History of economic thought

What does economics study?

What do you think of when you hear the word economics? Money, certainly, and perhaps more complicated things like business, inflation and unemployment. The science of economics studies all of these, but many more things as well. Perhaps you think that economics is all about the decisions that governments and business managers take. In fact, economists study the decisions we all take every day.

Very simply, economics studies the way people deal with a fact of life: resources are limited, but our demand for them certainly is not. Resources may be material things as food, housing and heating. There are some resources, through, that we cannot touch. Time, space and convenience, for example, are also resources. Think of a day. There are only 24 hours in one, and we have to choose the best way to spend them. Our everyday lives are full of decisions like these. Every decision we make is a trade-off. If you spend more time working, you make more money. However, you will have less time to relax. Economists study the trade-offs people make. They study the reasons for their decisions. They look at the effects those decisions have on our lives and our society.

Что изучает экономика?

О чем вы думаете, когда слышите слово экономика? О деньгах, конечно, и, возможно о более сложных вещах, таких как бизнес, инфляция и безработица. Экономическая наука изучает все это, а также многое другое. Возможно, вы думаете, что экономика – это решения, которые делают правительства и бизнес-менеджеры. На самом деле, экономика изучает решения, которые ежедневно делаем мы.

Проще говоря, экономика изучает то, как люди справляются с таким жизненным фактом: ресурсы ограничены, а наш спрос на них – нет. Ресурсами могут быть такие материальные вещи, как питание, жилье и отопление. Есть ресурсы, которые мы не можем потрогать. Время, пространство и комфорт, например, тоже ресурсы. Подумайте о сутках. В них всего лишь 24 часа и нам необходимо выбрать лучший способ провести их. Наша жизнь полна таких решений. Каждое наше решение – это компромисс. Если вы потратите больше времени на работу, вы получите больше денег. Однако у вас будет меньше времени на отдых. Экономисты изучают компромиссы, на которые идут люди. Они изучают причины этих решений. Они анализируют, какие последствия оказывают эти решения на нашу жизнь и на общество.

What are microeconomics and macroeconomics?

Economists talk about microeconomics and macroeconomic. Microeconomics deals with people, like you and me, and private businesses. It looks at the economic decisions people make every day. It examines how families manage their household budgets. Microeconomics also deals with companies – small or large – and how they run their business. Macroeconomics, on the other hand, looks at the economy of a country – and of the whole world. Any economist will tell you, through, that microeconomics and macroeconomics are closely related. All of our daily microeconomic decisions have an effect on the wider world around us.

Another way to look at the science of economics is to ask, ‘what’s it good for?’ Economists don’t all agree on the answer to this question. Some practice positive economics. They study economic data and try to explain the behaviour of the economy. They also try to guess economic changes before they happen. Others practice normative economics. They suggest how to improve the economy. Positive economists say, ‘this is how it is’. Normative economists say, ‘we should…’.

So what do economists do? Mainly, they do three things: collect data, create economic models and formulate theories. Data collection can include facts and figures about almost anything, from birth rates to coffee production. Economic models show relationships between these different data. For example, the relationship between the money people earn and unemployment. From this information, economists try to make theories which explain why the economy works the way it does.

Что такое микроэкономика и макроэкономика?

Экономисты говорят о микроэкономике и макроэкономике. Микроэкономика имеет дело с людьми, такими как вы и я, и частным бизнесом. Она смотрит на экономические решения, которые люди делают каждый день. Она исследует, как семьи управляют домашними хозяйствами. Микроэкономика также имеет дело с предприятиями – малыми или большими – и как они ведут бизнес. С другой стороны, макроэкономика рассматривает экономику страны и всего мира. Любой экономист скажет, что микроэкономика и макроэкономика тесно связаны. Все наши ежедневные микроэкономические решения влияют на мир вокруг нас.

По-другому посмотреть на экономическую науку можно, задав вопрос: «для чего это надо?» Не все экономисты согласны с ответом на этот вопрос. Некоторые занимаются позитивной экономикой. Они изучают экономические данные и пытаются объяснить поведение экономики. Они также пытаются предугадать экономические изменения до того, как они произошли. Другие занимаются нормативной экономикой. Они предлагают способы улучшения экономики. Позитивные экономисты говорят: «именно так оно и есть». Нормативные экономисты говорят: «мы должны…».

Итак, что делают экономисты? Главным образом, они делают три вещи: собирают информацию, создают экономические модели и формулируют теории. Сбор информации может включать факты и цифры почти о чем угодно, от рождаемости до производства кофе. Экономические модели показывают взаимосвязь между этими различными данными. Например, взаимосвязь между деньгами, которые зарабатывают люди и безработицей. С помощью этой информации экономисты пытаются сформулировать теории, которые объяснят, почему экономика работает так, как работает.

History of economic thought

Economic thought goes back thousands of years. The ancient Greek, Xenophon, used the word oikonomikos (from oikos, meaning family, household, estate, and nomos, for usage, law). He was talking about skilful or clever ways to manage land and households. We could call many of Aristotle’s political writings economics, although he did not use the word. The English word economics first appeared in the 19^th century – two and a half thousand years after Xenophon.

Early economic thought was all about the meaning of wealth or being rich. There early thinkers asked, ‘what makes a state or a country wealthy?’ For nearly 2,000 years, the answer was very simple: gold. A country or a nation’s wealth depended on its owning precious metals. This simple view of the economy remained until medieval times.

During medieval times – roughly the period between 1100 and 1500 AD, trading between nations grew, and a new social class appeared. These were merchants, people who made their money through the buying and selling of goods, and they began to write their own thoughts on the economy. They saw the economy as a way to make the state strong. For them, the nation’s wealth depended on stocks of gold and the size of population. More people meant bigger armies and a stronger state.

These were still simple ideas. However, daily experience had also taught people many basic economic concepts. For example, they understood the importance of trade with other states. They realized that scarcity makes things more expensive and abundance makes them cheaper.

Modern economics was really born in the 19^th century. At this time, thinkers like Adam Smith wrote down ideas that are still important today. Adam Smith if often called the Father of Modern Economics, although the science was called political economy then. Smith realized that a nation’s wealth depended on its ability to produce goods. The value of these goods depended on the cost of production. The cost of production depended on the cost of workers, raw materials and land. This was really the first example of macroeconomics.

Smith and other classical economists were writing at a time of great change. The industrial revolution had begun. Paper money began to replace precious metals. The middle classes were growing stronger. Economists’ theories echoed these changes. They wrote about the division of labour (each worker taking part in the production process). They discussed the problem of population growth. They influenced thinking about social classes.

For classical economists, the value of goods depends on the cost of production. However, the price of goods is not always the same as their real cost. Later economists developed new theories to explain the weakness in classical economics. These are known as the neoclassical economists and they were writing at the end of the 19^th and the early 20^th centuries.

In neoclassical economics, supply and demand make the economy work. In other words, the price of goods depends on how much people want them and how easily they can be found. Consumers want satisfaction from their resources (time and money). Firms want profit. In neoclassical economics this is the basic relationship in the economy. These ideas are still the basic of economic thinking today.

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