Reasoning within economic models. This process of reasoning (see the articles on informal logic, logical argument, fallacy) sometimes involves advanced mathematics. For instance, an established (though possibly unexamined) tradition among economists is to reason about economic variables in two-dimensional graphs in which curves representing relations between the axis variables are parameterized by various indices. A good example of this type of reasoning in Keynesian macroeconomics is the still commonly-used IS/LM model. Paul Samuelson's treatise Foundations of Economic Analysis examines the class of assertions called operationally meaningful theorems in economics, which are those that can be conceivably refuted by empirical data.[6] As usual in science, the conclusions obtained by reasoning have a predictive as well as confirmative (or dismissive) value. An example of the predictive value of economic theory is a prediction as to the effect of current deficits on interest rates 10 years into the future. An example of the confirmative value of economic theory would be confirmation (or dismissal) of theories concerning the relation between marginal tax rates and the deficit.
Economics typically employs two types of equations:
(1) Identity equations are used for defining how certain economic variables are calculated or related to each other. Identity equations are tautological in that the purpose is to define rather than to explain. An example is the value of national output, the price level times the quantity of output P*Q. Another example is Irving Fisher's equation of exchange P*Q = M*V. This relates the value of national output to the money supply and velocity of money. Given values of the other three terms in the equation, velocity V can be calculated.
(2) Descriptive equations are used to explain the behaviour of the economic agent(s) examined. For example, in the quantity theory of money, velocity in the equation of exchange is hypothesized to give a positive qualitative relation between the money supply M and value of output or the price level. The point is not that V is a constant but that it is stable enough for changes in the money supply to help explain changes in the value of output or the price level.
Economists often formulate very simple models in order to isolate the impact of just one variable changing, for example, the ceteris paribus ("other things equal") assumption, meaning that all other things are assumed not to change during the period of observation: for example, "If the price of movie tickets rises, ceteris paribus the demand for popcorn falls." It is, however, possible with the use of econometric methods to determine one relationship while removing much of the noise caused by other variables.
Formal modeling has been adapted to some extent by all branches of economics. It is motivated by general principles of consistency and completeness. It is not identical to what is often referred to as mathematical economics; this includes, but is not limited to, an attempt to set microeconomics, in particular general equilibrium, on solid mathematical foundations.
Some reject mathematical economics. The Austrian School of economics believes that anything beyond simple logic is likely unnecessary and inappropriate for economic analysis. In fact, the entire empirical-deductive method sketched in this section may be rejected outright by that school.
Still, much of modern economics employs the hypothetico-deductive method to explain real-world phenomena. Towards this end, economics has undergone a massive formalization of its concepts and methods. This has included extension of microeconomic methods to analysis of seemingly non-economic areas, sometimes called economic imperialism.
6.Development of economic thought.
Adam Smith, generally regarded as the Father of Economics, author of An Inquiry into the Nature and Causes of the Wealth of Nations, commonly known as The Wealth of Nations.
The term economics was coined around 1870 and popularized by influential "neoclassical" economists such as Alfred Marshall (Welfare definition), as a substitute for the earlier term political economy, which referred to "the economy of polities" - competing states.[citation needed] The term political economy was used through the 18th and 19th centuries, with Adam Smith, David Ricardo and Thomas Malthus as its main thinkers and which today is frequently referred to as the "classical" economic theory. Both "economy" and "economics" are derived from the Greek oikos- for "house" or "settlement", and nomos for "laws" or "norms".
Economic thought may be roughly divided into three phases: premodern (Greek, Roman, Arab), early modern (mercantilist, physiocrats) and modern (since Adam Smith in the late 18th century). Systematic economic theory has been developed mainly since the birth of the modern era. Joseph Schumpeter specifically credits the development of the scientific study of economics to the Late Scholastics, particularly those of 15th and 16th century Spain (see his History of Economic Analysis).
There have been different and competing schools of economic thought pertaining to capitalism from the late 18th Century to the present day. Important schools of thought include Mercantilism, Kameralism, physiocracy, classical economics, Manchester school, Austrian school, Marxian economics, and Chicago school.
Within macroeconomics there is, in general order of their appearance in the literature; classical economics, Keynesian economics, neo-classical synthesis, post-Keynesian economics, monetarism, new classical economics, and supply-side economics. New alternative developments include evolutionary economics, dependency theory, and world systems theory.
7. The system of economic relations.
Economics relations are divided into 2 blocs:
1. Organizational - economic relations
2. Socioeconomic relations (the relations of property).
1. The forms of organizational-economic relations:
-Division of labour, the specialization of a maker;
-The cooperation of labor - such form of organising of labor, in which a few persons participate in one or different processes connected between them. The labor cooperation generates new manufacturing force.
-The concentration of manufacturing and it centralization. Concentration - this increasing of the scale of enterprise at expense own resources. Centralization is a banding of enterprises.
-Organising of social economy - this natural and commodity economy.
-Control. The forms of control by economics: spontaneous-market planned.
2. Socioeconomics relations (the relations of property).
Socioeconomic relations - is a relations between people in the process of manufacturing, distributions, of exchange and consumption. Socioeconomics relations - it is relations between people in society apropos of material blessings and services, of their distribution and consumption between classes and social groups, between countries, enterprises or firms, indoor of enterprises, between shallow and large proprietors in city to and village. All system of economics relations is considered into relations, in their unity. The system of economics relations must correspond the development of manufacturing, in order to provide it development and efficient operation. Material manufacturing is the material basis of economic relations. Also is necessary to say that main factor of manufacturing is employee.
Conclusion.
The peculiarities of moderns world development inseparably are connected with processes arising in developed countries embracing the most of the states of world. Last two decades showed great differences in the economic development of two main subsystems. Breach in the levels of economic development industrial and developed countries increased. In its turn the processes of deepening of differentiation arise in the subsystem of developed world. The main accession of treating industry, of the export of finished articles was provided the small group of new industrial countries (NIC). The increase of their role not only result of differences in factors and the conditions of the development of this countries but also influence ons them exterior circumstances.
Enormous gaps in the levels of economic development in worlds economics system does not contribute its structural development, to the gain in performance of world manufacturing to and the support of the tempoes of economics development. This problems accord serious influence on international economic life and require its deciding.
Bibliography.
1. Makkonnell K., Briu S., «Ekonomix: Principles, problems and politics», Tallin, 1995.
2. Volkov F., Borisov E. «The bases of economics theory», Moscow, 1993 г.
3. World economics. Under the editorship V.A.Lomakins, Moscow, 1995.
Active vocabulary.
creation - Создание
obtaining - Приобретение
consumption - Потребление
exchange - Обмен
activitiy - Деятельность
knowledge - Знание
essence - Сущность
formation - Формирование
capitalism - Капитализм
directions - Направления
determined - Определенный
thought - Мысль
ancientness - Древность
mercantilismes - Меркантилизм
physiocratismes - Физиократизм
bourgeoisly - Буржуазно
proletarian - Пролетарий
row of scientific - развитие науки
imperialism - Империализм
dying - Умирая
utility - Полезность
maintained - Поддержанный
limitedness - Ограниченность
fetch - Принoсить
added up - Суммированный
efficiency - Производительность
abstention - Воздержание
Handled - Регулировать
growth - Увеличение
passes - Пропуски
payments - Платежи
perform - Произведить
situates - Располагать
blessings - блага
Industrial - развитые (индустриальная)
Developed - развивающаяся
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