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Economics

Edited by Matthew Barnett last updated 24th Sep 2021

Economics is the social science that studies how humans and other agents interact in a universe with scarce resources. It deals with topics such as trade, specialization of labor, accumulation of capital, technology, and resource consumption. Agents in economics are generally assumed to have utility functions, which they try to maximize under various constraints.

Economics is usually separated into microeconomics and macroeconomics. Microeconomics concerns the behavior of agents as they interact in a market. More narrowly, it studies the price mechanism, a decentralized system of allocating goods and services based on an evolving system of prices and trade, which all actors in a market economy contribute towards. The price mechanism is closely related to the concept of the invisible hand, first introduced by Adam Smith. Game theory is the mathematical study of rational agency, which formalizes many standard results in microeconomics.

Macroeconomics concerns the aggregate behavior of entire economies. For example, it studies economic growth, inflation, international trade and unemployment. An ongoing debate concerns to what extent the impacts of artificial intelligence should be viewed through the lens of economics.

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