Portal:Economics

Introduction

Economics (/ˌɛkəˈnɒmɪks, ˌiːkə-/) is a social science that studies the production, distribution, and consumption of goods and services.

Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics analyses what is viewed as the basic elements of economies, including individual agents and markets, their interactions, and the outcomes of those interactions. Individual agents may include households, firms, buyers, and sellers. Macroeconomics analyses economies as systems where production, distribution, consumption, savings, and investment expenditure interact; and the factors of production affecting them, such as: labour, capital, land, and enterprise, inflation, economic growth, and public policies that impact these elements. It also seeks to analyse and describe the global economy. (Full article...)

Selected general articles

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Hoppe in 2024

Hans-Hermann Hoppe (/ˈhɒpə/; German: [ˈhɔpə]; born 2 September 1949) is a German-American academic associated with Austrian School economics, anarcho-capitalism, right-wing libertarianism, paleolibertarianism, and opposition to democracy. From 1986 until 2008 he was professor of economics at the University of Nevada, Las Vegas (UNLV). He is a senior fellow of the Mises Institute think tank. In 2006 he emigrated to Turkey and founded the Property and Freedom Society.

Hoppe has written extensive criticisms of democracy, notably in his 2001 book Democracy: The God That Failed. The book favors exclusionary covenant communities that are "founded for the purpose of protecting family and kin". A section of the book favoring exclusion of democrats and homosexuals from society helped popularize Hoppe on the far-right. Some of the speakers invited at his Property and Freedom Society conferences in Turkey have been white nationalists. (Full article...)
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Neoclassical economics is an approach to economics in which the production, consumption, and valuation (pricing) of goods and services are observed as driven by the supply and demand model. According to this line of thought, the value of a good or service is determined through a hypothetical maximization of utility by income-constrained individuals and of profits by firms facing production costs and employing available information and factors of production. This approach has often been justified by appealing to rational choice theory.

Neoclassical economics is the dominant approach to microeconomics and, together with Keynesian economics, formed the neoclassical synthesis which dominated mainstream economics as "neo-Keynesian economics" from the 1950s onward. (Full article...)
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The Chicago school of economics is a neoclassical school of economic thought associated with the work of the faculty at the University of Chicago, some of whom have constructed and popularized its principles. Milton Friedman and George Stigler are considered the leading scholars of the Chicago school.

Chicago macroeconomic theory rejected Keynesianism in favor of monetarism until the mid-1970s, when it turned to new classical macroeconomics heavily based on the concept of rational expectations. The freshwater–saltwater distinction is largely antiquated today, as the two traditions have heavily incorporated ideas from each other. Specifically, new Keynesian economics was developed as a response to new classical economics, electing to incorporate the insight of rational expectations without giving up the traditional Keynesian focus on imperfect competition and sticky wages. (Full article...)
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From an economic perspective, contract theory studies how economic actors can and do construct contractual arrangements, generally in the presence of information asymmetry. Because of its connections with both agency and incentives, contract theory is often categorized within a field known as law and economics. One prominent application of it is the design of optimal schemes of managerial compensation. In the field of economics, the first formal treatment of this topic was given by Kenneth Arrow in the 1960s. In 2016, Oliver Hart and Bengt R. Holmström both received the Nobel Memorial Prize in Economic Sciences for their work on contract theory, covering many topics from CEO pay to privatizations. Holmström focused more on the connection between incentives and risk, while Hart on the unpredictability of the future that creates holes in contracts.

A standard practice in the microeconomics of contract theory is to represent the behaviour of a decision maker under certain numerical utility structures, and then apply an optimization algorithm to identify optimal decisions. Such a procedure has been used in the contract theory framework to several typical situations, labeled moral hazard, adverse selection and signalling. The spirit of these models lies in finding theoretical ways to motivate agents to take appropriate actions, even under an insurance contract. The main results achieved through this family of models involve: mathematical properties of the utility structure of the principal and the agent, relaxation of assumptions, and variations of the time structure of the contract relationship, among others. It is customary to model people as maximizers of some von Neumann–Morgenstern utility functions, as stated by expected utility theory. (Full article...)
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Portrait by Thomas Phillips, c. 1821

David Ricardo (18 April 1772 – 11 September 1823) was a British economist and politician. He is recognized as one of the most influential classical economists, alongside figures such as Thomas Malthus, Adam Smith and James Mill.

Ricardo was born in London as the third surviving child of a successful stockbroker and his wife. He came from a Sephardic Jewish family of Portuguese origin. At 21, he eloped with a Quaker and converted to Unitarianism, causing estrangement from his family. He made his fortune financing government borrowing and later retired to an estate in Gloucestershire. Ricardo served as High Sheriff of Gloucestershire and bought a seat in Parliament as an earnest reformer. He was friends with prominent figures like James Mill, Jeremy Bentham, and Thomas Malthus, engaging in debates over various topics. Ricardo was also a member of The Geological Society, and his youngest sister was an author. (Full article...)
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Arrow in 1996

Kenneth Joseph Arrow (August 23, 1921 – February 21, 2017) was an American economist, mathematician and political theorist. He received the John Bates Clark Medal in 1957, and the Nobel Memorial Prize in Economic Sciences in 1972, along with John Hicks.

In economics, Arrow was a major figure in postwar neoclassical economic theory. Four of his students (Roger Myerson, Eric Maskin, John Harsanyi, and Michael Spence) went on to become Nobel laureates themselves. His contributions to social choice theory, notably his "impossibility theorem", and his work on general equilibrium analysis are significant. His work in many other areas of economics, including endogenous growth theory and the economics of information, was also foundational. (Full article...)
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Georgist campaign button from the 1890s. The cat on the badge refers to the slogan "Do you see the cat?" from a story by Congressman James G. Maguire. He compared understanding the Single Tax to being able to make out a cat in a picture of a landscape.

Georgism, in modern times also called Geoism, and known historically as the single tax movement, is an economic ideology holding that persons should own the value that they produce themselves, while the economic rent derived from land—including from all natural resources, the commons, and urban locations—should belong equally to all members of society. Developed from the writings of American economist and social reformer Henry George, the Georgist paradigm seeks solutions to social and ecological problems based on principles of land rights and public finance that attempt to integrate economic efficiency with social justice.

Georgism is concerned with the distribution of economic rent caused by land ownership, natural monopolies, pollution rights, and control of the commons, including title of ownership for natural resources and other contrived privileges (e.g., intellectual property). Any natural resource that is inherently limited in supply can generate economic rent, but the classical and most significant example of land monopoly involves the extraction of common ground rent from valuable urban locations. Georgists argue that taxing economic rent is efficient, fair, and equitable. The main Georgist policy recommendation is a land value tax (LVT), the revenues from which can be used to reduce or eliminate existing taxes (such as on income, trade, or purchases) that are posited to be unfair and inefficient. Some Georgists also advocate the return of surplus public revenue to the people by means of a basic income or citizen's dividend. (Full article...)
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Complexity economics, or economic complexity, is the application of complexity science to the problems of economics. It relaxes several common assumptions in economics, including general equilibrium theory. While it does not reject the existence of an equilibrium, it features a non-equilibrium approach and sees such equilibria as a special case and as an emergent property resulting from complex interactions between economic agents. The complexity science approach has also been applied as the primary field in computational economics. (Full article...)
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Solow in 2008

Robert Merton Solow, GCIH (/ˈsoʊloʊ/; August 23, 1924 – December 21, 2023) was an American economist known for his studies of economic growth and the development of the Solow–Swan model, for which he won the 1987 Nobel Memorial Prize in Economic Sciences.

He was Institute Professor Emeritus of Economics at the Massachusetts Institute of Technology, where he was a professor from 1949 on. He was awarded the John Bates Clark Medal in 1961, the Nobel Memorial Prize in Economic Sciences in 1987, and the Presidential Medal of Freedom in 2014. Four of his PhD students, George Akerlof, Joseph Stiglitz, Peter Diamond, and William Nordhaus, later received Nobel Memorial Prizes in Economic Sciences in their own right. (Full article...)
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Disequilibrium macroeconomics is a tradition of research centered on the role of deviation from equilibrium in economics. This approach is also known as non-Walrasian theory, equilibrium with rationing, the non-market clearing approach, and non-tâtonnement theory. Early work in the area was done by Don Patinkin, Robert W. Clower, and Axel Leijonhufvud. Their work was formalized into general disequilibrium models, which were very influential in the 1970s. American economists had mostly abandoned these models by the late 1970s, but French economists continued work in the tradition and developed fixprice models. Other approaches that focus on the dynamic processes and interactions in economic systems that are constantly changing and do not necessarily settle into a stable state are discussed as non-equilibrium economics. (Full article...)
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Francis Ysidro Edgeworth (8 February 1845 – 13 February 1926) was an Anglo-Irish philosopher and political economist who made significant contributions to the methods of statistics during the 1880s. From 1891 onward, he was appointed the founding editor of The Economic Journal. (Full article...)
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Marx in 1875

Karl Marx (German: [ˈkaʁl ˈmaʁks]; 5 May 1818 – 14 March 1883) was a German philosopher, social and political theorist, economist, journalist, and revolutionary socialist. He developed the theory of historical materialism, analyzing class struggle under capitalism and predicting the system's overthrow by the proletariat in favour of communism. Marx co-authored The Communist Manifesto (1848) with his lifelong friend Friedrich Engels, and undertook a critique of classical political economy in his magnum opus, Das Kapital (1867–1894). Marx's ideas and their subsequent development, collectively known as Marxism, have had enormous influence and have influenced revolutions and uprisings in many countries.

Born in Trier in the Kingdom of Prussia, Marx earned a doctoral degree in philosophy from the University of Jena in 1841. A Young Hegelian, he was influenced by the philosophy of Georg Wilhelm Friedrich Hegel, and both critiqued and developed Hegel's ideas in works such as The German Ideology (written 1846) and the Grundrisse (written 1857–1858). While in Paris, Marx wrote his Economic and Philosophic Manuscripts of 1844 and met Engels, who became a close collaborator. After moving to Brussels in 1845, they were active in the Communist League, and in 1848 wrote The Communist Manifesto, which expresses Marx's ideas and lays out a programme for revolution. Marx was expelled from Belgium and Germany, and in 1849 moved to London, where he wrote The Eighteenth Brumaire of Louis Bonaparte (1852) and Das Kapital. From 1864, Marx was involved in the International Workingmen's Association (First International), in which he fought the influence of anarchists led by Mikhail Bakunin. In his Critique of the Gotha Programme (1875), Marx wrote on revolution, the state and the transition to communism. He died stateless in 1883 and was buried in Highgate Cemetery. (Full article...)
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Mutualism is an anarchist school of thought and economic theory that advocates for workers' control of the means of production, a free market made up of individual artisans, sole proprietorships and workers' cooperatives, and occupation and use property rights. As proponents of the labour theory of value and labour theory of property, mutualists oppose all forms of economic rent, profit and non-nominal interest, which they see as relying on the exploitation of labour. Mutualists seek to construct an economy without capital accumulation or concentration of land ownership. They also encourage the establishment of workers' self-management, which they propose could be supported through the issuance of mutual credit by mutual banks, with the aim of creating a federal society.

Mutualism has its roots in the utopian socialism of Robert Owen and Charles Fourier. It first developed a practical expression in Josiah Warren's community experiments in the United States, which he established according to the principles of equitable commerce based on a system of labor notes. Mutualism was first formulated into a comprehensive economic theory by the French anarchist Pierre-Joseph Proudhon, who proposed the abolition of unequal exchange and the establishment of a new economic system based on reciprocity. In order to establish such a system, he proposed the creation of a "People's Bank" that could issue mutual credit to workers and eventually replace the state; although his own attempts to establish such a system were foiled by the 1851 French coup d'état. (Full article...)
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This is an incomplete alphabetical list by surname of notable economists, experts in the social science of economics, past and present. For a history of economics, see the article History of economic thought. Only economists with biographical articles in Wikipedia are listed here. (Full article...)
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Economics classes make extensive use of supply and demand graphs like this one to teach about markets. In this graph, S and D refer to supply and demand and P and Q refer to the price and quantity.
The following outline is provided as an overview of and topical guide to economics. Economics is a branch of science that analyzes the production, distribution, and consumption of goods and services. It aims to explain how economies work and how agents (people) respond to incentives.

Economics is a behavioral science (a scientific discipline that focuses on the study of human behavior) as well as a social science (a scientific discipline that explores aspects of human society). (Full article...)
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Ludwig Heinrich Edler von Mises (/vɒn ˈmiːzɪz/; German: [ˈluːtvɪç fɔn ˈmiːzəs]; September 29, 1881 – October 10, 1973) was an Austrian and American political economist and philosopher of the Austrian school. Mises wrote and lectured extensively on the social contributions of classical liberalism and the central role of consumers in a market economy. He is best known for his work in praxeology, particularly for studies comparing communism and capitalism, as well as for being a defender of classical liberalism in the face of rising illiberalism and authoritarianism throughout much of Europe during the 20th century.

Since the mid-20th century, both libertarian and classical liberal movements, as well as the field of economics as a whole have been strongly influenced by Mises's writings. Economist Tyler Cowen lists his writings as "the most important works of the 20th century" and as "among the most important economics articles, ever". Entire schools of thought trace their origins to Mises's early work, including the development of anarcho-capitalist philosophy through Murray Rothbard and the contemporary Austrian economics program led by scholars such as Peter Boettke at George Mason University. (Full article...)
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Experimental economics is the application of experimental methods to study economic questions. Data collected in experiments are used to estimate effect size, test the validity of economic theories, and illuminate market mechanisms. Economic experiments usually use cash to motivate subjects, in order to mimic real-world incentives. Experiments are used to help understand how and why markets and other exchange systems function as they do. Experimental economics have also expanded to understand institutions and the law (experimental law and economics).

A fundamental aspect of the subject is design of experiments. Experiments may be conducted in the field or in laboratory settings, whether of individual or group behavior. (Full article...)
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Carl Menger von Wolfensgrün (/ˈmɛŋɡər/ MENG-ghər; German: [ˈmɛŋɐ]; 28 February 1840 – 26 February 1921) was an Austrian economist who contributed to the marginal theory of value. Menger is considered the founder of the Austrian school of economics.

In building his marginalist approach, Menger rejected many established views of classical economics. He directly disputed the view of the "German school" that economic theory could be derived from history. Departing from the cost-of-production theory of value—the prevailing theory of Adam Smith, David Ricardo, and Karl Marx—Menger's subjective theory of value emphasized role of mutual agreement in deriving prices. Although he had few readers outside Vienna until late in his career, disciples including Eugen von Böhm-Bawerk and Friedrich von Wieser brought his theories into wider readership. Friedrich Hayek wrote that the Austrian school's "fundamental ideas belong fully and wholly to Carl Menger." (Full article...)
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Mainstream economics is the body of knowledge, theories, and models of economics, as taught by universities worldwide, that are generally accepted by economists as a basis for discussion. Also known as orthodox economics, it can be contrasted to heterodox economics, which encompasses various schools or approaches that are only accepted by a minority of economists.

The economics profession has traditionally been associated with neoclassical economics. However, this association has been challenged by prominent historians of economic thought including David Colander. They argue the current economic mainstream theories, such as game theory, behavioral economics, industrial organization, information economics, and the like, share very little common ground with the initial axioms of neoclassical economics. (Full article...)
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New classical macroeconomics is a school of thought in macroeconomics based on a neoclassical framework. It emphasizes the importance of foundations based on microeconomics, especially rational expectations.

New classical macroeconomics uses neoclassical microeconomic foundations for macroeconomic analysis. This is in contrast with the new Keynesian school that uses microfoundations, such as price stickiness and imperfect competition, to generate macroeconomic models similar to earlier, Keynesian ones. (Full article...)
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Myrdal in 1964

Karl Gunnar Myrdal (/ˈmɜːrdɑːl, ˈmɪər-/ MUR-dahl, MEER-; Swedish: [ˈɡɵ̌nːar ˈmy̌ːɖɑːl]; 6 December 1898 – 17 May 1987) was a Swedish economist and sociologist. In 1974, he received the Nobel Memorial Prize in Economic Sciences along with Friedrich Hayek for "their pioneering work in the theory of money and economic fluctuations and for their penetrating analysis of the interdependence of economic, social and institutional phenomena." When his wife, Alva Myrdal, received the Nobel Peace Prize in 1982, they became the fourth ever married couple to have won Nobel Prizes, and the first and only to win independent of each other (versus a shared Nobel Prize by scientist spouses).

Myrdal is best known in the United States for his study of race relations, which culminated in his 1944 book An American Dilemma: The Negro Problem and Modern Democracy. The study was influential in the 1954 landmark U.S. Supreme Court decision Brown v. Board of Education. In Sweden, his work and political influence were important to the establishment of the Folkhemmet and the welfare state. (Full article...)
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Koopmans in 1967

Tjalling Charles Koopmans (August 28, 1910 – February 26, 1985) was a Dutch-American mathematician and economist. He was the joint winner with Leonid Kantorovich of the 1975 Nobel Memorial Prize in Economic Sciences for his work on the theory of the optimum allocation of resources. Koopmans showed that on the basis of certain efficiency criteria, it is possible to make important deductions concerning optimum price systems. (Full article...)
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The upper-left space $\Theta$ depicts the type space and the upper-right space X the space of outcomes. The social choice function $f(\theta )$ maps a type profile to an outcome. In games of mechanism design, agents send messages $M$ in a game environment $g$ . The equilibrium in the game $\xi (M,g,\theta )$ can be designed to implement some social choice function $f(\theta )$ .

Mechanism design (sometimes implementation theory or institution design) is a branch of economics and game theory. It studies how to construct rules—called mechanisms or institutions—that produce good outcomes according to some predefined metric, even when the designer does not know the players' true preferences or what information they have. Mechanism design thus focuses on the study of solution concepts for a class of private-information games.

Mechanism design has broad applications, including traditional domains of economics such as market design, but also political science (through voting theory). It is a foundational component in the operation of the internet, being used in networked systems (such as inter-domain routing), e-commerce, and advertisement auctions by Facebook and Google. (Full article...)
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Alan Greenspan (born March 6, 1926) is an American economist who served as the 13th chairman of the Federal Reserve from 1987 to 2006. He worked as a private adviser and provided consulting for firms through his company, Greenspan Associates LLC.

First nominated to the Federal Reserve by President Ronald Reagan in August 1987, Greenspan was reappointed at successive four-year intervals until retiring on January 31, 2006, after the second-longest tenure in the position, behind only William McChesney Martin. President George W. Bush appointed Ben Bernanke as his successor. Greenspan came to the Federal Reserve Board from a consulting career. Although he was subdued in his public appearances, favorable media coverage raised his profile to a point that several observers likened him to a "rock star". Democratic leaders of Congress criticized him for politicizing his office because of his support for Social Security privatization and tax cuts. (Full article...)
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Buchanan in 2010

James McGill Buchanan Jr. (/bjuːˈkænən/ bew-KAN-ən; October 3, 1919 – January 9, 2013) was an American economist known for his work on public choice theory originally outlined in his most famous work, The Calculus of Consent, co-authored with Gordon Tullock in 1962. He continued to develop the theory, eventually receiving the Nobel Memorial Prize in Economic Sciences in 1986.

Buchanan's work initiated research on how politicians' and bureaucrats' self-interest, utility maximization, and other non-wealth-maximizing considerations affect their decision-making. He was a member of the Board of Advisors of The Independent Institute as well as of the Institute of Economic Affairs, a member of the Mont Pelerin Society (MPS) and MPS president from 1984 to 1986, a Distinguished Senior Fellow of the Cato Institute, and professor at George Mason University. (Full article...)

Did you know...

... that a 1998 documentary covers economic exploitation in post-communist gay pornography from Eastern Europe?
... that in the essay "Toward European Unity" George Orwell presumed that one of the greatest obstacles to a federal Europe would be economic pressure by the United States?
... that people are robbing Lebanese banks to get their own money back?
... that Ernst Hinsken smuggled a red lantern into the Bundestag to draw attention to Germany's economic struggles?
... that when the COVID-19 pandemic began, Masyita Crystallin was instructed by the Indonesian finance minister to study the Spanish flu to help formulate unconventional economic policies?
... that environmental economist V. Kerry Smith has been described as a "Renaissance Man of Economics"?

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Selected images

Image 1The circulation of money in an economy in a macroeconomic model. In this model, the use of natural resources and the generation of waste, such as greenhouse gases, is not included. (from Economics)
Image 2The supply and demand model describes how prices vary as a result of a balance between product availability and demand. The graph depicts an increase in demand from D₁ to D₂ and the resulting increase in price and quantity required to reach a new equilibrium point on the supply curve (S).
Image 3The Marxist critique of political economy comes from the work of German philosopher Karl Marx.
Image 4The U.S. unemployment rate from 1990 to 2022 (from Economics)
Image 5John Maynard Keynes, who is considered the "father of macroeconomics" (from Economics)
Image 6The publication of Adam Smith's The Wealth of Nations in 1776 is considered to be the first formalisation of economic thought.
Image 7An example production–possibility frontier with illustrative points marked (from Economics)
Image 8A 1638 painting of a French seaport during the heyday of mercantilism
Image 9Median income by country (from Economics)
Image 10A basic illustration of a business cycle (from Economics)
Image 11Economists study trade, production, and consumption decisions, including those that occur in a traditional marketplace.
Image 12An environmental scientist sampling water
Image 13A map showing the main trade routes for goods within late medieval Europe (from Economics)
Image 14List of countries by gross domestic product (PPP) per capita in April 2022 (from Economics)
Image 15São Paulo Stock Exchange in Brazil, an electronic trading network that brings together buyers and sellers through an electronic trading platform
Image 16Milton Friedman (from Economics)
Image 17Pollution can be a simple example of market failure; if costs of production are not borne by producers but are by the environment, accident victims, or others, then prices are distorted.