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Economicsis the social sciencethat studies the behavior of

individuals, households, and organizations(called economic

actors, players, or agents), when they manage or use scarce

resources, which have alternative uses, to achieve desired ends.

Agents are assumed to act rationally, have multiple desirable

ends in sight, limited resources to obtain these ends, a set of

stable preferences, a definite overall guiding objective, and

the capability of making a choice. There exists an economic

problem, subject to study by economic science, when a decision

(choice) is made by one or more resource-controlling players to

attain the best possible outcome under bounded rational

conditions. In other words, resource-controlling agents maximize

value subject to the constraints imposed by the information the

agents have, their cognitive limitations, and the finite amount

of time they have to make and execute a decision. Economic

science centers on the activities of the economic agents that

comprise society.[1]They are the focus of economic analysis.[2]

The traditional concern of economic analysis is to gain an

understanding of the processes that govern the production,

distribution and consumption of goods and services in an

exchange economy.[3]An approach to understanding these

processes, through the study of agent behavior under scarcity,

may go as follows:

The continuous interplay (exchange or trade) done by economic

actors in all markets sets the prices for all goods and services

which, in turn, make the rational managing of scarce resources

possible. At the same time, the decisions (choices) made by thesame actors, while they are pursuing their own interest,

determine the level of output (production), consumption,

savings, and investment, in an economy, as well as the

remuneration (distribution) paid to the owners of labor (in the

form of wages), capital (in the form of profits) and land (in

the form of rent).[4]Each period, as if they were in a giant

feedback system, economic players influence the pricing

processes and the economy, and are in turn influenced by them

until a steady state (equilibrium) of all variables involved is

reached or until an external shock throws the system toward a

new equilibrium point. Because of the autonomous actions ofrational interacting agents, the economy is a complex adaptive

system.[5][6]

The term economicscomes from the Ancient Greek(oikonomia, "management of a household, administration") from

(oikos, "house") and (nomos, "custom" or "law"), hence"rules of the house(hold for good management)".[7]'Political

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economy' was the earlier name for the subject, but economists in

the late 19th century suggested "economics" as a shorter term

for "economic science" to establish itself as a separate

discipline outside of political science and other social

sciences.[8]

Economics focuses on the behavior and interactions of economic

agentsand how economieswork. Consistent with this focus,

primary textbooks often distinguish between microeconomics and

macroeconomics. Microeconomicsexamines the behavior of basic

elements in the economy, including individual agents and

markets, their interactions, and the outcomes of interactions.

Individual agents may include, for example, households, firms,

buyers, and sellers. Macroeconomicsanalyzes the entire economy

(meaning aggregated production, consumption, savings, and

investment) and issues affecting it, including unemployment of

resources (labor, capital, and land), inflation, economic

growth, and the public policies that address these issues

(monetary, fiscal, and other policies).

Other broad distinctions within economics include those between

positive economics, describing "what is," and normative

economics, advocating "what ought to be"; between economic

theory and applied economics; between rationaland behavioral

economics; and between mainstream economics(more "orthodox" and

dealing with the "rationality-individualism-equilibrium nexus")

and heterodox economics(more "radical" and dealing with the

"institutions-history-social structure nexus").[9][10]

Besides the traditional concern in production, distribution, and

consumption in an economy, economic analysis may be applied

throughout society, as inbusiness, finance, health care, and

government. Economic analyses may also be applied tosuch

diverse subjects as crime,[11]education,[12]the family, law,

politics, religion,[13]social institutions, war,[14]and

science;[15]by considering the economic aspects of these

subjects. Education, for example, requires time, effort, and

expenses, plus the foregone income and experience, yet these

losses can be weighted against future benefits education may

bring to the agent or the economy. At the turn of the 21stcentury, the expanding domain of economics in the social

sciences has been described as economic imperialism.[16]

A map of world economies by size of GDP (nominal)in $US, CIA World

Factbook, 2011.[17]

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There are a variety of modern definitions of economics. Some of

the differences may reflect evolving views of the subject or

different views among economists.[18]Scottishphilosopher Adam

Smith(1776) defined what was then called political economyas

"an inquiry into the nature and causes of the wealth of

nations", in particular as:

a branch of the science of a statesman or legislator [with the

twofold objectives of providing] a plentiful revenue or

subsistence for the people ... [and] to supply the state or

commonwealth with a revenue for the publick services.[19]

J.-B. Say(1803), distinguishing the subject from its public-

policyuses, defines it as the science ofproduction,

distribution, and consumption of wealth.[20]On the satirical

side, Thomas Carlyle(1849) coined "the dismal science" as an

epithetfor classical economics, in this context, commonlylinked to the pessimistic analysis of Malthus(1798).[21]John

Stuart Mill(1844) defines the subject in a social context as:

The science which traces the laws of such of the phenomena of

society as arise from the combined operations of mankind for the

production of wealth, in so far as those phenomena are not

modified by the pursuit of any other object.[22]

Alfred Marshallprovides a still widely cited definition in his

textbook Principles of Economics(1890) that extends analysis

beyond wealthand from the societalto the microeconomiclevel:

Economics is a study of man in the ordinary business of life. It

enquires how he gets his income and how he uses it. Thus, it is

on the one side, the study of wealth and on the other and more

important side, a part of the study of man.[23]

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