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Economics
is the social science that studies the production, distribution,
and consumption of goods and services. The word 'economics'
is from the meaning house, and meaning custom or law, hence
"rules of the house."
Discussions about production
and distribution date back to ancient laws and to philosophers,
such as Plato. Economics in its modern sense, however, is
conventionally dated from the publication of Adam Smith's
The Wealth of Nations in 1776. Smith defines the subject in
a way that yokes a proposed methodological program to practical
concerns:
Political economy, considered
as a branch of the science of a statesman or legislator, proposes
two distinct objects first, to supply a plentiful revenue
or product for the people, or, more properly, to enable them
to provide such a revenue or subsistence for themselves and
secondly, to supply the state or commonwealth with a revenue
sufficient for the public services. It proposes to enrich
both the people and the sovereign.
A definition that captures much
of modern economics is that of Lionel Robbins in a 1932 essay
"the science which studies human behaviour as a relationship
between ends and scarce means which have alternative uses."
Scarcity means that available resources are insufficient to
satisfy all wants and needs. Absent scarcity and alternative
uses of available resources, there is no economic problem.
A convenient name for approaches
to economics that use certain standard assumptions, distinctions,
or methods of analysis is mainstream economics. Heterodox
economics, including institutional economics, Marxian economics,
socialism, and green economics may make other assumptions,
such as that economics primarily deals with the exchange of
value and that labour is the source of all value.
The field may be divided in
other ways, most commonly microeconomics vs. macroeconomics.
It may also be divided as to positive vs. normative, and by
subfield. Economics has many direct applications in business,
personal finance, and government.
Economics involves the
study of choice, as affected by incentives and resources.
Its methods have been increasingly applied to seemingly distant
fields of study that involve people with faced with alternatives
that require choice, including education, the family, politics,
health, law, crime, religion,and war.
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