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In the social sciences, economics is the study of human choice behavior and the methodology used to make associated investment and production decisions; in particular, though not limited to, how those choices and decisions determine the allocation of scarce resources and their effect on production, distribution, and consumption. The word "economics" is from the Greek words οἶκος [oikos], meaning "family, household, estate", and νέμω [nemo], or "distribution, allocation", hence meaning "household management" or "management of the state". An economist is a person using economic concepts and data in the course of employment, or someone who has earned a university degree in the subject. Economics undergraduate courses cover at least two main branches:
- Microeconomics studies the behavior of individual households and firms in making decisions on the allocation of limited resources. Microeconomics applies to markets where goods or services are bought and sold. It examines how decisions and behaviors affect the supply and demand for goods and services, which determine prices, and how prices, in turn, determine the quantity supplied and quantity demanded of goods and services.
- Macroeconomics studies inflation, price levels, rates of growth, national income, gross domestic product and changes in unemployment of a country, rather than the more specific details that microeconomics studies.
There are also other sub-fields of economics.
In economics, the field economic systems studies and analyzes the organizing of production, distribution, consumption and investment, as well as optimal resource allocation and institutional design. Traditionally, the study of economic systems was based on a dichotomy between market economies and planned economies, but contemporary studies compare and contrast a number of different systems, such as ownership structure (public, private or collective), economic coordination (planning, markets or mixed systems), management structure (hierarchy versus adhocracy), the incentive system, and the level of centralization in decision-making. An economy can be analyzed in terms of its economic sectors, the classic breakdown being into primary, secondary and tertiary.
Economic policy comprises the actions that governments take in the economic field. It covers the systems for setting interest rates and the government budget as well as the labor market regulations, national ownership, trade policy, monetary policy, fiscal policy, regulatory policy, anti-trust policy and industrial policy. In economics, sustainable development refers to development that meets the needs of the present without compromising the ability of future generations to meet their own needs.
A business, also known as an enterprise or a firm, is an organization involved in the trade of goods, services, or both to consumers. Businesses are prevalent in capitalist economies, where most of them are privately owned and provide goods and services to customers in exchange of other goods, services, or money. Businesses may also be not-for-profit or state-owned. Management in business and organizations is the function that coordinates the efforts of people to accomplish goals and objectives using available resources efficiently and effectively. Management comprises planning, organizing, staffing, leading and directing, and controlling an organization or initiative to accomplish a goal. Management is also an academic discipline, and is traditionally taught at business schools.
Photo credit: Indianhilbilly
An auctioneer and her assistants scan the crowd
An auction is a process of buying and selling goods or services by offering them up for bid, taking bids, and then selling the item to the highest bidder. In economic theory, an auction may refer to any mechanism or set of trading rules for exchange.
"In early September we wrote about the (ir)relevance of oil to equities and introduced the idea that the U.S. is a Plutonomy - a concept that generated great interest from our clients. As global strategists, this got us thinking about how to buy stocks based on this plutonomy thesis, and the subsequent thesis that it will gather strength and amass breadth. In researching this idea on a global level and looking for stock ideas we also chanced upon some interesting big picture implications. This process manifested itself with our own provocative thesis: that the so called “global imbalances” that worry so many of our equity clients who may subsequently put a lower multiple on equities due to these imbalances, is not as dangerous and hostile as one might think. Our economics team led by Lewis Alexander researches and writes about these issues regularly and they are the experts. But as we went about our business of finding stock ideas for our clients, we thought it important to highlight this provocative macro thesis that emerged, and if correct, could have major implications in terms of how equity investors assess the risk embedded in equity markets. Sometimes kicking the tires can tell you a lot about the car-business.
Well, here goes. Little of this note should tally with conventional thinking. Indeed, traditional thinking is likely to have issues with most of it. We will posit that: 1) the world is dividing into two blocs - the plutonomies, where economic growth is powered by and largely consumed by the wealthy few, and the rest. Plutonomies have occurred before in sixteenth century Spain, in seventeenth century Holland, the Gilded Age and the Roaring Twenties in the U.S. What are the common drivers of Plutonomy? Disruptive technology-driven productivity gains, creative financial innovation, capitalist-friendly cooperative governments, an international dimension of immigrants and overseas conquests invigorating wealth creation, the rule of law, and patenting inventions. Often these wealth waves involve great complexity, exploited best by the rich and educated of the time."
- —Ajay Kapur, Niall Macleod, Narendra Singh, Plutonomy: Buying, Explaining Global Imbalances, 2005
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On this day in Business history...
- 1836 - Jay Gould, a leading American railroad developer and speculator, was born on this day.
Did you know...
- ...that dismal science is a derogatory alternative name for economics coined by the Victorian historian Thomas Carlyle in the 19th century to draw a contrast with the then-familiar use of the phrase "gay science"?
- ...that, according to historical legend, Laissez-faire stems from a meeting in about 1681 between the powerful French finance minister Jean-Baptiste Colbert and a group of French businessmen led by a certain M. Le Gendre?
- ...that Antoine Augustin Cournot derived the first formula for the rule of supply and demand as a function of price and in fact was the first to draw supply and demand curves on a graph in his Researches on the Mathematical Principles of the Theory of Wealth?
- ...that the Toyota Production System (TPS) developed by Toyota, that comprises its management philosophy and practices, organizes manufacturing and logistics for the automobile manufacturer, including interaction with suppliers and customers?