A textbook definition of macroeconomics says that “[it] is the study of the economy as a whole, including growth in incomes, changes in prices, and the rate of unemployment.” (Mankiw, 2010) Extending over global, regional and national economies. Economists advise on policies for the government regarding important economic indicators. Macroeconomics though can often cause mistakes and problems for trying to over regulate or just regulating small parts of the economy, with bigger unseen consequences.
Macroeconomics main goals is to help explain but must not try to regulate the causes that affect both households or businesses in the market economy. In contrast to microeconomics that tells us how individuals whether through households or businesses make decisions in the market economy. Macroeconomics is basically a collection of all the microeconomics principals and actions taken by individuals. There are microeconomics foundations of macroeconomics, in particular where economics would focus on choice, individuals are known to choose after weighing their expected costs and benefits.
Macroeconomics could not interfere in this market phenomena as only individuals choose based on what they believe best for themselves and bear their own consequences. Neither does society choose as a collective as it is not an individual economic agent. However, central planners with the power to interfere in this market phenomena are people too, who judge and analyse from their own expected costs and benefits. Additionally, peoples goals vary, therefore their differing value preferences allow for specialisation and trade, which increases individuals wealth and in turn societies wealth.
Economics has variables which include prices and quantities that determine whether one buys or sells and are reflections of individual market participants choices and actions. Where individuals are free to choose, act and to change ones mind. Economics itself helps individuals to choose between available means to achieve their ends. Individuals decide what are the best ends for themselves, and macroeconomics could not provide these answers. It is good to bring and complement economics with other disciplines to expand ones theories that define causal relationships, that is cause and effect relationships.
In another article I will explain economics models, however for now it is useful to talk about basic abstractions, such as supply and demand, but not to assign numerical data to them. The reason being is that there are no fixed proportions between economic variables, such as the mentioned prices and quantities, and data can only describe the past and not predict the future, as for its uncertainty. For more on macroeconomics see my article on Macroeconomics – Models & Introduction.
Reference List (American Psychological Association)
Mankiw, G. (2010). Macroeconomics. (International 3rd ed.). New York, United States of America: Worth Publishers.
Featured image supplied from Pixabay.
Copyright © 2016 Zoë-Marie Beesley
