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Face-to-face trading on the New York Stock Exchange's trading floor.

Economics is the study of opportunity. More specifically, economics is the study of the opportunities made possible by the production, distribution, and consumption of goods and services. 'Because of its primary application to government policy, it is understandable why the subject was originally known as political economy, which was its name from the time of Adam Smith to the last quarter of the nineteenth century, when the change to "economics" took place.' [1] Economics attempts "to explain the way in which individuals interact with one another, to use their limited resources to satisfy their alternative ends." [2] It is a social science, concerned with how people produce, distribute, and consume. Governments can be classified by their economic policy. The U.S. Constitution provides basic protections for private property that are the foundation of American economic policy.

George Reisman, Professor of Economics at Pepperdine University, wrote

Economics, as the science which studies the production of wealth under a system of division of labor, is actually the science which studies the production of wealth under capitalism.[1]

C. Lowell Harriss, a professor of economics at Columbia, describes economics as the study of the allocation of scarce goods and services. In market economies, this is determined by supply and demand.[3]

Why it should be studied

Issues in economics

Economics deals with a large number of issues:

Disciplines within economics

Economics is a very broad discipline, and involves the following other disciplines as well:

  • Moral philosophy: How ought a society produce and distribute goods and services?
  • Psychology: What principles underlie human economic decision-making?
  • Mathematics: What mathematical models can predict economic outcomes?
  • Ecology: How and in what quantities do households consume goods?

Branches of economics

  • Microeconomics: the study of economic decisions of firms and households acting in markets.
  • Macroeconomics: the study of aggregate economic decisions and the results of those decisions in a local, national, or world economy.

History of economics

For a more detailed treatment, see History of economics.

Economic thought originated with the rise of the state. Classical economics, or the long-run model, was articulated by Adam Smith and has since fomented the rise of free-market capitalism in economic thought.[4]


"Economics is haunted by more fallacies than any other study known to man. This is no accident. The inherent difficulties of the subject would be great enough in any case, but they are multiplied a thousandfold by a factor that is insignificant in, say, physics, mathematics or medicine – the special pleading of selfish interests." - Henry Hazlitt, Economics In One Lesson[5]

See also