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Information about Economy

This article is about the human activity. For the social science that studies it, see Economics. For other meanings see Economy (disambiguation).
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Gross domestic product in 2005
An economy is the system of human activities related to the production, distribution, exchange, and consumption of goods and services of a country or other area.

The composition of a given economy is inseparable from technological evolution, civilization's history and social organization, as well as from Earth's geography and ecology, e.g. ecoregions which represent different agricultural and resource extraction opportunities, among other factors.

Economy refers also to the measure of how a country or region is progressing in terms of product.

Etymology

The word "economy" can be traced back to the Greek word oikonomos, "one who manages a household", derived from oikos, "house", and nemein, "to manage." From oikonomos was derived oikonom, which had not only the sense "management of a household or family" but also senses such as "thrift", "direction", "administration", "arrangement", and "public revenue of a state". The first recorded sense of the word "economy", found in a work possibly composed in 1440, is "the management of economic affairs", in this case, of a monastery. Economy is later recorded in other senses shared by oikonomi in Greek, including "thrift" and "administration". What is probably the most frequently used current sense, "the economic system of a country or an area", seems not to have developed until the 19th or 20th century.

The range of activities involved

Sectors

Main article: Three-sector hypothesis
The economy includes several sectors (also called industries), that evolved in successive phases.
  • The ancient economy was mainly based on subsistence farming.
  • The industrial revolution lessened the role of subsistence farming, converting it to more extensive and monocultural forms of agriculture in the last three centuries. The economic growth took place mostly in mining, construction and manufacturing industries.
  • In the economies of modern consumer societies there is a growing part played by services, finance, and technology -- the (knowledge economy).
In modern economies, there are three main sectors of economic activity:
  • Primary sector: Involves the extraction and production of raw materials, such as corn, coal, wood and iron. (A coal miner and a fisherman would be workers in the primary sector.)
  • Secondary sector: Involves the transformation of raw or intermediate materials into goods e.g. manufacturing steel into cars, or textiles into clothing. (A builder and a dressmaker would be workers in the secondary sector.)
  • Tertiary sector: Involves the provision of services to consumers and businesses, such as baby-sitting, cinema and banking. (A shopkeeper and an accountant would be workers in the tertiary sector.)
More details about the various phases of economic development follow. As this process was far from being homogenous geographically, the balance between these sectors differs widely among the various regions of the world.

History

Ancient times

The ancient economy was mainly based on subsistence farming. The exchange of goods happened within a barter economy. In Ancient Greece, when the word 'economy' arose, the majority of people were bond slaves of the freeholders. Economic discussion was driven by scarcity. Aristotle (384-322 B.C.) was the first to differentiate between a use value and an exchange value of goods. (Politics, Book I). The exchange ratio he defined was not only the expression of the value of goods but of the relations between the people involved in trade. For most of the time in history economy therefore stood in opposition to institutions with fixed exchange ratios as reign, state, religion, culture and tradition.

Middle ages

In Medieval times the great conquerors raised venture capital (from ventura, ital.; risk) to finance their captures. The capital should be refunded by the goods they would bring up in the New World. Merchants such as Jakob Fugger (1459-1525) and Giovanni di Bicci de' Medici (1360-1428) founded the first banks. The discoveries of Marco Polo (1254-1324), Christopher Columbus (1451-1506) and Vasco de Gama (1469-1524) led to a first World economy, meaning international trade between the continents. The first enterprises therefore were trading establishments. In 1513 the first stock exchange was founded in Antwerpen. Economy at the time meant firstly trade.

Early modern times

The European captures became branches of the European states, the so-called colonies. The rising nation-states Spain, Portugal, France, Great Britain and the Netherlands tried to control the trade through custom duties and taxes in order to protect their national economy. The so-called mercantilism (from mercator, lat.: merchant) was a first approach to intermediate between private wealth and public interest. The secularization in Europe allowed states to use the immense property of the church for the development of towns. The influence of the nobles decreased. The first secretaries of state for economy started their work. Bankers like Amschel Mayer Rothschild (1773-1855) started to finance national projects such as wars and infrastructure. Economy from then on meant national economy as a topic for the economic activities of the citizens of a state.

The industrial revolution

The first economist in the true meaning of the word was the Scotsman Adam Smith (1723-1790). He defined the elements of a national economy: products are offered at a natural price generated by the use of competition - supply and demand - and the division of labour. He maintained that the basic motive for free trade is human self interest. The so-called self interest hypothesis became the anthropological basis for economics. Thomas Malthus (1766-1834) transferred the idea of supply and demand to the problem of overpopulation. The United States of America became the place where millions of expatriates from all European countries were searching for free economic evolvement. In Europe wild capitalism started to replace the system of mercantilism (today: protectionism) and led to economic growth. The period today is called industrial revolution because the system of production and division of labour enabled the mass production of goods.

Capitalism and communism

Especially in England the ideas of Adam Smith became reality while the economization—the process of always diminishing the efforts of production—led to mass poverty, starvation, urbanization and pauperization of the population. Karl Marx (1818-1883) and the German industrialist and philosopher Friedrich Engels (1820-1895) described economy as the "system of capitalism". The exploitation of labour and nature by the capitalist is creating a surplus value. The capital will accumulate itself and finally destroy the competition. Therefore the system of communism should liberate the economy from the reign of capital. The first centrally planned economy was established after the Russian Revolution of 1917 by Lenin. Other states launched social security systems in order to minimize the effects of uncontrolled capitalism, called Manchester capitalism.

After World War II

In order to build up the countries destroyed in two World Wars new definitions of economy were needed. Friedrich August von Hayek (1899-1992) and Milton Friedman (1912-2006) pleaded for a global free trade and are supposed to be the fathers of the so called neoliberalism. In contrast, John Maynard Keynes (1883-1946) argued for a stronger control of the markets by the state. The theory that the state could alleviate economic problems and instigate economic growth through state manipulation of aggregate demand is called Keynesianism. In the late 1950s the economic growth in America and Europe—often called Wirtschaftswunder (ger.: economic miracle)—brought up a new form of economy: consumption. In 1958 Kenneth Galbraith (1908-2006) was the first to speak of an affluent society. In most of the countries the economic system is called a social market economy.

Postmodern society

The globalization pushes national economies and rules in the backyard. The global and controversial discussion on the politics of the World Bank, the World Trade Organization and Global Players within the World Economic Forum as well as the discussion of global ecology and sustainability issues influences the definition of economy. Joseph E. Stiglitz today defines economy to be a global public good. Economists like Peter Barnes and Alexander Dill are reclaiming the commons and give new definitions including new phenomena like freeware. Game theorists such as Ernst Fehr and Klaus M. Schmidt are disproving the self-interest hypothesis. A so-called gift economy is the topic for widespread activities of grassroot movements as well as of the credit programs of Nobel laureate Muhammed Yunus. The Wealth of Nations Report 2006 of theWorld Bank for the first times tracks social and human capital. The change of definitions is to be continued. There's also neoclassical economics.

Economic measures

There are number of ways to measure economic activity of a nation. These methods of measuring economic activity include:

GDP

The GDP - Gross domestic product of a country measures the size of its Economy.

See also

Further reading

  • Friedman, Milton, Capitalism and Freedom, 1962.
  • Galbraith, John Kenneth, The Affluent Society, 1958.
  • Keynes, John Maynard, The General Theory of Employment, Interest and Money, 1936.
  • Smith, Adam, An Inquiry into the Nature and Causes of the Wealth of Nations, 1776.

References

Economics is the social science that studies the production, distribution, and consumption of goods and services. The term economics comes from the Greek for oikos (house) and nomos (custom or law), hence "rules of the house(hold).
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Economy can refer to:
  • Economy, the human activity that consists in producing, distributing, exchanging and consuming goods and services, studied by economics and realised inside an economic system.

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Economic systems

Ideologies and Theories
Primitive communism
Capitalist economy
Corporate economy
Fascist economy
Laissez-faire
Mercantilism
Natural economy
Social market economy
Socialist economy
Communist economy


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A good or commodity in economics is any object or service that increases utility, directly or indirectly, not to be confused with good in a moral or ethical sense (see Utilitarianism and consequentialist ethical theory).
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Technological evolution is the name of a science and technology studies theory developed by Czech philosopher Radovan Richta.

Theory of technological evolution

According to Richta and later Bloomfield [1] [2]
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History is the study of the past, focused on human activity and leading up to the present day.[1] More precisely, history is the continuous, systematic narrative and research of past events as relating to the human race [1]
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Social organization or social institution, is a group of social positions, connected by social relations, performing a social role. It can be also defined in a narrow sense as any institution in a society that works to socialize the groups or people in it.
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Geography - (from the Greek words Geo (γη) or Gaea (γαία), both meaning "Earth", and graphein (γράφειν) meaning "to describe" or "to write"
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Ecology (also known as Oekologie, Okology, or Oekology[1],from Greek: οίκος, oikos, "household"; and λόγος, logos
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Agriculture (from Agri Latin for ager ("a field"), and culture, from the Latin cultura "cultivation" in the strict sense of "tillage of the soil". A literal reading of the English word yields "tillage of the soil of a field".
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worldwide view of the subject.
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Mining is the extraction of valuable minerals or other geological materials from the earth, usually (but not always) from an ore body, vein, or (coal) seam.
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gross domestic product, or GDP, is one of the ways for measuring the size of its economy. The GDP of a country is defined as the total market value of all final goods and services produced within a country in a given period of time (usually a calendar year).
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The social sciences are a group of academic disciplines that study human aspects of the world. They diverge from the arts and humanities in that the social sciences tend to emphasize the use of the scientific method in the study of humanity, including quantitative and qualitative
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Economics is the social science that studies the production, distribution, and consumption of goods and services. The term economics comes from the Greek for oikos (house) and nomos (custom or law), hence "rules of the house(hold).
..... Click the link for more information.
History is the study of the past, focused on human activity and leading up to the present day.[1] More precisely, history is the continuous, systematic narrative and research of past events as relating to the human race [1]
..... Click the link for more information.
Economic history is the study of how economic phenomena evolved in the past. Analysis in economic history is undertaken using historical methods and statistical methods, sometimes to test economic theories.
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Geography - (from the Greek words Geo (γη) or Gaea (γαία), both meaning "Earth", and graphein (γράφειν) meaning "to describe" or "to write"
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Economic geography is the study of the location, distribution and spatial organisation of economic activities across the Earth. It focuses on the location of industries and retail and wholesale businesses, on transportation and trade, and on the changing value of real estate.
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Engineering is the applied science of acquiring and applying knowledge to design, analysis, and/or construction of works for practical purposes. The American Engineers' Council for Professional Development, also known as ECPD,[1] (later ABET [2]
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Management comprises directing and controlling a group of one or more people or entities for the purpose of coordinating and harmonizing that group towards accomplishing a goal.
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The word "administration" is derived from the Middle English word administracioun, which is in turn derived from the French
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Applied science is the application of knowledge from one or more natural scientific fields to solving practical problems. Fields of engineering are applied sciences. Applied science is important for technology development.
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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.
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profession is an occupation, vocation or career where specialized knowledge of a subject, field, or science is applied.[1] It is usually applied to occupations that involve prolonged academic training and a formal qualification.
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A

  • Accountant
  • Actor
  • Actuary
  • Administrator
  • Advocate
  • Aerospace engineer
  • Aesthetician (also Esthetician)
  • Agrarian
  • Agrologist

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In economics, an agent is an actor in a model that (generally) solves an optimization problem. In this sense, it is equivalent to the term player, which is also used in economics, but is more common in game theory.
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For other uses, see consumption


In economics, consumption refers to the final use of goods and services to provide utility.

Keynesian economics and aggregate consumption

In Keynesian economics aggregate consumption
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In common usage, saving generally means putting money aside, for example, by putting money in the bank or investing in a pension plan.

In a broader sense, saving is typically used to refer to economizing, cutting costs, or to rescuing someone or something.
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Investment or investing[1] is a term with several closely-related meanings in business management, finance and economics, related to saving or deferring consumption.
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three-sector hypothesis is an economic theory which divides economies into three sectors of activity: extraction of raw materials (primary), manufacturing (secondary), and services (tertiary). It was developed by C. Clark and Jean Fourastié.
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