Economics is a social science that seeks to analyze and give a description of the production, distribution and consumer behavior trends of wealth.
Historical Summary of Economics
In the 19th century, economics was a hobby during leisure time and little to do with academics. Economists put across economic policies, but were never consulted by legislators anytime a decision was made. In modern society, government, agencies and even commercial banks have their economists.
Economist dedicates their time in teaching economics in tertiary institutions and all over the world. Although the work varies from advisory levels for research, either individually or in consulting firms, industries and for the government. The demand for economists services remains insatiable.
The birth of economics as a separate entity traces back to the year 1976. At this time, a Scottish philosopher named Adam Smith published ‘an inquiry into the nature and causes of the Wealth of Nations’ however, there was economics even earlier on. The Greeks played a significant role in the middle age scholastics between the 15th and 18th century, when a lot of literature was developed implying economic nationalism.
Smith came up with the first treatise in economics through his magisterial influence and what later turned to what is currently referred to as classical economics.
Advancements saw a book titled wealth of nations published. The book just as the title suggests looks at economic development and policies that lead to a promotion or end up hindering economic growth. Smith identified the private sector as the drivers of the economy governing human activity. In a commercial society, each is controlled by self-interests and can only have a negligible impact on prices.
In the competitive markets, Smith believed he had come across an instrument capable of converting individual selfish interest to public virtues for maximum production. However, this is only possible if the competitive system is backed up by the necessary legal and institutional framework.
Later in 1817, Smith published another book titled ‘Principles of Political Economy and Taxation.’ The book brought a critical commentary sense of the earlier book, ‘Wealth of Nations’ Ricardo came up with the idea if economic models which consisted of strategic valuables capable of yielding if manipulated and added to other empirical observations.
A breakthrough came in 1930 when Keynes came up with the theory of income determination. He had interest in determining the income at national levels and the volume of employment. He also raised concerns about the issue of demand and supply. Keynesian economics is an analysis of the factors that determine effective demand.
After the second world war, nature of economics as a discipline was significantly transformed as mathematics permeated almost all the branch of the field. Developments such as linear programming and analysis of activities saw the possibility of application of numerical problems in industries. This was further advanced through the use of difference and differential equations.
Economics plays a vital role in its broad application in empirical works. Prediction is possible in business through the application of econometrics since it deals with the building of models based on mathematics and testing of economic predictions.