economy

The term "economy" first appeared in 1878 as an expression of British economic policy. The term has been largely defined by its usage, but the origins of this word can be traced back nearly a century; it was first used during the Second War of Independence, referring to Britain's planned military reconstruction program for which it won the war.[citation needed]

Economics refer to the process of producing goods and services, including the distribution and consumption of these goods over a period of time. It also covers all aspects of trade and trade policy, including international relations, exchange rates, exchange limitations, import tariffs and non-tariff barriers . Also included are factors like supply and demand, efficiency, externalities, and taxation. A major part of economics is the theory of business and the law of capital markets.[1][2]

Economics has two types

The microeconomics or general economics and macroeconomics or national economics. Microeconomics is a field that investigates fundamental principles of individual choices and the structure and functioning of society. Macroeconomics is the study of how individuals and organizations interact with one another, their resources and environment.[3]

Economics is closely interconnected with other disciplines, such as political science, sociology, anthropology, psychology, and political science. By combining various areas of expertise together it enables us to better understand how and why people behave the way they do, and what influences cause them to do so.[2][4]

Key concepts include:

In the real world: people, places, institutions.

Macroeconomics consists of a wide range of interrelated branches as well as related approaches to solving problems such as inequality, unemployment, social justice, foreign affairs, and globalization. Some macroeconomic issues include: global GDP (gross domestic product), unemployment, income inequality, inflation, global public debt, corporate profits.[5]

Macroeconomics encompasses a broad variety of empirical approaches to measuring and understanding human behavior and performance—including surveys, experiments, and technical modeling—in a series of models of human choice. This includes the model of free markets, neoclassical economics, Keynesianism and liberalism, etc.[6][7]

The government has to influence macroeconomics in more ways than just passing taxes. Politicians control prices, interest rates, money lending, monetary, fiscal policies. They use fiscal and monetary measures to help make sure businesses have enough money to pay their wages and benefits. Fiscal measures have helped boost the Great Recession by temporarily cutting spending and making other changes that will eventually keep it from getting worse.[8][9] In 2010-2011, the federal government provided approximately $50 billion for small and medium sized enterprises.[10]

Macroeconomics refers to the set of ideas, processes and data used to predict, plan and regulate the national economy. In terms of social behavior such as income, tax revenue, crime, government expenditure and welfare the United Kingdom would be considered a relatively rich country.[11] In contrast, the US (also a liberal democracy) ranks eighth out of the ten richest countries on the 2019 world wealthiest list.[12][13][14]

History [ edit ]

Origins [ edit ]

Economics as we know it owes its existence to a great deal of work done by British economists who were at the forefront of the Industrial Revolution and the scientific revolution. The origins of modern day economists are laid down in the writings of Adam Smith who wrote about the importance of specialization, and David Ricardo who described industrial productivity for his book 'On the Principles of Political Organization',[15] though they had little interest in industrial production until the middle ages when French economist Jean Jacques Rousseau popularized the idea of human beings being driven by needs.[16] The first formal history of economics, Rene Descartes' Discourse on the Method (1637)[17] was published in 1721.[18][19] Before the dawn of Enlightenment, it was believed that humans could not explain nature and were therefore subject to deception. The German Philosopher Immanuel Kant (1724–1804) claimed that humans were rational creatures capable of reason. He also argued that if an innate human drive for knowledge and progress were present, then it would be able to replace natural causes, thus proving the necessity of the Enlightenment.[20] George Berkeley (1608–1690) developed the concept of abstract thought as a form of philosophy that did not rely on anything concrete, and he wrote about what he perceived to be the most important question in human life: "What is true knowledge, and how is it attainable?".[21][22][23][24]

In 1676, Thomas Hobbes (1588–1679).[25] Published A Treatise Concerning Human Nature: Leviathan, written during the English Civil War, Hobbes argued that every person must live according to certain criteria. He stated that humans only follow what they can do without any further action. John Locke (1632 – 1704) also took up Hobbes's ideas of humanity as having no ability to fulfill its own needs and that they must seek happiness. Locke's theories of moral virtue, or virtue of character, focused on treating other people and animals as objects, rather than subjects. He developed the idea of utilitarianism, arguing that humans should be self-interests more than they are self-preservation. Jonathan Swift ("Gulliver", 1726 – 1792).[26] introduced the idea of mercantilism after watching Lord Chancellor Daniel Bay. According to him, a state relies on foreign allies. If Britain should be weakened by internal fighting, they would have more chance of establishing colonies and trading with the Indians. Mercantilist states therefore need support of external nations.[28][29][30] The French thinkers Rene Descartes and René Bloch began to develop the logic that humans do what they can do. They argued that people can overcome the basic desire for self-preservation and go to war or conflict to pursue things.[31]

The Modern Age, the age of scientific enlightenment and industrialization, started around the turn of the 20th century. Many of the greatest names in modern philosophy are now seen as prominent figures in the development of liberal capitalism.[32] Early scientists used to believe in supernatural forces which they said were powerful in controlling life, but had no answers for. Scientific reasoning gained a lot of attention after the publication of Gottfried Wilhelm Leibniz's Principia Mathematica (1665). John Locke began to publish a succession of works called the papers de la Science and became an influential figure in both the early-modern and modern periods. His philosophical thoughts inspired many other philosophers and psychologists until he died in 1704.[33] In 1600s Europe, there were no universities which taught philosophy as science such as in England.[34][35][36][37][38]

Political economy [ edit ]

The Oxford Dictionary defines political economy as "the field of study concerned with the principles of acquisition, and the relationships between governments and citizens." Political economy and economic policy often relate, although some economists may argue otherwise. For instance, the Nobel laureate Robert Lucas has argued about the relationship between economic policy and politics. One of his arguments against the connection is that the political system is based on cooperation, whereas economic policy aims to achieve collective goods. Lucas also argues that the distinction depends on the difference in method used such as classical economists or neoliberal economists. Another argument against the connection of economic policy, and political-economic policy, is that the economic system is a collection of separate institutions whereas the political system in an organization is a single entity and therefore the economic system cannot act alone.[39][40] This view has led to several claims by politicians in different countries, among them: 1) Economic systems are characterized as a whole entity and political systems as parts of the same entity; 2) Economic policies do not require consensus before implemention. 3) Politics and Economics can become interchangeable if one is substituted with another, and can be treated as one single branch of research, 4) Economist can describe themselves as intellectuals whereas economists should be professional and not intellectuals. 6) Conservatives are committed to free enterprise while libertarians are opposed to state intervention; 7) Capitalism is incompatible with socialism whilst communism is compatible with socialism. 8) Economic policies should not be limited to private rights, but should also target social rights.[41] Some economists, however, argue that it is difficult to define the scope, methodology, and results of political economy and economic policy. To add to this, there is disagreement about how much economic policy or political strategy should be discussed within political systems.[42]

The post-World Wars II European Union as a new community is an example of the historical event of integration to create a larger state. On 9 April 1999, the Treaty of Maastricht came into effect following the end of World War II. As part of EU reform, Maastricht established an independent Commission of Ministers to advise and lead Maastricht legislation. However, there was serious criticism from conservatives and opponents of the European project who argued that the treaty was too liberal. After years of negotiations, this finally saw the formation of the Council of ministers.[43][44][45][46][47][48]

During the 1960s, there was considerable debate on which of the three main elements of classical liberalism or free market to adopt as its base in dealing with social issues on the international level. The free enterprise and free market thought on economic affairs did not agree very well on this and there was a gap. There was a widespread sense that government intervention should be avoided whenever possible because it created bureaucracy and unnecessary costs. But this was not the case. Classical free markets had taken the place of classical liberals, whose