Subject Overview A (e.g. Economics)
Economics is a form of social science, which uses paradigms to determine production, distribution, and consumption of goods and services. The word ‘economics’ is derived from ancient Greek word oikos nomos, which translates as ‘rules of the house’. The first documentation of economic writings were written by Mesopotamian, Roman, Greek, Indian, Chinese, Arab, Indian subcontinent, and Persian civilisations. Modern economics depend heavily on a combination of mathematical and statistical equations. In essence, economics strives to understand why and how exchange takes place, and how exchange creates benefits and costs for the participants.
The study of economics can be simply separated into two schools of thought, microeconomics and macroeconomics. Microeconomics deals with impact and behaviours of individuals and small organisations on the allocation of limited resources, whilst macroeconomics deals with the performance, behaviour, and decision-making of the world economy as a whole – incorporating national, regional, and global economies. Essentially, microeconomics deals with the individual’s relationship with demand and supply, and aims to solve problems such as market failure, sudden growth, inflation, and unemployment by implementing theoretical paradigms such as equilibrium, and game theory – with aims to create an economy that benefits the individual. In contrast to microeconomics, the study of macroeconomics deals with indicators such as GDP, unemployment rates, and price indexes from a world perspective. In opposition to the individual’s use of microeconomics, macroeconomic models are used by governmental agencies to forecast the development and evaluation of economic policy.
Throughout history, economic writings have shaped the fates of nations. From the works of Adam Smith to Karl Marx, economic literature has been extremely didactic and has brought forth new and revolutionary paradigms of thinking. In 1776, Adam Smith wrote the The Wealth of Nations, which has been said to have given birth to the subject of economics as a separate discipline. According to the liberal historian Lord Acton, The Wealth of Nations gave a “scientific backbone to liberal sentiment”, and to the study economics. One of Adam Smith’s most important economic theories within the book is theory of the ‘invisible hand’. Smith’s paradigm suggests that the ‘invisible hand’ is the unobservable market force that helps the demand and supply of good in a free market to reach equilibrium automatically. This theory stipulates that an individual’s efforts to pursue their own interest may frequently benefit society more than if their actions were directly intending to benefit society. In essence, Adam Smith came up with the theory of capitalism before a term even existed for the economic paradigm. The Wealth of Nations went on to inspire other revolutionary theories of economics, most notably, the works of Karl Marx. Karl Marx’s most famous work, Das Kapital, drew the blueprint for the economic model for Communism.