My favorite economist Adam Smith (1723-1790), Scottish philosopher and economist, whose celebrated tre atise An Inquiry into

the Nature and Causes of the Wealth of Nations was the fir st serious attempt to study the nature of capital and the historical development of industry and commerce among European nations. Smith was born in Kirkcaldy, Scotland, and educated at the universities of Glasg ow and Oxford. From 1748 to 1751, he gave lectures on rhetoric and belles-lettre s in Edinburgh. During this period, a close association developed between Smith and fellow Scottish philosopher David Hume that lasted until the latter's death in 1776 and contributed much to the development of Smith's ethical and economic theories. What is Economics? Economics, social science concerned with the production, distribution, exchange, and consumption of goods and services. Economists focus on the way in which ind ividuals, groups, business enterprises, and governments seek to achieve efficien tly any economic objective they select. Other fields of study also contribute to this knowledge: Psychology and ethics try to explain how objectives are formed; history records changes in human objectives; sociology interprets human behavio r in social contexts. Standard economics can be divided into two major fields. The first, price theory or microeconomics, explains how the interplay of supply and demand in competiti ve markets creates a multitude of individual prices, wage rates, profit margins, and rental changes. Microeconomics assumes that people behave rationally. Consu mers try to spend their income in ways that give them as much pleasure as possib le. As economists say, they maximize utility. For their part, entrepreneurs (see Entrepreneur) seek as much profit as they can extract from their operations. The second field, macroeconomics, deals with modern explanations of national inc ome and employment. Macroeconomics dates from the book, The General Theory of Em ployment, Interest, and Money (1935), by the British economist John Maynard Keyn es. His explanation of prosperity and depression centers on the total or aggrega te demand for goods and services by consumers, business investors, and governmen ts. Because, according to Keynes, inadequate aggregate demand increases unemploy ment, the indicated cure is either more investment by businesses or more spendin g and consequently larger budget deficits by government. George Akerlof, born in 1940, American economist and cowinner of the 2001 Nobel Prize in economics for his pioneering work in the field of information economics , the study of how inadequate or imperfect information can influence a market. A kerlof shared the prize with American economists A. Michael Spence and Joseph E. Stiglitz. Microsoft Encarta 2008. 1993-2007 Microsoft Corporation. All rights reserved.