Lesson 1/54 min
Economics: meaning and branches
The English word Economics comes from the Greek Oikonomia, which literally means household management.
Three definitions of economics
| Economist | Book and year | Core of the definition |
|---|---|---|
| Adam Smith | An Inquiry into the Nature and Causes of the Wealth of Nations, 1776 | Economics is the science of wealth; it studies the nature and causes of the wealth of nations |
| Alfred Marshall | Principles of Economics, 1890 | A study of the ordinary affairs of human life; economics is a social science; its main aim is human welfare |
| Lionel Robbins | An Essay on the Nature and Significance of Economic Science, 1932 | The science of balancing unlimited wants against limited means that have alternative uses |
Three features of Robbins's definition
- Unlimited wants
- Limited resources
- Resources have alternative uses
Watch out: Khandokar's GK calls Robbins a Cambridge professor. Web sources say he was a professor at the London School of Economics (LSE), and the preface of the book is signed from LSE.
Microeconomics and macroeconomics
| Micro | Macro | |
|---|---|---|
| Word origin | Greek Mikros = very small | Greek Makros = large, whole |
| How it looks | At each single unit (a consumer, a firm) separately | At the whole-economy or national level |
| Topics | A consumer's demand, a person's income, spending and saving, a firm's price and output policy, price setting, elasticity of demand | National income, causes and effects of national unemployment, aggregate demand and supply, national saving and investment, public debt, the general price level, total imports and exports |
- Ragnar Frisch of the University of Oslo first divided economics into micro and macro, in 1933.
- The father of macroeconomics is John Maynard Keynes.
- The analysis of the economic system as a whole is called macroeconomics.
Three schools of economic thought
| School | Main thinkers |
|---|---|
| Classical | Adam Smith, David Ricardo, John Stuart Mill |
| Neo-classical | Marshall, Cannan, Pigou |
| Modern | Lionel Robbins, Cairncross, Samuelson, Stonier, Hague |
Check yourself
Who first divided economics into micro and macro?
At a glance
- 1
Economics comes from the Greek Oikonomia, meaning household management.
- 2
Robbins's definition has three features: unlimited wants, limited resources, alternative uses of resources.
- 3
Frisch first made the micro/macro split (1933); Keynes is the father of macroeconomics.
- 4
Three schools: Classical (Smith, Ricardo, Mill), Neo-classical (Marshall, Cannan, Pigou), Modern (Robbins, Samuelson and others).