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An economy (; ) is an area of the
production Production may be: Economics and business * Production (economics) * Production, the act of manufacturing goods * Production, in the outline of industrial organization, the act of making products (goods and services) * Production as a statistic, g ...
,
distributionDistribution may refer to: Mathematics *Distribution (mathematics) Distributions, also known as Schwartz distributions or generalized functions, are objects that generalize the classical notion of functions in mathematical analysis. Distr ...
and
trade Trade involves the transfer of goods from one person or entity to another, often in exchange for money. Economists refer to a system A system is a group of Interaction, interacting or interrelated elements that act according to a set of ru ...

trade
, as well as
consumption Consumption may refer to: *Resource consumption *Tuberculosis, an infectious disease, historically in biology: * Consumption (ecology), receipt of energy by consuming other organisms in social sciences: * Consumption (economics), the purchasing of ...
of
goods In economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods ...
and
services Service may refer to: Activities :''(See the Religion section for religious activities)'' * Administrative service, a required part of the workload of Faculty (academic staff), university faculty * Civil service, the body of employees of a governm ...
by different agents. In general, it is defined 'as a social domain that emphasize the practices, discourses, and material expressions associated with the production, use, and management of scarce resources'. A given economy is a set of processes that involves its culture, values, education, technological evolution, history, social organization, political structure and legal systems, as well as its geography, natural resource endowment, and ecology, as main factors. These factors give context, content, and set the conditions and parameters in which an economy functions. In other words, the economic domain is a social domain of interrelated human practices and transactions that does not stand alone. Economic agents can be individuals, businesses, organizations, or governments. Economic transactions occur when two groups or parties agree to the value or price of the transacted good or service, commonly expressed in a certain
currency A currency, "in circulation", from la, currens, -entis, literally meaning "running" or "traversing" in the most specific sense is money Image:National-Debt-Gillray.jpeg, In a 1786 James Gillray caricature, the plentiful money bags handed t ...
. However, monetary transactions only account for a small part of the economic domain. Economic activity is spurred by production which uses natural resources, labor and capital. It has changed over time due to
technology Technology ("science of craft", from Ancient Greek, Greek , ''techne'', "art, skill, cunning of hand"; and , ''wikt:-logia, -logia'') is the sum of any Art techniques and materials, techniques, skills, Scientific method, methods, and Business ...

technology
,
innovation 190px, Thomas Edison with phonograph. Edison was one of the most prolific inventors in history, holding List of Edison patents, 1,093 U.S. patents in his name. Innovation is the practical implementation of ideas that result in the introduction ...

innovation
(new products, services, processes, expanding markets, diversification of markets, niche markets, increases revenue functions) such as, that which produces intellectual property and changes in industrial relations (most notably
child labor Child labour ( British English) or child labor (American English American English (AmE, AE, AmEng, USEng, en-US), sometimes called United States English or U.S. English, is the set of varieties of the English language native to the Un ...
being replaced in some parts of the world with
universal access to education Universal access to education Education is the process of facilitating learning, or the acquisition of knowledge, skills, value (ethics), values, morals, beliefs, and habits. Educational methods include teaching, training, storytelli ...
). A
market-based economy A market economy is an economic system in which the decisions regarding investment To invest is to allocate money Image:National-Debt-Gillray.jpeg, In a 1786 James Gillray caricature, the plentiful money bags handed to King George III ar ...
is one where
goods In economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods ...
and
services Service may refer to: Activities :''(See the Religion section for religious activities)'' * Administrative service, a required part of the workload of Faculty (academic staff), university faculty * Civil service, the body of employees of a governm ...
are produced and exchanged according to
demand In economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods ...
and
supply Supply may refer to: *The amount of a resource A resource is a source or supply from which a benefit is produced and that has some utility. Resources can broadly be classified upon their availability — they are classified into renewable and ...
between participants (economic agents) by
barter In trade, barter (derived from ''baretor'') is a system of exchange (economics), exchange in which participants in a financial transaction, transaction directly exchange good (economics), goods or service (economics), services for other goods or ...

barter
or a
medium of exchange Medium of exchange is a term in economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumption (econo ...
with a
credit px, Domestic credit to private sector in 2005 Credit (from Latin Latin (, or , ) is a classical language belonging to the Italic languages, Italic branch of the Indo-European languages. Latin was originally spoken in the area around Rome, kn ...
or
debit Debits and credits in double entry bookkeeping are entries made in account ledger A ledger is a book or collection of accounts in which account transactions are recorded. Each account has an opening or carry-forward balance, would record tr ...
value Value or values may refer to: * Value (ethics) it may be described as treating actions themselves as abstract objects, putting value to them ** Values (Western philosophy) expands the notion of value beyond that of ethics, but limited to Western s ...
accepted within the network, such as a unit of currency. A command-based economy is one where political agents directly control what is produced and how it is sold and distributed. A
green economy A green economy is an economy An economy (from Greek language, Greek οίκος – "household" and νέμoμαι – "manage") is an area of the Production (economics), production, Distribution (economics), distribution and trade, as well as ...
is
low-carbon A low-carbon economy (LCE), low-fossil-fuel economy (LFFE), or decarbonised economy is an economy An economy (from Greek language, Greek οίκος – "household" and νέμoμαι – "manage") is an area of the Production (economics), produ ...
, resource efficient and socially inclusive. In a green economy, growth in income and employment is driven by public and private investments that reduce carbon emissions and pollution, enhance
energy In physics, energy is the physical quantity, quantitative physical property, property that must be #Energy transfer, transferred to a physical body, body or physical system to perform Work (thermodynamics), work on the body, or to heat it. En ...
and
resource efficiencyResource efficiency is the maximising of the supply of money, materials, staff, and other assets that can be drawn on by a person or organization in order to function effectively, with minimum waste Waste (or wastes) are unwanted or unusable m ...
, and prevent the
loss of biodiversity Biodiversity loss includes the extinction of species worldwide, as well as the local reduction or loss of species in a certain habitat, resulting in a loss of biological diversity. The latter phenomenon can be temporary or permanent, depending on w ...
and
ecosystem services File:Mothugudem road near Chintoor.jpg, Social forestry in India, Social forestry in Andhra Pradesh, India, providing fuel, soil protection, shade and even well-being to travellers. Ecosystem services are the many and varied benefits to humans ...
. A
gig economy Gig workers are independent contractors An independent contractor is a person, business, or corporation that provides good (accounting), goods or Service (economics), services under a written contract or a oral contract, verbal agreement. Unlike e ...
is one in which short-term jobs are assigned or chosen via online platforms. New economy is a term that referred to the whole emerging ecosystem where new standards and practices were introduced, usually as a result of technological innovations. The
global economy The world economy or the global economy is the economy of all humans of the world, referring to the global economic system which includes all economic activities which are conducted both within and between nation A nation is a community of peop ...
refers to humanity's economic system or systems overall.


Range

Today the range of fields of study examining the economy revolves around the
social science Social science is the Branches of science, branch of science devoted to the study of society, societies and the Social relation, relationships among individuals within those societies. The term was formerly used to refer to the field of sociol ...

social science
of
economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services. ...
, but may include
sociology Sociology is a social science Social science is the Branches of science, branch of science devoted to the study of society, societies and the Social relation, relationships among individuals within those societies. The term was formerly ...
(
economic sociology Economic sociology is the study of the social cause and effect of various economic phenomena. The field can be broadly divided into a classical period and a contemporary one, known as "New economic sociology". The classical period was concerned ...
),
history History (from Greek Greek may refer to: Greece Anything of, from, or related to Greece Greece ( el, Ελλάδα, , ), officially the Hellenic Republic, is a country located in Southeast Europe. Its population is approximately 10.7 millio ...

history
(
economic history Economic history is the academic study of economies or economic events of the past. Research is conducted using a combination of historical methods, statistical methods and the application of economic theory to historical situations and insti ...
),
anthropology Anthropology is the scientific study of human Humans (''Homo sapiens'') are the most populous and widespread species of primates, characterized by bipedality, opposable thumbs, hairlessness, and intelligence allowing the use of culture ...
(
economic anthropology Economic anthropology is a field that attempts to explain human economic behavior in its widest historic, geographic and cultural scope. It is an amalgamation of economics Economics () is the social science that studies how people intera ...
), and
geography Geography (from Greek: , ''geographia'', literally "earth description") is a field of science devoted to the study of the lands, features, inhabitants, and phenomena of the Earth and planets. The first person to use the word γεωγρα ...

geography
(
economic geography Economic geography is the subfield of human geography which studies economic activity and factors affecting them. It can also be considered a subfield or method in economics Economics () is a social science that studies the Production ...
). Practical fields directly related to the human activities involving
production Production may be: Economics and business * Production (economics) * Production, the act of manufacturing goods * Production, in the outline of industrial organization, the act of making products (goods and services) * Production as a statistic, g ...
,
distributionDistribution may refer to: Mathematics *Distribution (mathematics) Distributions, also known as Schwartz distributions or generalized functions, are objects that generalize the classical notion of functions in mathematical analysis. Distr ...
,
exchange Exchange may refer to: Places United States * Exchange, Indiana Exchange is an Unincorporated area, unincorporated community in Green Township, Morgan County, Indiana, Green Township, Morgan County, Indiana, Morgan County, in the U.S. state of In ...

exchange
, and
consumption Consumption may refer to: *Resource consumption *Tuberculosis, an infectious disease, historically in biology: * Consumption (ecology), receipt of energy by consuming other organisms in social sciences: * Consumption (economics), the purchasing of ...
of
goods and services Goods are items that are usually (but not always) tangible, such as pens, salt, apples, and hats. Services are activities provided by other people, who include doctors, lawn care workers, dentists, barbers, waiters, or online servers, a book, a ...
as a whole are
engineering Engineering is the use of scientific method, scientific principles to design and build machines, structures, and other items, including bridges, tunnels, roads, vehicles, and buildings. The discipline of engineering encompasses a broad rang ...

engineering
,
management Management (or managing) is the administration of an organization, whether it is a business, a not-for-profit, non-profit organization, or a government body. It is the art and science of managing resources. Management includes the activities o ...

management
,
business administration Business administration (also known as business management) is the administration of a commercial enterprise. It includes all aspects of overseeing and supervising business operations. From the point of view of management Management (or man ...
,
applied science Applied science is the use of the scientific method The scientific method is an Empirical evidence, empirical method of acquiring knowledge that has characterized the development of science since at least the 17th century. It involves caref ...
, and
finance Finance is the study of financial institutions, financial markets and how they operate within the financial system. It is concerned with the creation and management of money and investments. Savers and investors have money available which could ...

finance
. All
profession A Profession is a disciplined group of individuals who adhere to ethical standards and who hold themselves out as, and are accepted by the public as possessing special knowledge and skills in a widely recognised body of learning derived from re ...

profession
s, occupations,
economic agent In economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods a ...
s or economic activities, contribute to the economy.
Consumption Consumption may refer to: *Resource consumption *Tuberculosis, an infectious disease, historically in biology: * Consumption (ecology), receipt of energy by consuming other organisms in social sciences: * Consumption (economics), the purchasing of ...
,
saving Saving is income not spent, or deferred consumption. Methods of saving include putting money aside in, for example, a deposit account, a pension account, an investment fund, or as cash In economics Economics () is the social scie ...
, and
investment Investment is the dedication of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money, or effort. In finance Finance is the study of financial institutions ...

investment
are variable components in the economy that determine macroeconomic equilibrium. There are three main sectors of economic activity:
primary Primary or primaries may refer to: Arts, entertainment, and media Music Groups and labels * Primary (band), from Australia * Primary (musician), hip hop musician and record producer from South Korea * Primary Music, Israeli record label Works * ...
,
secondary Secondary is an adjective meaning "second" or "second hand". It may refer to: * Secondary (chemistry), term used in organic chemistry to classify various types of compounds * The group of (usually at least four) defensive backs in gridiron football ...
, and
tertiary Tertiary ( ) is a widely used but obsolete term for the Period (geology), geologic period from 66 million to 2.6 million years ago. The period began with the demise of the non-bird, avian dinosaurs in the Cretaceous–Paleogene extincti ...
. Due to the growing importance of the financial sector in modern times, the term ''real economy'' is used by analysts as well as politicians to denote the part of the economy that is concerned with the actual production of goods and services, as ostensibly contrasted with the ''paper economy'', or the financial side of the economy, which is concerned with buying and selling on the financial markets. Alternate and long-standing terminology distinguishes measures of an economy expressed in
real Real may refer to: * Reality Reality is the sum or aggregate of all that is real or existent within a system, as opposed to that which is only Object of the mind, imaginary. The term is also used to refer to the ontological status of things, ind ...
values (adjusted for
inflation In economics, inflation refers to a general progressive increase in prices of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a r ...

inflation
), such as
real GDP Real gross domestic product (real GDP) is a macroeconomic measure of the value of economic output adjusted for price changes (i.e. inflation or deflation). This adjustment transforms the money-value measure, nominal GDP, into an index Index m ...
, or in nominal values (unadjusted for inflation).


Etymology

The
English English usually refers to: * English language English is a West Germanic languages, West Germanic language first spoken in History of Anglo-Saxon England, early medieval England, which has eventually become the World language, leading lan ...

English
words "economy" and "
economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services. ...
" can be traced back to the
Greek#REDIRECT Greek Greek may refer to: Greece Anything of, from, or related to Greece Greece ( el, Ελλάδα, , ), officially the Hellenic Republic, is a country located in Southeast Europe. Its population is approximately 10.7 million as of ...
word (i.e. "household management"), a composite word derived from ("house;household;home") and νέμω ("manage; distribute;to deal out;dispense") by way of ("household management"). The first recorded sense of the word "economy" is in the phrase "the management of œconomic affairs", found in a work possibly composed in a monastery in 1440. "Economy" is later recorded in more general senses, including "thrift" and "administration". The most frequently used current sense, denoting "the economic system of a country or an area", seems not to have developed until the 1650s.


History


Ancient times

As long as someone has been making, supplying and distributing goods or services, there has been some sort of economy; economies grew larger as societies grew and became more complex.
Sumer Sumer ()The name is from AkkadianAkkadian or Accadian may refer to: * The Akkadian language Akkadian ( ''akkadû'', ''ak-ka-du-u2''; logogram: ''URIKI'')John Huehnergard & Christopher Woods, "Akkadian and Eblaite", ''The Cambridge Encyclo ...

Sumer
developed a large-scale economy based on
commodity money Commodity money is money Image:National-Debt-Gillray.jpeg, In a 1786 James Gillray caricature, the plentiful money bags handed to King George III are contrasted with the beggar whose legs and arms were amputated, in the left corner, 174x174px ...
, while the
Babylonians Babylonia () was an ancient Akkadian-speaking state and cultural area based in central-southern Mesopotamia Mesopotamia ( ar, بِلَاد ٱلرَّافِدَيْن '; grc, Μεσοποταμία; Syriac language, Classical Syriac: ...
and their neighboring
city states A city-state is an independent sovereign Sovereign is a title which can be applied to the highest leader in various categories. The word is borrowed from Old French ''souverain'', which is ultimately derived from the Latin word ''superānus'' ...
later developed the earliest system of
economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services. ...
as we think of, in terms of rules/laws on
debt Debt is an obligation that requires one party, the debtor A debtor or debitor is a legal entity (legal person) that owes a debt Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to ...

debt
, legal contracts and law codes relating to business practices, and private property.Sheila C. Dow (2005), "Axioms and Babylonian thought: a reply", ''Journal of Post Keynesian Economics'' 27 (3), p. 385-391. The Babylonians and their city state neighbors developed forms of economics comparable to currently used civil society (law) concepts. They developed the first known codified legal and administrative systems, complete with courts, jails, and government records. The ancient economy was mainly based on
subsistence farming Subsistence agriculture occurs when farmer A farmer (also called an agriculturer) is a person engaged in agriculture Agriculture is the science, art and practice of cultivating plants and livestock. Agriculture was the key development ...
. The
Shekel Shekel or sheqel ( akk, 𒅆𒅗𒇻 ''šiqlu'' or ''siqlu,'' he, שקל, plural or shekels, Phoenician: ) is an ancient Near Eastern coin, usually of silver Silver is a chemical element Image:Simple Periodic Table Chart-blocks.sv ...
referred to an ancient unit of weight and currency. The first usage of the term came from
Mesopotamia Mesopotamia ( grc, Μεσοποταμία ''Mesopotamíā''; ar, بِلَاد ٱلرَّافِدَيْن ; syc, ܐܪܡ ܢܗܪ̈ܝܢ, or , ) is a historical region of Western Asia situated within the Tigris–Euphrates river system, in the ...

Mesopotamia
circa 3000 BC. and referred to a specific mass of
barley Barley (''Hordeum vulgare''), a member of the grass family Poaceae () or Gramineae () is a large and nearly ubiquitous family In human society, family (from la, familia) is a group of people related either by consanguinity (by recogn ...

barley
which related other values in a
metric METRIC (Mapping EvapoTranspiration at high Resolution with Internalized Calibration) is a computer model Computer simulation is the process of mathematical modelling, performed on a computer, which is designed to predict the behaviour of or th ...
such as silver, bronze, copper etc. A barley/shekel was originally both a unit of
currency A currency, "in circulation", from la, currens, -entis, literally meaning "running" or "traversing" in the most specific sense is money Image:National-Debt-Gillray.jpeg, In a 1786 James Gillray caricature, the plentiful money bags handed t ...
and a unit of weight, just as the British Pound was originally a unit denominating a one-pound mass of silver. For most people, the exchange of goods occurred through social relationships. There were also traders who bartered in the marketplaces. In
Ancient Greece Ancient Greece ( el, Ἑλλάς, Hellás) was a civilization belonging to a period of History of Greece, Greek history from the Greek Dark Ages of the 12th–9th centuries BC to the end of Classical Antiquity, antiquity ( AD 600). This era was ...
, where the present English word 'economy' originated, many people were bond slaves of the freeholders. The economic discussion was driven by
scarcity Scarcity as an economic concept "refers to the basic fact of life that there exists only a finite amount of human and nonhuman resources which the best technical knowledge is capable of using to produce only limited maximum amounts of each econom ...
.


Middle ages

In
Medieval In the history of Europe The history of Europe concerns itself with the discovery and collection, the study, organization and presentation and the interpretation of past events and affairs of the people of Europe since the beginning of w ...

Medieval
times, What is now known as an economy was not far from the subsistence level. Most exchange occurred within
social groups Social organisms, including humans, live collectively in interacting populations. This interaction is considered social whether they are aware of it or not, and whether the exchange is voluntary/involuntary. Etymology The word "Social" derives fr ...
. On top of this, the great conquerors raised what we now call
venture capital Venture capital (VC) is a form of private equity Private equity (PE) typically refers to investment funds, generally organized as limited partnerships, that buy and restructure companies that are not publicly traded. Private equity is a typ ...
(from ''ventura'', ital.; ''risk'') to finance their captures. The
capital Capital most commonly refers to: * Capital letter Letter case (or just case) is the distinction between the letters that are in larger uppercase or capitals (or more formally ''majuscule'') and smaller lowercase (or more formally ''minusc ...
should be refunded by the goods they would bring up in the
New World The "New World" is a term for the majority of Earth Earth is the third planet from the Sun and the only astronomical object known to harbour and support life. 29.2% of Earth's surface is land consisting of continents and islands. The rem ...
. The discoveries of
Marco Polo Marco Polo (, , ; September 15, 1254January 8, 1324) was a Venetian merchant, explorer, and writer who travelled through Asia along the Silk Road The Silk Road was and is a network of trade routes connecting the Eastern world, East and W ...

Marco Polo
(1254–1324),
Christopher Columbus Christopher Columbus * lij, Cristoffa C(or)ombo * es, Cristóbal Colón * pt, Cristóvão Colombo * ca, Cristòfor (or ) * la, Christophorus Columbus. (; born between 25 August and 31 October 1451, died 20 May 1506) was an Italian ...

Christopher Columbus
(1451–1506) and
Vasco da Gama Vasco da Gama, 1st Count of Vidigueira (, ; ; c. 1460s – 24 December 1524), was a Portugal in the Age of Discovery, Portuguese explorer and the first European to reach India by sea. His initial voyage to India by way of Cape of Good Hope (1 ...

Vasco da Gama
(1469–1524) led to a first
global Global means of or referring to a globe A globe is a spherical physical model, model of Earth, of some other astronomical object, celestial body, or of the celestial sphere. Globes serve purposes similar to some maps, but unlike maps, do not dis ...

global
economy. The first
enterprises
enterprises
were trading establishments. In 1513, the first
stock exchange A stock exchange, securities exchange, or bourse is an Exchange (organized market), exchange where stockbrokers and stock trader, traders can buy and sell security (finance), securities, such as share (finance), shares of stock, Bond (finance), ...
was founded in
Antwerp Antwerp (; nl, Antwerpen ; french: Anvers ) is a city in Belgium and the capital of Antwerp (province), Antwerp province in the Flemish Region. With a population of 520,504,
Antwerp
. Economy at the time meant primarily
trade Trade involves the transfer of goods from one person or entity to another, often in exchange for money. Economists refer to a system A system is a group of Interaction, interacting or interrelated elements that act according to a set of ru ...

trade
.


Early modern times

The European captures became branches of the
Europe Europe is a continent A continent is one of several large landmasses. Generally identified by convention (norm), convention rather than any strict criteria, up to seven regions are commonly regarded as continents. Ordered from largest ...

Europe
an states, the so-called
colonies In political science, a colony is a territory subject to a form of foreign rule. Though dominated by the foreign colonizers, colonies remain separate from the administration of the original country of the colonizers, the metropole, metropolitan ...
. The rising
nation-state A nation state is a political unit where the state State may refer to: Arts, entertainment, and media Literature * ''State Magazine'', a monthly magazine published by the U.S. Department of State * The State (newspaper), ''The State'' (newsp ...
s
Spain , * gl, Reino de España, * oc, Reiaume d'Espanha, , , image_flag = Bandera de España.svg , image_coat = Escudo de España (mazonado).svg , national_motto = , national_anthem = , image_map = , map_caption = , image_ ...

Spain
,
Portugal Portugal, officially the Portuguese Republic ( pt, República Portuguesa, links=yes ), is a sovereign state, country whose mainland is located on the Iberian Peninsula, in Southern Europe, Southwestern Europe, and whose territory also includ ...

Portugal
,
France France (), officially the French Republic (french: link=no, République française), is a country primarily located in Western Europe, consisting of metropolitan France and Overseas France, several overseas regions and territories. The metro ...

France
,
Great Britain Great Britain is an island in the North Atlantic Ocean off the northwest coast of continental Europe. With an area of , it is the largest of the British Isles, the List of European islands by area, largest European island, and the List of i ...

Great Britain
and the
Netherlands The Netherlands ( nl, Nederland ), informally referred to as Holland, is a country primarily located in Western Europe and partly in the Dutch Caribbean, Caribbean. It is the largest of four Kingdom of the Netherlands#Constituent countries, cons ...

Netherlands
tried to control the trade through
custom duties Customs is an authority In the fields of sociology Sociology is the study of society, human social behaviour, patterns of social relationships, social interaction, and culture that surrounds everyday life. It is a social science that uses ...
and (from ''mercator'', lat.:
merchant A merchant is a person who trades in Commodity, commodities produced by other people, especially one who trades with foreign countries. Historically, a merchant is anyone who is involved in commerce, business or trade. Merchants have operated for ...

merchant
) was a first approach to intermediate between private wealth and
public interest The public interest is "the welfare or well-being Well-being, also known as ''wellness'', ''prudential value'' or ''quality of life'', refers to what is intrinsically valuable relative ''to'' someone. So the well-being of a person is what ...
. The
secularization In sociology Sociology is a social science Social science is the Branches of science, branch of science devoted to the study of society, societies and the Social relation, relationships among individuals within those societies. The ter ...
in Europe allowed states to use the immense property of the church for the development of towns. The influence of the
nobles Nobility is a social class normally ranked immediately below royalty and found in some societies that have a formal aristocracy Aristocracy ( grc-gre, ἀριστοκρατία , from 'excellent', and , 'rule') is a form of governme ...

nobles
decreased. The first Secretaries of State for economy started their work.
Bankers A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets. Beca ...

Bankers
like
Amschel Mayer Rothschild Baron Amschel Mayer von Rothschild (12 June 1773 – 6 December 1855) was a German Jewish The history of the Jews in Germany goes back at least to the year 321, and continued through the Early Middle Ages (5th to 10th centuries CE) and High Mi ...

Amschel Mayer Rothschild
(1773–1855) started to finance national projects such as wars and
infrastructure Infrastructure is the set of fundamental facilities and systems that support the sustainable functionality of households and firms. Serving a country, city, or other area, including the services and facilities necessary for its economy An eco ...

infrastructure
. Economy from then on meant national economy as a topic for the economic activities of the
citizens Citizenship is a relationship between an individual and a state to which the individual owes allegiance and in turn is entitled to its protection. Each state determines the conditions under which it will recognize persons as its citizens, and th ...

citizens
of a state.


Industrial Revolution

The first
economist An economist is a professional and practitioner in the social science Social science is the Branches of science, branch of science devoted to the study of society, societies and the Social relation, relationships among individuals within t ...

economist
in the true modern meaning of the word was the Scotsman
Adam Smith Adam Smith ( 1723 – 17 July 1790) was a Scottish economist, philosopher as well as a Ethics, moral philosopher, a pioneer of political economy, and a key figure during the Scottish Enlightenment, also known as ''The Father of Economics'' * ...

Adam Smith
(1723–1790) who was inspired partly by the ideas of
physiocracy , a physician who is considered the founding father of physiocracy, published the "Tableau économique" (Economic Table) in 1758 Image:Pierre Samuel du Pont de Nemours (1739-1817).png, Pierre Samuel du Pont de Nemours, a prominent physiocrat. In ...
, a reaction to mercantilism and also later Economics student, Adam Mari. He defined the elements of a national economy:
products Product may refer to: Business * Product (business), an item that serves as a solution to a specific consumer problem. * Product (project management), a deliverable or set of deliverables that contribute to a business solution Mathematics * Produc ...
are offered at a natural price generated by the use of
competition Competition is a rivalry A rivalry is the state of two people or groups engaging in a lasting competitive relationship. Rivalry is the "against each other" spirit between two competing sides. The relationship itself may also be called "a riv ...
-
supply and demand In microeconomics, supply and demand is an economic model In economics, a model is a theory, theoretical construct representing economic wikt:process, processes by a set of Variable (mathematics), variables and a set of logical and/or quant ...

supply and demand
- and the
division of labor The division of labour is the separation of tasks in any economic system or organisation An organization, or organisation ( Commonwealth English; see spelling differences), is an entity – such as a company A company, abbreviated a ...
. He maintained that the basic motive for
free trade Free trade is a trade policy A commercial policy (also referred to as a trade policy or international trade policy) is a government's policy governing international trade International trade is the exchange of capital, goods, and service ...
is human self-interest. The so-called self-interest hypothesis became the
anthropological Anthropology is the scientific study of human Humans (''Homo sapiens'') are the most populous and widespread species of primates, characterized by bipedality, opposable thumbs, hairlessness, and intelligence allowing the use of culture, ...
basis for economics.
Thomas Malthus Thomas Robert Malthus (; 13/14 February 1766 – 23 December 1834) was an English cleric Clergy are formal leaders within established religion Religion is a social system, social-cultural system of designated religious behaviour, beh ...

Thomas Malthus
(1766–1834) transferred the idea of supply and demand to the problem of
overpopulation Overpopulation or overabundance occurs when a species' population In biology, a population is a number of all the organisms of the same group or species In biology, a species is the basic unit of biological classification, classifica ...
. The
Industrial Revolution The Industrial Revolution was the transition to new manufacturing processes in Great Britain, continental Europe Mainland or continental Europe is the contiguous continent of Europe, excluding its surrounding islands. It can also be ...
was a period from the 18th to the 19th century where major changes in
agriculture Agriculture is the science, art and practice of cultivating plants and livestock. Agriculture was the key development in the rise of sedentism, sedentary human civilization, whereby farming of domestication, domesticated species created food ...

agriculture
,
manufacturing Manufacturing is the creation or Production (economics), production of goods with the help of equipment, Work (human activity), labor, machines, tools, and chemical or biological processing or formulation. It is the essence of secondary sector ...
,
mining Mining is the extraction of valuable minerals or other geological materials from the Earth, usually from an ore body, lode, vein, seam, reef, or placer deposit. These deposits form a mineralized commodity that is of economic interest to t ...

mining
, and
transport Transport (commonly used in the U.K.), or transportation (used in the U.S.), is the Motion, movement of humans, animals and cargo, goods from one location to another. In other words, the action of transport is defined as a particular movement ...

transport
had a profound effect on the socioeconomic and cultural conditions starting in the
United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain,Usage is mixed. The Guardian' and Telegraph' use Britain as a synonym for the United Kingdom. Some prefer to use Britain as shortha ...

United Kingdom
, then subsequently spreading throughout
Europe Europe is a continent A continent is one of several large landmasses. Generally identified by convention (norm), convention rather than any strict criteria, up to seven regions are commonly regarded as continents. Ordered from largest ...

Europe
,
North America North America is a continent entirely within the Northern Hemisphere and almost all within the Western Hemisphere. It can also be described as the northern subcontinent of the Americas. It is bordered to the north by the Arctic Ocean, to ...

North America
, and eventually the
world In its most general sense, the term "world" refers to the totality of entities, to the whole of reality or to everything that is. The nature of the world has been conceptualized differently in different fields. Some conceptions see the world ...

world
. The onset of the Industrial Revolution marked a major turning point in human history; almost every aspect of daily life was eventually influenced in some way. In Europe wild
capitalism Capitalism is an economic system An economic system, or economic order, is a system of Production (economics), production, allocation of resources, resource allocation and Distribution (economics), distribution of goods and services within ...

capitalism
started to replace the system of
mercantilism Mercantilism is an economic policy The economic policy of governments covers the systems for setting levels of taxation, government budgets, the money supply and interest rates as well as the labour market, nationalization, national owner ...

mercantilism
(today:
protectionism Protectionism is the economic policy The economic policy of governments covers the systems for setting levels of taxation, government budgets, the money supply and interest rates as well as the labour market, nationalization, national o ...
) and led to
economic growth Economic growth can be defined as the increase or improvement in the inflation-adjusted market value Market may refer to: *Market (economics) A market is a composition of system A system is a group of Interaction, interacting or interrela ...

economic growth
. The period today is called
industrial revolution The Industrial Revolution was the transition to new manufacturing processes in Great Britain, continental Europe Mainland or continental Europe is the contiguous continent of Europe, excluding its surrounding islands. It can also be ...
because the system of
Production Production may be: Economics and business * Production (economics) * Production, the act of manufacturing goods * Production, in the outline of industrial organization, the act of making products (goods and services) * Production as a statistic, g ...
, production and
division of labor The division of labour is the separation of tasks in any economic system or organisation An organization, or organisation ( Commonwealth English; see spelling differences), is an entity – such as a company A company, abbreviated a ...
enabled the
mass production Mass production, also known as flow production or continuous production, is the production of substantial amounts of standardized Standardization or standardisation is the process of implementing and developing technical standard A technic ...
of
goods In economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods ...
.


Recognition of the concept of "the economy"

The contemporary concept of "the economy" wasn't popularly known until the American
Great Depression The Great Depression was a severe worldwide economic depression that took place mostly during the 1930s, beginning Great Depression in the United States, in the United States. The timing of the Great Depression varied around the world; in mos ...
in the 1930s. After the chaos of two
World War A world war is "a war War is an intense armed conflict between states, government A government is the system or group of people governing an organized community, generally a State (polity), state. In the case of its broad ...
s and the devastating Great Depression, policymakers searched for new ways of controlling the course of the economy. This was explored and discussed by Friedrich August von Hayek (1899–1992) and
Milton Friedman Milton Friedman (; July 31, 1912 – November 16, 2006) was an American economist An economist is a practitioner in the social sciences, social science discipline of economics. The individual may also study, develop, and apply theories and c ...

Milton Friedman
(1912–2006) who pleaded for a global
free trade Free trade is a trade policy A commercial policy (also referred to as a trade policy or international trade policy) is a government's policy governing international trade International trade is the exchange of capital, goods, and service ...
and are supposed to be the fathers of the so-called
neoliberalism Neoliberalism, or neo-liberalism, is a term used to describe the 20th-century resurgence of 19th-century ideas associated with free-market In economics Economics () is the social science that studies how people interact with value; ...

neoliberalism
. However, the prevailing view was that held by
John Maynard Keynes John Maynard Keynes, 1st Baron Keynes, ( ; 5 June 1883 – 21 April 1946) was an English economist, whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments. Originally trained in mat ...

John Maynard Keynes
(1883–1946), who argued for a stronger control of the
market Market may refer to: *Market (economics) *Market economy *Marketplace, a physical marketplace or public market Geography *Märket, an island shared by Finland and Sweden Art, entertainment, and media Films *Market (1965 film), ''Market'' (1965 ...
s by the state. The theory that the state can alleviate economic problems and instigate economic growth through state manipulation of aggregate demand is called Keynesianism in his honor. In the late 1950s, the economic growth in America and Europe—often called
Wirtschaftswunder The term ''Wirtschaftswunder'' (, "economic miracle"), also known as the Miracle on the Rhine, describes the rapid reconstruction and development of the economies of West Germany ) , capital = Bonnf , largest_city ...
(ger: ''economic miracle'') —brought up a new form of economy: mass consumption economy. In 1958, John Kenneth Galbraith (1908–2006) was the first to speak of an affluent society. In most of the countries the economic system is called a social market economy.


Late 20th – beginning of 21st century

With revolutions of 1989, the fall of the Iron Curtain and the transition of the countries of the Eastern Bloc towards democratic government and market economies, the idea of the post-industrial society is brought into importance as its role is to mark together the significance that the service sector receives instead of industrialization. Some attribute the first use of this term to Daniel Bell's 1973 book, ''The Coming of Post-Industrial Society'', while others attribute it to social philosopher Ivan Illich's book, ''Tools for Conviviality''. The term is also applied in philosophy to designate the fading of postmodernism in the late 90s and especially in the beginning of the 21st century. With the spread of Internet as a mass media and communication medium especially after 2000-2001, the idea for the Internet and information economy is given place because of the growing importance of e-commerce and electronic businesses, also the term for a global information society as understanding of a new type of "all-connected" society is created. In the late 2000s, the new type of economies and economic expansions of countries like China, Brazil, and India bring attention and interest to different from the usually dominating Western type economies and economic models.


Economic phases of precedence

The economy may be considered as having developed through the following phases or degrees of precedence. * The Ancient history, ancient economy was mainly based on subsistence economy, subsistence farming. * The
industrial revolution The Industrial Revolution was the transition to new manufacturing processes in Great Britain, continental Europe Mainland or continental Europe is the contiguous continent of Europe, excluding its surrounding islands. It can also be ...
phase lessened the role of subsistence farming, converting it to more extensive farming, extensive and monoculture, mono-cultural forms of agriculture in the last three centuries. The economic growth took place mostly in mining, construction and manufacturing industries. Commerce became more significant due to the need for improved exchange and distribution of produce throughout the community. * In the economies of modern consumer society, consumer societies phase there is a growing part played by
services Service may refer to: Activities :''(See the Religion section for religious activities)'' * Administrative service, a required part of the workload of Faculty (academic staff), university faculty * Civil service, the body of employees of a governm ...
,
finance Finance is the study of financial institutions, financial markets and how they operate within the financial system. It is concerned with the creation and management of money and investments. Savers and investors have money available which could ...

finance
, and
technology Technology ("science of craft", from Ancient Greek, Greek , ''techne'', "art, skill, cunning of hand"; and , ''wikt:-logia, -logia'') is the sum of any Art techniques and materials, techniques, skills, Scientific method, methods, and Business ...

technology
—the knowledge economy. In modern economies, these phase precedences are somewhat differently expressed by the three-sector theory. * Primary sector of the economy, Primary stage/degree of the economy: Involves the extraction and production of raw materials, such as corn, coal, wood and iron. (A coal miner and a fisherman would be workers in the primary degree.) * Secondary sector of the economy, Secondary stage/degree of the economy: Involves the transformation of raw or intermediate materials into goods e.g. manufacturing steel into cars, or textiles into clothing. (A builder and a dressmaker would be workers in the secondary degree.) At this stage the associated industrial economy is also sub-divided into several economic sectors (also called industry (economics), industries). Their separate evolution during the
Industrial Revolution The Industrial Revolution was the transition to new manufacturing processes in Great Britain, continental Europe Mainland or continental Europe is the contiguous continent of Europe, excluding its surrounding islands. It can also be ...
phase is dealt with elsewhere. * Tertiary sector of the economy, Tertiary stage/degree of the economy: Involves the provision of services to consumers and businesses, such as baby-sitting, film, cinema and banking. (A shopkeeper and an accountant would be workers in the tertiary degree.) * Quaternary sector of the economy, Quaternary stage/degree of the economy: Involves the research and development needed to produce products from natural resources and their subsequent by-products. (A logging company might research ways to use partially burnt wood to be processed so that the undamaged portions of it can be made into pulp for paper.) Note that education is sometimes included in this sector. Other sectors of the developed community include : * the public sector or state sector (which usually includes: parliament, law-courts and government centers, various emergency services, public health, shelters for impoverished and threatened people, transport facilities, air/sea ports, post-natal care, hospitals, schools, libraries, museums, preserved historical buildings, parks/gardens, nature-reserves, some universities, national sports grounds/stadiums, national arts/concert-halls or theaters and centers for various religions). * the private sector or privately run businesses. * the social sector or voluntary sector.


Economic measures

The main indicators used to monitor the performance of an economy are: * Consumer spending * Exchange rate * Gross domestic product * GDP per capita * GNP * Stock Market * Interest rate * Government debt * Inflation, Rate of Inflation * Unemployment * Balance of Trade


GDP

The GDP (gross domestic product) of a country is a measure of the size of its economy. The most conventional economic analysis of a country relies heavily on economic indicators like the GDP and GDP per capita. While often useful, GDP only includes economic activity for which money is exchanged.


Informal economy

An informal economy is the set of economic activities operating as to partially avoid being taxed or regulated, in contrast to a formal economy. The informal economy is thus not included in that government's gross national product (GNP). Although the informal economy is often associated with developing countries, all economic systems contain an informal economy in some proportion. Informal economic activity is a dynamic process that includes many aspects of economic and social theory including exchange, regulation, and enforcement. By its nature, it is necessarily difficult to observe, study, define, and measure. No single source readily or authoritatively defines informal economy as a unit of study. The terms "underground", "under the table" and "off the books" typically refer to this type of economy. The term black market refers to a specific subset of the informal economy. The term "informal sector" was used in many earlier studies, and has been mostly replaced in more recent studies which use the newer term. The informal sector makes up a significant portion of the economies in developing countries but it is often stigmatized as troublesome and unmanageable. However, the informal sector provides critical economic opportunities for the poor and has been expanding rapidly since the 1960s. As such, integrating the informal economy into the formal sector is an important policy challenge.


Economic research

Economic research is conducted in fields as different as Agricultural, Development, Econometrics, Environmental, Game theory, Industrial Organization, International, Labor, Macroeconomics, Mathematical, Monetary, Public, Regional and Urban, Education, and Economics History.


See also

* Business ethics * Ecological economics * Econometrics * Economic equilibrium * Economic history (includes list by country) * Economic system * Resistive economy * Economic union * Economics education * History of money * List of economic communities * List of economists * List of free trade agreements * Macroeconomics * Microeconomics * Mixed economy * Non-market economics * Socialism * Solidarity economy * Steady-state economy * Supply and demand * Thermoeconomics * World economy


References


Bibliography

* Aristotle, Politics, Book I-IIX, translated by Benjamin Jowett
Classics.mit.edu
* Barnes, Peter, Capitalism 3.0, A Guide to Reclaiming the Commons, San Francisco 2006
Whatiseconomy.com
* Dill, Alexander, Reclaiming the Hidden Assets, Towards a Global Freeware Index, Global Freeware Research Paper 01-07, 2007
Whatiseconomy.com
* Fehr Ernst, Schmidt, Klaus M., The Economics Of Fairness, Reciprocity and Altruism - experimental Evidence and new Theories, 2005, Discussion PAPER 2005-20, Munich Economics
Whatiseconomy.com
* Marx, Karl, Engels, Friedrich, 1848, The Communist Manifesto

* Stiglitz, Joseph E., Global public goods and global finance: does global governance ensure that the global public interest is served? In: Advancing Public Goods, Jean-Philippe Touffut, (ed.), Paris 2006, pp. 149/164,
GSB.columbia.edu
* Where is the Wealth of Nations? Measuring Capital for the 21st Century. Wealth of Nations Report 2006, Ian Johnson and Francois Bourguignon, World Bank, Washington 2006
Whatiseconomy.com


Further reading

* Friedman, Milton, ''Capitalism and Freedom'', 1962. * Rothbard, Murray, ''Man, Economy, and State: A Treatise on Economic Principles'', 1962. * Galbraith, John Kenneth, ''The Affluent Society'', 1958. * Mises, Ludwig von, ''Human Action: A Treatise on Economics'', 1949. * Keynes, John Maynard, ''The General Theory of Employment'', Interest and Money, 1936. * Marx, Karl, ''Das Kapital'', 1867. * Smith, Adam, ''An Inquiry into the Nature and Causes of the Wealth of Nations'', 1776. {{Authority control Economy, Main topic articles