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Showing posts with the label economics scope and nature

Decision Making as Output and Bounded Rationality

  The classical economics theories proceed on the assumption of rational agents. Rationality implies the economic agents undertake actions or exercise choices based on the cost-benefit analysis they undertake. The assumption further posits that there exists no information asymmetry and thus the agent is aware of all the costs and benefits associated with the choice he or she has exercised. The behavioral school contested the decision stating the decisions in practice are often irrational. Implied there is a continuous departure from rationality. Rationality in the views of the behavioral school is more an exception to the norm rather a rule. The past posts have discussed the limitations of this view by the behavioral school. Economics has often posited rationality in the context in which the choices are exercised rather than theoretical abstract view of rational action. Rational action in theory seems to be grounded in zero restraint situation yet in practice, there are numerous restra

Historical Evolution of Economics Theoretical Thought and Practice in Modern Times

In popular perception economics is about demand and supply. Nothing can be farther from the truth. The origin of the word economics can be traced to an ancient Greek word ‘oikonomikos’ which literally meant managing the household.  The French mercantilist thinkers at their peak expanded the definition into one of managing public administration laying the foundations of political economy. Mercantilists like James Stewart conceptualised economics as an art of providing for all wants of the family. In fact, the concept of reciprocal altruism can be traced in its anchors to mercantilist definitions of economics.  The objectives of funding a subsistence level of livelihood, providing employment to inhabitants, providing all necessities for secure livelihood by the state was essentially to create a set of related dependencies thus a motive for reciprocal altruism.  Adam Smith conceptualized economics in terms of national wealth. Therefore his understanding of economics was captured in