New details will be emailed to you. Simply reserve online and pay at the counter when you collect. Available in shop from just two hours, subject to availability. Your order is now being processed and we have sent a confirmation email to you at. This item can be requested from the shops shown below. If this item isn't available to be reserved nearby, add the item to your basket instead and select 'Deliver to my local shop' at the checkout, to be able to collect it from there at a later date. Preferred contact method Email Text message.
When will my order be ready to collect? Following the initial email, you will be contacted by the shop to confirm that your item is available for collection. Call us on or send us an email at. Unfortunately there has been a problem with your order. Please try again or alternatively you can contact your chosen shop on or send us an email at. Microeconomics focuses on relations among individuals with firms and households frequently counting as honorary individuals and little said about the idiosyncrasies of the demand of particular individuals.
Individuals have complete and transitive preferences that govern their choices. Firms attempt to maximize profits in the face of diminishing returns: holding fixed all the inputs into production except one, output increases when there is more of the remaining input, but at a diminishing rate.
Economists idealize and suppose that in competitive markets, firms and individuals cannot influence prices, but economists are also interested in strategic interactions, in which the rational choices of separate individuals are interdependent. Game theory, which is devoted to the study of strategic interactions, is of growing importance in economics. Economists model the outcome of the profit-maximizing activities of firms and the attempts of consumers optimally to satisfy their preferences as an equilibrium in which there is no excess demand on any market.
What this means is that anyone who wants to buy anything at the going market price is able to do so. There is no excess demand, and unless a good is free, there is no excess supply. Macroeconomics grapples with the relations among economic aggregates, such as relations between the money supply and the rate of interest or the rate of growth, focusing especially on problems concerning the business cycle and the influence of monetary and fiscal policy on economic outcomes.
Philosophy of Economics
Macroeconomics is immediately relevant to economic policy and hence and unsurprisingly subject to much more heated and politically-charged controversy than microeconomics or econometrics. Branches of mainstream economics are also devoted to specific questions concerning growth, finance, employment, agriculture, housing, natural resources, international trade, and so forth.
Within orthodox economics, there are also many different approaches, such as agency theory Jensen and Meckling , Fama , the Chicago school Becker , or public choice theory Brennan and Buchanan , Buchanan These address questions concerning incentives within firms and families and the ways that institutions guide choices. Although mainstream economics is dominant and demands the most attention, there are many other schools. Austrian economists accept orthodox views of choices and constraints, but they emphasize uncertainty and question whether one should regard outcomes as equilibria, and they are skeptical about the value of mathematical modeling Buchanan and Vanberg , Dolan , Kirzner , Mises , , , Rothbard , Wiseman , Boettke , Holcombe , Nell a, b, , Boettke and Coyne , Hagedorn , Horwitz , Dekker , Linsbichler Traditional institutionalist economists question the value of abstract general theorizing and emphasize evolutionary concepts Dugger , Wilber and Harrison , Wisman and Rozansky , Hodgson , , , Hodgson and Knudsen , Delorme , Richter They emphasize the importance of generalizations concerning norms and behavior within particular institutions.
Applied work in institutional economics is sometimes very similar to applied orthodox economics. There are also socio-economists , who are concerned with the norms that govern choices Etzioni , , behavioral economists , who study the nitty-gritty of choice behavior Winter , Thaler , Ben Ner and Putterman , Kahneman and Tversky , Camerer , Camerer and Loewenstein , Camerer et al.
Economics is not one homogeneous enterprise. Although the different branches and schools of economics raise a wide variety of epistemological and ontological issues concerning economics, six problems have been central to methodological reflection in this philosophical sense concerning economics:. Most economists and methodologists believe that there is a reasonably clear distinction between facts and values, between what is and what ought to be, and they believe that most of economics should be regarded as a positive science that helps policy makers choose means to accomplish their ends, though it does not bear on the choice of ends itself.
First economists have to interpret and articulate the incomplete specifications of goals and constraints provided by policy makers Machlup b. Those values need not be the same as the values that influence economic policy, but it is debatable whether the values that govern the activity of economists can be sharply distinguished from the values that govern policy makers. Third, much of economics is built around a normative theory of rationality. One can question whether the values implicit in such theories are sharply distinguishable from the values that govern policies.
For example, it may be difficult to hold a maximizing view of individual rationality, while at the same time insisting that social policy should resist maximizing growth, wealth, or welfare in the name of freedom, rights, or equality. There is evidence that studying theories that depict individuals as self-interested leads people to regard self-interested behavior more favorably and to become more self-interested Marwell and Ames , Frank et al. Positive and normative are especially interlinked within economics, because economists are not all researchers and teachers.
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The bitter polemics concerning macroeconomic policy responses to the great recession beginning in testify to the influence of ideology. Orthodox theoretical microeconomics is as much a theory of rational choices as it a theory that explains and predicts economic outcomes. Since virtually all economic theories that discuss individual choices take individuals as acting for reasons, and thus in some way rational, questions about the role that views of rationality and reasons should play in economics are of general importance.
Economists are typically concerned with the aggregate results of individual choices rather than with the actions of particular individuals, but their theories in fact offer both causal explanations for why individuals choose as they do and accounts of the reasons for their choices. See also the entries on methodological individualism and reasons for action: justification, motivation, explanation.
Explanations in terms of reasons have several features that distinguish them from explanations in terms of causes. Reasons can be evaluated, and they are responsive to criticism. Reasons, unlike causes, must be intelligible to those for whom they are reasons.
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On grounds such as these, many philosophers have questioned whether explanations of human action can be causal explanations von Wright , Winch Donald Davidson argued that what distinguishes the reasons that explain an action from the reasons that fail to explain it is that the former are also causes of the action. Although the account of rationality within economics differs in some ways from the folk psychology people tacitly invoke in everyday explanations of actions, many of the same questions carry over Rosenberg , ch.
An additional difference between explanations in terms of reasons and explanations in terms of causes, which some economists have emphasized, is that the beliefs and preferences that explain actions may depend on mistakes and ignorance Knight As a first approximation, economists can abstract from such difficulties caused by the intentionality of belief and desire. They thus often assume that people have perfect information about all the relevant facts. If people have perfect information, then they believe and expect whatever the facts are.
But once one goes beyond this first approximation, difficulties arise which have no parallel in the natural sciences.
Consider for example the stock market. In house prices in the U. They were excellent investments if one could sell them to others who would be willing to pay even more for them.
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Economists disagree about how significant this subjectivity is. Members of the Austrian school argue that these differences are of great importance and sharply distinguish theorizing about economics from theorizing about any of the natural sciences Buchanan and Vanberg , von Mises Of all the social sciences, economics most closely resembles the natural sciences. Economic theories have been axiomatized, and articles and books of economics are full of theorems. Of all the social sciences, only economics boasts an ersatz Nobel Prize. Economics is thus a test case for those concerned with the extent of the similarities between the natural and social sciences.
2. Six central methodological problems
Those who have wondered whether social sciences must differ fundamentally from the natural sciences seem to have been concerned mainly with three questions:. Some of these issues were already mentioned in the discussion above of reasons versus causes.
Philosophers and economists have argued that in addition to or instead of the predictive and explanatory goals of the natural sciences, the social sciences should aim at providing us with understanding. This and the closely related recognition that explanations cite reasons rather than just causes seems to introduce an element of subjectivity into the social sciences that is not found in the natural sciences.
Given human free will, perhaps human behavior is intrinsically unpredictable and not subject to any laws. But there are, in fact, many regularities in human action, and given the enormous causal complexity characterizing some natural systems, the natural sciences must cope with many irregularities, too. Economics raises questions concerning the legitimacy of severe abstraction and idealization.
For example, mainstream economic models often stipulate that everyone is perfectly rational and has perfect information or that commodities are infinitely divisible. Such claims are exaggerations, and they are clearly false. Other schools of economics may not employ idealizations that are this extreme, but there is no way to do economics if one is not willing to simplify drastically and abstract from many complications.
In addition, because economists attempt to study economic phenomena as constituting a separate domain, influenced only by a small number of causal factors, the claims of economics are true only ceteris paribus — that is, they are true only if there are no interferences or disturbing causes.
What are ceteris paribus clauses, and when if ever are they legitimate in science?
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Questions concerning ceteris paribus clauses are closely related to questions concerning simplifications and idealizations, since one way to simplify is to suppose that the various disturbing causes or interferences are inactive and to explore the consequences of some small number of causal factors. These issues and the related question of how well supported economics is by the evidence have been the central questions in economic methodology.
They will be discussed further below mainly in Section 3. Many important generalizations in economics are causal claims. For example, the law of demand asserts that a price increase will ceteris paribus diminish the quantity demanded. It does not merely assert an inverse relationship between price and demand.