worked on state intervention in the economy. Three important early theoretical authors were above all William Petty , John Law and John Locke , who published the first theoretical knowledge about, for example, money in circulation and money or banknotes ( assignats ).

The physiocrats developed the first systematic approaches to explain economic structures and processes. The Tableau économique by Francois Quesnay is the first representation of the economic cycle , from which the national accounts (VGR) or national economic accounting were later developed.

After the mercantilist and physiocratic epochs, with Adam Smith , David Ricardo , Jean-Baptiste Say and other authors, classical economics emerged . Above all, Smith's work The Wealth of Nations (original title: An Inquiry into the Nature and Causes of the Wealth of Nations ) is an important basic work of economic theory to this day. In this he summarizes theories that have already been developed (also by others) and formulates a structure of economic relationships. Smith's most significant contribution is the concept of the " invisible hand ", which represents the interplay of supply and demand in a free market. Say's theorem , named after Say, states that every supply creates its own demand.

Ricardo developed the concept of the division of labor and the comparative cost advantages of two countries and described why trade has a positive effect on the economy and factor allocation of two countries.

Friedrich List can be described as the first German economist with his main work The national system of political economy from 1841. He distinguishes himself from the English classical period in his doctrine of the domestic market and his doctrine of productive forces. From the beginning of the 19th century, several economic theorists wrote relatively independently of each other important works on the monopoly theory ( Antoine-Augustin Cournot and Arsène-Jules-Étienne-Juvénal Dupuit ) or spatial planning and site planning ( Johann Heinrich von Thünen ) with his Thünenschen circles. The works of Karl Marx on political economy fall predominantly in the period after 1850. As his sources he mainly refers to the British economists from William Petty to Adam Smith to David Ricardo. Also his considerations, in which he starts from what he believes to be the all-founding , evolutionary factor work , are strongly influenced by the development of capitalism in England, which he viewed as paradigmatic and which, according to his expectations, the other states with a time lag and more or less large variations would follow.

Karl Bücher and the Younger Historical School of Political Economy developed a step model ( economic step theory ) to clarify the internal interrelationships of economic phenomena, according to which the national economy historically and structurally follows housekeeping and urban economics .

With the end of the 19th century, three independent schools in the developed theory of marginal utility , which the so-called marginalist revolution , the Austrian School: elicited Carl Menger , the Cambridge School of William Stanley Jevons and the Lausanne school to Léon Walras . All three schools developed the theories of marginal utility and general balance . However, the essential fundamentals of the marginal utility theory had already been developed around 20 years earlier (around 1850) by the German economist Hermann Heinrich Gossen , although this remained unknown until well after his death. Gossen received more attention only after his death.

The schools produced a large number of important economists who decisively shaped economic theory up to the Second World War: In addition to Carl Menger, the Austrian school also consisted of Eugen Böhm von Bawerk , Friedrich von Wieser , Friedrich August von Hayek and Ludwig von Mises . In addition to Jevons, the Cambridge School also includes the outstanding English economist Alfred Marshall , who was the first to use the term “economics” instead of “political economy” and thus conceptually transferred economic theory into a separate science. The Cambridge School also included Francis Ysidro Edgeworth , Arthur Cecil Pigou and Lord John Maynard Keynes . In addition to Walras, Vilfredo Pareto , Eugenius Slutsky and Irving Fisher , probably the most important American economist in the first half of the 20th century , belong to the Lausanne School, which was decisive for a stronger mathematical development of economic theory . Heinrich von Stackelberg and Paul A. Samuelson can also be counted to the Lausanne school .

History of science of economic theories

The development of economics can best be represented by changing theories and views in the dominant textbooks of the respective epoch, not from the perspective of the last theory.

This is exemplified by Adam Smith's phrase about “ an invisible hand ” somewhere inside the Wealth of Nations , which today as the invisible hand is a basic element of modern economics. This view is relatively new. Neither JB Say , nor Ricardo , nor JS Mill or Marshall - they determined 150 years of economics - found Smith's invisible hand worth mentioning. Only among German economists like Hildebrand was this taken up in the current sense in 1848, but rejected by Knies in 1853 , as Smith himself emphasized that this invisible hand only works frequently (mostly translated as often ).

With the rebirth of neoclassical economics in the USA after 1930 - before that institutionalist economy ( similar to the historical school ) dominated - it became important to prove that a market economy is superior to a Soviet planned economy. Only the market economy can lead to a general equilibrium in which nobody can be better off without making others worse off. This led to the abandonment of Marshall -influenced British neoclassical music, which only deals with partial equilibria because technologies and cost curves shift over time and a static general equilibrium that assumes constant data is therefore of little help. Marshall briefly discusses the possibility of a general equilibrium in Note XXI of the "Principles of Economics".

Smith's invisible hand has now been rediscovered as a proto version of the new goal: general balance. Samuelson's Economics , 1948, mentions Smith's invisible hand only once. In editions 12 to 15 it is mentioned at least 6 times and at least once - abbreviated - cited. On the occasion of the 200th anniversary of the Wealth of Nation , Stigler said to the audience: "I bring you greetings from Adam Smith, who is still alive and well and who lives in Chicago".

This American orientation of the economy also led to the rediscovery of Walras' general equilibrium . Walras was of a certain importance among German-writing economists; he was almost unknown to English literature. It was not until 1954, 70 years after its publication, that Walras' Éléments d'économie politique pure , 1874, was translated into English. According to Samuelson , all modern economics today is based on Walras.

For Schumpeter , "Walras is ... the greatest of all economists". But in The Theory of Economic Development , 1911, Schumpeter describes how the economic process by itself repeatedly destroys equilibrium, so that Walras' stationary equilibrium is little illuminating. At Harvard, Schumpeter refused to teach about his dynamic analysis and heretical criticism of Walras' statics.

Adam Smith's central message was certainly not the microeconomic invisible hand , but the first lines of the Wealth of Nations , which introduce a macroeconomic growth theory . The wealth of nations is the stock of capital that generates the goods of the next economic cycle, i.e. output that becomes input again. Smith measures this heterogeneous stick in units of work, direct work plus work in the pre- and pre-pre-products. The quantity of food that this work reproduces could also serve as a numéraire. Or the area of ​​homogeneous land plus processing costs on which this food is produced.

Work that is only (subjectively) useful, but does not become an input for the next period, reduces the capital stock and is unproductive work . An enlarged economic cycle, on the other hand, deepens the division of labor and leads to falling prices through competition. The increased real income increases demand, which in turn deepens the division of labor, and so on. Falling prices of an output mean falling costs of inputs, thus lowering the overall price level and increasing all real incomes. However, this only applies to “productive work” - Sraffa's basic products - that is, work that becomes input.

Smith's circulatory analysis is a legacy of the Physiocracy and his stay in Paris. At that time the manuscript was well advanced and Smith had to incorporate the French concepts that became the basis of political economy or classical theory afterwards. According to classical price theory, relative prices correspond to production costs in the long term if dynamic competition eliminated all margins by imitating better technology. If all outputs were to be input again, trouble-free reproduction would be guaranteed. However, if there is unproductive work or if savings are made due to margins or if banks create demand through loans that are not matched by products, fluctuations in the effective demand can disrupt the cycle.

Unproductive work slows growth. During the Depression, however , an increasing demand for unproductive work can fuel demand for productive work and soak up idle capacity. Keynes developed this short-term concept in 1936 during the Great Depression, independently of the classical theory, apart from his recourse to Malthus. The later macroeconomic formalization of Keynesian theory obscures the proximity to classical macroeconomics.

While modern microeconomics is based on the concept of a general equilibrium and the invisible hand , modern macroeconomics is based on Keynes, who denies an invisible hand and believes a stable imbalance is possible.

Development of the study

The study of economic sciences gained greater popularity around 1850. For a long time it was only an additional course that was taken out of personal interest, but not for professional reasons. With the emerging economy and the emergence of large companies, the need for “economically trained workers” became more urgent. Economics was first into existing courses such as the course of study economics incorporated. A graduate of the economics degree usually only graduated with a doctorate. For the students, the focus was on their dissertation to be written and not on other practice-relevant content. A “certificate of competence for practice” was missing. 1923 in the Weimar Republic , the course economics adapted and in the degree program Economics including the academic degree degree diploma economist converted. This should meet the needs of the economy more. Based on the graduate economist, the academic degree Diplom-Kaufmann was introduced in 1924 (see also the article Historical Development of the Diplom-Kaufmann ).

Trade journals

Economics journals have been around since the mid-19th century. The oldest publications in the discipline include the Zeitschrift für die Allgemeine Staatswissenschaft (1844), the Swiss Journal for Economics and Statistics (1864) and the Quarterly Journal of Economics (1886).

Today the five most notable journals are the American Economic Review , Econometrica , the Journal of Political Economy , the Quarterly Journal of Economics, and the Review of Economic Studies .

Organizations, associations and clubs

See also

Portal: Economy  - Overview of Wikipedia content on the topic of economy

literature

Web links

Wiktionary: Economics  - explanations of meanings, word origins, synonyms, translations
Wiktionary: VWL  - explanations of meanings, word origins, synonyms, translations

Individual evidence

  1. ↑ Christian-Uwe Behrens, Matthias Kirspel: Fundamentals of Economics: Introduction. P. 13.
  2. ↑ Ulrich Blum: Fundamentals of Economics.
  3. ↑ Ulrich Blum: Fundamentals of Economics.
  4. ↑ Wolfgang Leininger, Erwin Amann: Introduction to game theory. P. 3.
  5. ↑ Eugen von Philippovich : Grundriß der Politischen Oekonomie. First volume. General Economics. 9., arr. Edition. Mohr (Paul Siebeck), Tübingen 1911, p. 3 ff.
  6. ^ A. Smith: The Glasgow Edition of the Works and Correspondence of Adam Smith. vol. IIa, Oxford University Press, Oxford et al. 1976, p. 456.
  7. ↑ B. Hildebrand: The economics of the present and future. Leipzig 1848, p. 32.
  8. ↑ K. Knies: The political economy from the point of view of the historical method. Schweischke, Braunschweig 1853, p. 150.
  9. ^ "I bring you greetings from Adam Smith, who is alive and well and living in Chicago", quoted in R. Meek: Smith, Marx, and after. Chapman, London 1977, p. 3.
  10. ^ G. Stigler: There is no general history of economic thought in English which devotes more than passing reference to his work. [1941]. In: Production and Distribution Theories. Transaction Publishers, New Brunswick, NJ 1994, ISBN 1-56000-710-9 , p. 222.
  11. ↑ [T] oday [1961] there can be little doubt that most of the literary and mathematical economic theory appearing in our professional journals is more an offspring of Walras than of anything else. In: PA Samuelson: The Collected Scientific Papers of Paul A. Samuelson. vol. II, MIT Press, Cambridge, Mass. 1966-1986, p. 1501.
  12. ^ J. Schumpeter: History of economic analysis. [1954]. Allen & Unwin, London 1994, p. 795.
  13. ↑ Walras said Schumpeter, "that economic life is naturally passive by its nature and only adapts to natural ... influences". To this Schumpeter: "I felt clearly that this was wrong and that there is an energy source within the economic system which would by itself create any balance that could be achieved" In: J. Schumpeter: Theory of economic development. [1911]. Duncker & Humblot, Berlin 1952 Foreword to the Japanese edition 1937, pp. Xxii - xxvi; not included in the English edition.
  14. ↑ PM Sweezy In: DC Colander, Harry Landreth (Eds.): The Coming of Keynesianism to America. Elgar, Cheltenham / Brookfield 1966, p. 77; PA Samuelson: Schumpeter as a Teacher and Economic Theorist. In: The Collected Scientific Papers of Paul A. Samuelson. vol. II, MIT Press, Cambridge, Mass 1966-1986, p. 1555.
  15. ↑ Cannan mentions "the older British economist's ordinary practice of regarding the wealth of a nation as an accumulated fund" E. Cannan: Editor's Introduction. In: Adam Smith: An Inquiry into the Nature and Causes of the Wealth of Nations. Random House, 1937, p. Lvii.
  16. ^ PA Samuelson: A Modern Treatment of the Ricardian Economy. In: The Collected Scientific Papers of Paul A. Samuelson. vol. I, MIT Press, Cambridge, Mass 1966-1986, p. 374; W. Petty: … all things ought to be valued by… Land and Labor. 1662. In: Ch. H. Hull (Ed.): The Economic Writings of Sir William Petty. vol. I, Routledge / Thoemmes, London 1899, p. 44.
  17. ^ A. Smith: The Division of Labor is limited by the Extend of the Market. In: The Glasgow Edition of the Works and Correspondence of Adam Smith. vol. IIa, Oxford University Press, Oxford et al. 1976, p. 32; Samuelson only quotes this statement in the first edition in 1948.
  18. ↑ Adam Smith's dictum Amounts to the theorem did the division of labor depends in large part upon the division of labor. ... Thus change becomes progressive and propagates itself in a cumulative way. from A. Young: Increasing Returns and Economic Progress. In: Economic Journal. 38, 1928, pp. 527-542, 532-533.
  19. ^ W. Leontief: The economy as a cycle. Mohr, Tübingen 1928, p. 119.
  20. ^ E. Cannan: Editor's Introduction. In: Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations. Random House, 1937, p. Xxxviii and lvii: " There are some very obvious additions, the most prominent being the account of the French physiocratic [...] system " and " Following the physiocrats, Smith sees that the important thing is how much can be produced in a given time ".
  21. ↑ Smith started the Wealth of Nations in 1764 when he was bored in Toulouse for 18 months because he did not speak French. The basis was his earlier lectures . Only then did he spend ten months in Paris and met Quesnay, to whom he would later dedicate the wealth . But here too a lack of language skills hindered him; J. Rae: Life of Adam Smith. Macmillan, London 1895, pp. 103, 113, 125.
  22. ^ 'To dig holes in the ground', paid for out of savings, will increase, not only goods and services, but the real national dividend of useful goods and services. In: JM Keynes: The General Theory of Employment, Interest and Money, Macmillan, London 1936, p. 220, similar to p. 131.
  23. ^ JM Keynes: The General Theory of Employment, Interest and Money, Macmillan. London 1936.
  24. ↑ in the later phase of Malthus the notion of the insufficiency of effective demand takes a definite place as a scientific explanation of unemployment. In: JM Keynes: The General Theory of Employment, Interest and Money. Macmillan, London 1936, p. 362.
  25. ↑ Keynes denies that there is an invisible hand channeling the self-centered action of each individual to the social optimum. This is the sum and substance of his heresy. from: PA Samuelson: The General Theory. [1946]. In: PA Samuelson: The Collected Scientific Papers of Paul A. Samuelson. vol. V, MIT Press, Cambridge, Mass 1966-1986, p. 1523.
  26. ^ W. Prion: The theory of business operations. Book 1: The economic enterprise in the context of the overall economy. Julius Springer, Berlin 1935.
  27. ↑ James Heckman , Sidharth Moktan: Publishing and promotion in economics: The tyranny of the Top Five. In: VoxEU.org. November 1, 2018, accessed February 8, 2020 .