Еconomic theory

mathematical economics for representing economic theories with simplicity, generality, and precision.

econometrics, which applies statistical methods to analyze economic data for the purpose of drawing fact-based generalizations and testing theories as to acceptance, rejection, or refinement.[4]

computational economics, which encompasses both computational economic modeling and the comp

utational solution of analytically and statistically formulated economic problems.

Another important technique is national (or social) accounting, which summarizes economic activity for a nation (or other geographic area). The national accounts are double-entry accounting systems that provide detailed underlying measures of such information. These include national income and product accounts, balance sheets, accounts of capital accumulation and finance, and input-output tables.

5.Language and reasoning.

Economics relies on rigorous styles of argument. Economic method has several interacting parts:

Formulation of testable models of economic relationships, for example, the relationship between the general level of prices and the general level of employment. This includes observable forms of economic activity, such as money, consumption, buying, selling, and prices.

Collection of economic data. The data may include values of commodity prices and quantities, for example, the cost to hire a worker for a week, or the quantity purchased of a particular service.

Production of economic statistics. Taking the data collected, and applying the model being used to produce a representation of economic activity. For example, the "general price level" is a theoretical idea common to macroeconomic models. The specific inflation rate involves taking measurable prices, and a model of how people consume, and calculating what the "general price level" is from the data within the model. For example, suppose that diesel fuel costs 1 euro a litre: to calculate the price level would require a model of how much diesel an average person uses, and what fraction of their income is devoted to this, but it also requires having a model of how people use diesel, and what other goods they might substitute for it.

Reasoning within economic models. This process of reasoning (see the articles on informal logic, logical argument, fallacy) sometimes involves advanced mathematics. For instance, an established (though possibly unexamined) tradition among economists is to reason about economic variables in two-dimensional graphs in which curves representing relations between the axis variables are parameterized by various indices. A good example of this type of reasoning in Keynesian macroeconomics is the still commonly-used IS/LM model. Paul Samuelson's treatise Foundations of Economic Analysis examines the class of assertions called operationally meaningful theorems in economics, which are those that can be conceivably refuted by empirical data.[6] As usual in science, the conclusions obtained by reasoning have a predictive as well as confirmative (or dismissive) value. An example of the predictive value of economic theory is a prediction as to the effect of current deficits on interest rates 10 years into the future. An example of the confirmative value of economic theory would be confirmation (or dismissal) of theories concerning the relation between marginal tax rates and the deficit.

Economics typically employs two types of equations:

(1) Identity equations are used for defining how certain economic variables are calculated or related to each other. Identity equations are tautological in that the purpose is to define rather than to explain. An example is the value of national output, the price level times the quantity of output P•Q. Another example is Irving Fisher's equation of exchange P•Q = M•V. This relates the value of national output to the money supply and velocity of money. Given values of the other three terms in the equation, velocity V can be calculated.

(2) Descriptive equations are used to explain the behaviour of the economic agent(s) examined. For example, in the quantity theory of money, velocity in the equation of exchange is hypothesized to give a positive qualitative relation between the money supply M and value of output or the price level. The point is not that V is a constant but that it is stable enough for changes in the money supply to help explain changes in the value of output or the price level.

Economists often formulate very simple models in order to isolate the impact of just one variable changing, for example, the ceteris paribus ("other things equal") assumption, meaning that all other things are assumed not to change during the period of observation: for example, "If the price of movie tickets rises, ceteris paribus the demand for popcorn falls." It is, however, possible with the use of econometric methods to determine one relationship while removing much of the noise caused by other variables.

Formal modeling has been adapted to some extent by all branches of economics. It is motivated by general principles of consistency and completeness. It is not identical to what is often referred to as mathematical economics; this includes, but is not limited to, an attempt to set microeconomics, in particular general equilibrium, on solid mathematical foundations.

Some reject mathematical economics. The Austrian School of economics believes that anything beyond simple logic is likely unnecessary and inappropriate for economic analysis. In fact, the entire empirical-deductive method sketched in this section may be rejected outright by that school.

Still, much of modern economics employs the hypothetico-deductive method to explain real-world phenomena. Towards this end, economics has undergone a massive formalization of its concepts and methods. This has included extension of microeconomic methods to analysis of seemingly non-economic areas, sometimes called economic imperialism.

6.Development of economic thought.

Adam Smith, generally regarded as the Father of Economics, author of An Inquiry into the Nature and Causes of the Wealth of Nations, commonly known as The Wealth of Nations.

The term economics was coined around 1870 and popularized by influential "neoclassical" economists such as Alfred Marshall (Welfare definition), as a substitute for the earlier term political economy, which referred to "the economy of polities" – competing states.[citation needed] The term political economy was used through the 18th and 19th centuries, with Adam Smith, David Ricardo and Thomas Malthus as its main thinkers and which today is frequently referred to as the "classical" economic theory. Both "economy" and "economics" are derived from the Greek oikos- for "house" or "settlement", and nomos for "laws" or "norms".

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