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Definition: economics from Greenwood Dictionary of Education

The scientific study of financial and money matters focused on production, distribution, consumption, and commercialism of goods and services balancing the means and the ends of a society. Economics applies to all aspects of the social sciences: geography, history, and political science through business, government, education, safety, family, health, and law. Economics addresses both the behaviors of agents involved in the system through microeconomics and the entire system through macroeconomics. (npg)


Summary Article: economics
from Greenwood Encyclopedia of International Relations

The modern field of study concerned with production, distribution, and consumption of goods and services. For centuries, political economists were also concerned with politics and sociology, but these subdisciplines have since spun off on their own within academia. Early economists were essentially concerned with the problem of scarcity, and thus with both private and public mechanisms by which decisions were made on the allocation of limited resources in what many saw as, and that for millennia actually was, a Malthusian world. Reflecting on this baleful reality, and the dreary conclusions and uneven social consequences of many economic observations and theories, such as those characterizing the beggar-thy-neighbor practices of mercantilism even under great finance ministers like Jean-Baptiste Colbert, Thomas Carlyle famously (though rather unfairly) called economics “the Dismal Science.”

However, with the advance of capitalism (since c. 1750), and its remarkable capacity to create new forms of wealth, macroeconomic theory shifted to a primary focus on the problem of how to sustain growth while avoiding sharp cycles of boom and bust in production and consumption. The Physiocrats were among the first to break with mercantilism, and thereby greatly influenced the classical school of economic liberalism, which was later identified most closely with Adam Smith. The field changed again with the advent of full industrialization. David Ricardo (1772–1823) developed theories of rent and labor value, which were enormously influential, and the theory of comparative advantage, which spurred new thinking about the role of trade and prompted some leading states to adopt free trade practices. This new economics competed directly with the work of Robert Malthus, who clung to an older, more deeply pessimistic view of economic possibilities. It also emphasized scientific inquiry of a form that, over time, led to an academic discipline almost wholly divorced from history and an interest in growth, and instead nearly exclusively concerned with mechanics of rational choice by individuals, distribution theory, wages and prices, and efficiency of markets.

From the mid-nineteenth century a competing worldview arose based on the work of Karl Marx. For all its flaws, Marxist economics remained concerned with historical inquiry into the question of the wealth and poverty of nations. Essentially arguing from economic determinism, this school (Marxism) rejected classical liberal theory in favor of a radical critique of capitalism that was primarily moral in its inspiration, but that claimed to be rooted in the “scientific logic” of dialectical materialism. In the mid-twentieth century, Keynesianism interpretations of the business cycle and recommendations of new solutions (such as pump priming) to the age-old problems of recession and depression dominated in Western countries, even as the Soviet Union and other Communist states experimented with command economies and instituted such colossal and calamitous socioeconomic experiments as collectivization and five-year plans. With the breakdown of the old empires after World War II, new branches of economics evolved that specialized in problems of development. Some were derivations or refinements of classical liberal thinking about growth, such as supply-side theory and monetarism, others (dependency theory) were offshoots of older Marxist ideas. New environmental concerns led to ongoing arguments about possible limits to growth and the forms that sustainable development might take. By the early twenty-first century, much academic economic theory was highly rarified, as one highly mathematized microeconomic speculation was heaped upon another. On the other hand, economics had also become a truly “hopeful science,” from which most people expected real help in the progressive betterment of the human condition.

See also absolute advantage; adjustment; agriculture; aid; allocation; Andean Group; anti-dumping laws; arbitrage; Asia Pacific Economic Co-operation; autarky; backwash effect; Baker Plan; balance of payments; balance of trade; Bank of International Settlements; barter agreements; basic needs; black market; Black Tuesday; boom; boycott; Bretton Woods system; buffer stock; buyers’ market; capital; capital account; capital flight; capital formation; capital goods; capital intensive; capital investment; capitalism; capitalist; capital markets; Caribbean Community and Common Market; cartel; Central American Common Market; central bank; class struggle; collective goods theory; commodity; common market; Communauté Financière Africaine; compensation; compensatory financing; competitive advantage; competitiveness; conditionality; consumer price index; convertibility; cost-benefit analysis; Council for Mutual Economic Assistance; counterpart funds; countertrade; countervailing duty; currency; current account; customs union; debt; debt crisis; debt-equity swaps; debt fatigue; debtor cartel; debt rescheduling; debt service; deficit spending; deflation; demonetize; dependency; depreciation; depressions, world; devaluation; developing nation; dirigisme; dirty float; disinflation; disinvestment; distributive justice; dollar convertibility; dollar diplomacy; drug trade; dumping; durable goods; econometrics; economic espionage; Economic and Social Council; economies of scale; economy; elasticity of demand; encomienda system; Engel’s Law; eurobond markets; eurocurrencies; European Coal and Steel Community; European Currency Unit; European Economic Area; European Economic Community; European Free Trade Association; European Monetary Institute; European Monetary System/Union; European Recovery Program; European Union; exchange controls; exchange rate; Exchange Rate Mechanism; excise; Exclusive Economic Zone; exploitation; export-led growth; export processing zones; expropriation; factor analysis; factor endowments; factors of production; fair trade; final goods; finance; First Tranche; fiscal policy; fixed currency; floating currency; foreign direct investment; foreign exchange; foreign exchange reserve; forward market; free enterprise; free market; free rider problem; free trade area; Free Trade Area of the Americas; fungible; G-5; G-7; G-8; G-10; G-77; GATT; gold rush; gold standard; goods; graduation clause; green loans; Gross Domestic Product; Gross National Product; guanxi; hard currency; hard loan; hot money; human development index; hyperinflation; imperialism; import quotas; import substitution; indicators; Industrial Revolution; inflation; informal sector; infrastructure; input; integration; interdependence; interest rates; intermediate inputs; internalization theory; International Bank for Reconstruction and Development (IBRD); international commodity agreement; International Development Agency; International Finance Corporation; International Fund for Agricultural Development; International Monetary Fund (IMF); investment; invisible trade; Integrated Program for Commodities; International Trade Organization; Kennedy Round; Keynes; Kondratieff cycles; labor; labor theory of value; laissez-faire; land; Latin American Free Trade Association; Latin American Integration Association; law of diminishing returns; leading indicators; leaseholds; Least Developed Countries; liberalism; licensing; linkage; liquidity; managed trade; Manchester school; market economy; Marxism-Leninism; mass production; mature economy; means of production; Mercosur; Ministry of Trade and Industry; mixed economy; MNC/MNE; mode of production; modernization; monetary policy; money market; monopoly; monopsony; most-favored nation; NAFTA; national income; nationalization; natural resources; Net Domestic Product; Net National Product; new protectionism; New International Economic Order; Newly Industrialized Countries; Nixon shocks; nontariff barriers (NTBs); official financing; oil; oil shocks; oligopoly; Open Door; orderly market arrangements; Organization for Economic Cooperation and Development; Organization for European Economic Cooperation; Organization of Arab Oil Exporting Countries; Organization of Petroleum Exporting Countries; outputs; patient capital; pegging; petrodollars; planned economy; Plaza Agreement; political economy; portfolio investment; poverty; preferential tariff; price controls; price elasticity; price supports; primary producer; primary products; primary sector; private sector; privatize; product cycle theory; production; productivity; profit; protectionism; protective tariffs; public goods; public sector; quotas; raw materials; reciprocity; reflation; reformism; reform liberalism; refugees; regional banks; remittances; requerimiento; reserve currency; reserves; resources; revaluation; rising expectations; sanctions; scissors crisis; secondary sector; sellers’ market; sensitivity; services; short-term capital account; slavery; slave trade; slump; Smoot-Hawley Tariff; social overhead capital; soft currency; soft goods; soft loan; Special Drawing Rights; spice trade; spot market; STABEX; stability; stabilization program; stages of growth; stagflation; stagnation; standard of living; stock; stock exchange; strategic materials; strategic stockpiles; structural adjustment loan; structure; subsidiary; subsidy; Super 301 Procedures; supply; surplus value; sustainable growth; System of National Accounts; takeoff; tariff; tax haven; technology transfer; terms of trade; tertiary sector; textiles; tied aid; tied loan; Tokyo Round; tourism; trade balance; trade barrier; trade routes; turn-key factory; underground economy; uneven development; Uruguay Round; venture capital; visible trade; voluntary export restraints; vulnerability; water; world capitalist system; world system theory; zaibatsu.

Suggested Readings
  • Derek Aldcroft; Anthony Sutcliffe, eds., Europe in the International Economy, 1500-2000 (1999).
  • Ashworth, William, A Short History of the World Economy (1987).
  • Foreman-Peck, J., History of the World Economy (1983).
  • Heilbroner, Robert L., The Worldly Philosophers, 7th ed. (1999).
  • Robert L. Heilbroner; L. C. Thurow, Economics Explained, 2nd ed. (1998).
  • Pomeranz, Kenneth, The Great Divergence: Europe, China, and the Making of the Modern World Economy (2000).
  • Rostow, W. W., The World Economy (1978).
  • Paul Samuelson; W. Nordhaus, Economics, 16th ed. (1997).
  • Viljoen, S., Economic Systems in World History (1974).
  • © 2002 by Cathal J. Nolan

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