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Encyclopedia > Philosophy of economics
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This article is about philosophy of economics, and by extension about the philosophy of social sciences. Image File history File links Stop_hand. ...


Two views of economics:Micro and Macro

Economics is traditionally separated into two main blocks: Microeconomics and Macroeconomics. Apart from that, specialized subfields s.a. Economic history, Financial economics exist; their methods are similar or identical to either Micro or Macro U.S. Economic Calendar Economics at the Open Directory Project Economics textbooks on Wikibooks The Economists Economics A-Z Daily analysis of economics in the news (UK focus) Institutions and organizations Bureau of Labor Statistics - from the American Labor Department Center for Economic and Policy Research (USA) National Bureau... This article does not cite its references or sources. ... Macroeconomics is the economics sub-field of study that considers aggregate behavior, i. ... Economic history is the application of economic theories to historical study. ... Financial economics is the branch of economics concerned with the workings of financial markets, such as the stock market, and the financing of companies. ...

Microeconomics: The algebra of psychology

Micro studies economics on a small scale, modelling the behavior of individuals, firms and the government. Since this behavior is that of individuals, whose behavior is commonly described by psychology, it is a mathematical psychology focused on the behaviors connected with business. Algebra is a branch of mathematics which studies structure and quantity. ... Psychology (ancient Greek: psyche = soul or mind, logos/-ology = study of) is an academic and applied field involving the study of mind and behavior. ... In metaphysics and statistics, the word individual, while sometimes meaning a person, more typically describes any numerically singular thing. ... Firm can have several meanings: Firm - a loose legal term for a company. ...

The success of mathematical psychological descriptions of human behavior has been so small as to be non-existent. Therefore, success of describing actual behavior in a predictive manner (as needed in philosophy of science for falsification) was very small as well; the main outflow being terms for certain situations, assessed after the fact. Examples would be adverse selection, monopoly, moral hazard, etc. Mathematics is commonly defined as the study of patterns of structure, change, and space; more informally, one might say it is the study of figures and numbers. Mathematical knowledge is constantly growing, through research and application, but mathematics itself is not usually considered a natural science. ... The philosophy of science is the branch of philosophy which studies the philosophical foundations, assumptions, and implications of science, including the natural sciences such as physics, mathematics, and biology, and the social sciences, such as psychology, sociology, political science, and economics. ... Falsification is the act of disproving a theory. ... Adverse selection or anti-selection is a term used in economics and insurance. ... In economics, a monopoly (from the Greek monos, one + polein, to sell) is defined as a persistent market situation where there is only one provider of a kind of product or service. ... This section is studied by Argagui monopoli In law and economics, moral hazard is the name given to the risk that one party to a contract can change their behaviour to the detriment of the other party once the contract has been concluded. ...

A sign that microeconomics has little forecasting power is evident in the small amount of economists hired for microeconomic purposes by private companies. (disputed )

Macroeconomics: A theory of history

Macro on the other hand ignores individual behavior or takes very simplified assumptions about it, and tries to establish regularities out of the aggregate data. If successful, this would indeed lead to a theory of history, since the economic wellbeing is a big part in history, influencing governments, wars, peoples, and culture. The philosophy of history asks at least these questions: what is the proper unit for the study of the human past? the individual, the city or sovereign territory, the civilization, or nothing less than the whole of the species?; what broad patterns can we discern through the study of the...

Are economic data real?

Is economics similar to physics and the other natural sciences (and adjacent fields like medicine, climatology, etc.) concerned with reliably measurable data? The answer is strictly no--FAPP yes. Since antiquity, people have tried to understand the behavior of matter: why unsupported objects drop to the ground, why different materials have different properties, and so forth. ... See also Medical doctor (BE), Physician (AE), and Medical school. ... Climatology is the study of climate, and is a branch of the atmospheric sciences. ... FAPP is an abbervation of For All Practical Purposes, a pragmatic approach toward the problem of incompleteness of every scientific theory and the usage of asymptotical approximations. ...

Measuring economic activity requires measuring of flows of goods and services and securities (including money). Measured are, however, only items bought or sold in a market, so there is apparently no equivalent to the law of conservation of energy. Goods could disappear, intermediate goods could be wasted instead of used productively, and new goods could be sold that were not considered goods before (Many services have become marketable only in the last decades). A good in economics is any physical object (natural or man-made) or service that, upon consumption, increases utility, and therefore can be sold at a price in a market. ... In economics and marketing, a service is the non-material equivalent of a good. ... Security is a type of transferable interest representing financial value. ... Money Money is any marketable good or token used by a society as a store of value, a medium of exchange, and a unit of account. ... Street markets such as this one in Rue Mouffetard, Paris are still common in France. ... Conservation of energy is possibly the most important, and certainly the most practically useful of several conservation laws in physics. ... Intermediate goods or producer goods are goods used as inputs in the production of other goods, such as partly finished goods or raw materials. ...

This is true even more of money and securities in general. Even in the times of the gold standard, currency could be turned into commodities (jewelry as an example) and vice versa. Today, money is created and destroyed constantly by expanding and contracting of bank accounts, changing of maturities of securities, securitisation etc.; even the narrower money supply can jump around far more than other indicators. 1922 U.S. gold certificate The gold standard is a monetary system in which the standard economic unit of account is a fixed weight of gold and currency issuers guarantee, under specified rules, to redeem notes in that amount of gold. ... Jewelry (the American spelling; spelled jewellery in Commonwealth English) consists of ornamental devices worn by persons, typically made with gems and precious metals. ... Bank deposits accounts are the large part of the money supply. They come in different types depending on withdrawal restrictions. ... // Biology In Biology, an organism is said to have reached maturity when it has reached a stage at which it could produce offspring. ... Securitization is a financial technique that pools assets together and, in effect, turns them into a tradeable security. ... The examples and perspective in this article do not represent a worldwide view. ...

For practical purposes though, many of those numbers have proven useful, while not as strict as their physical counterparts.

Self fulfilling prophecies, culture, and change of systems

Another peculiarity of economics its power to change exactly what it wants to explain. If a theory in economics or finance gains widespread acceptance, it influences the phenomenon studied. For example, the Black-Scholes formula for options pricing influenced the pricing of options by participants. A self-fulfilling prophecy is a prediction that, in being made, actually causes itself to become true. ... The word culture, from the Latin colere, with its root meaning to cultivate, generally refers to patterns of human activity and the symbolic structures that give such activity significance. ... Finance studies and addresses the ways in which individuals, businesses and organizations raise, allocate and use monetary resources over time, taking into account the risks entailed in their projects. ... The Black-Scholes model, often simply called Black-Scholes, is a model of the varying price over time of financial instruments, and in particular stocks. ...

Changes in government regulations, as almost all law can also affect economic outcomes. Government regulation involves the use of the law, mandated by the state, to produce outcomes which might not otherwise occur, prevent outcomes which might otherwise occur, produce or prevent outcomes in different places to what might otherwise occur, or produce or prevent outcomes in different timescales than would otherwise occur. ... Wikimedia Commons has media related to: Law Law topics overview List of areas of law List of legal topics List of legal terms List of jurists List of legal abbreviations List of case law lists List of law firms Further reading Cheyenne Way: Conflict & Case Law in Primitive Jurisprudence, Karl...

On top of that, maturing and developing economies change their behavior, making them a moving target for theorists. This article needs to be cleaned up to conform to a higher standard of quality. ...

Different degrees of reliability

As laid out, there are no truths comparable to those of the natural sciences to be expected from economic theory. There is, however a great demand for insights and descriptions of economic situations. One possible direction for economics is to describe different degrees of reliability of theories.

  • Accounting identities are by no means true (see above); they still are the most reliable statements in economics. In finance, arbitrage is often based on them.
  • Less reliable are statements based solely on the growth or shrinkage of some other variable, for example GDP growth or inflation. Since these other variables are not forecasted, but only assumed, the consequences of outcomes can be quite clear. An example would be retirement payments given the growth of population and productivity, given stable percentages of benefits compared to wages.
  • Least reliable are statements relying directly on a specific model of individual behavior, like personal preferences, production functions, or game theoretic outcomes. This is illustrated by the coexistence of different models dealing with one single economic entity, like the consumer. This doesn't mean they are useless--they could be describing a specific behavior or outcome ("I know an adverse selection when I see one")

When someone sincerely agrees with an assertion, they might claim that it is the truth. ... In economics, arbitrage is the practice of taking advantage of a state of imbalance between two or more markets: a combination of matching deals are struck that exploit the imbalance, the profit being the difference between the market prices. ... Preference (or taste) is a concept, used in the social sciences, particularly economics. ... In microeconomics, a production function expresses the relationship between an organizations inputs and its outputs. ... Game theory is a branch of applied mathematics that studies strategic situations where players choose different actions in an attempt to maximize their returns. ... In economics, consumers are individuals or households that consume goods and services generated within the economy. ...

See also

The philosophy of science is the branch of philosophy which studies the philosophical foundations, assumptions, and implications of science, including the natural sciences such as physics, mathematics, and biology, and the social sciences, such as psychology, sociology, political science, and economics. ... The movement for Post-Autistic Economics was born through the work of Sorbonne economist Bernard Guerrien. ...

External links

  • Stanford Encyclopedia of Philosophy entry on Philosophy of Economics

  Results from FactBites:
Philosophy of Economics (15867 words)
Economic theories of rationality, welfare, and social choice defend substantive philosophical theses often informed by relevant philosophical literature and of evident interest to those interested in action theory, philosophical psychology, and social and political philosophy.
Economics is of particular interest to those interested in epistemology and philosophy of science both because of its detailed peculiarities and because it possesses many of the overt features of the natural sciences, while its object consists of social phenomena.
Since rationality is a central concept in branches of philosophy such as action theory, epistemology, ethics, and philosophy of mind, studies of rationality frequently cross the boundaries between economics and philosophy and thus constitute one of the domains of philosophy of economics.
  More results at FactBites »



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