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Economy
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For the field of study, see Economics.
For other uses, see Economy (disambiguation).
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An economy (from Greek οίκος – "household" and νέμoμαι – "manage") is an area of
the production, distribution and trade, as well as consumption of goods and
services by different agents. Understood in its broadest sense, 'The economy is
defined as a social domain that emphasize the practices, discourses, and material
expressions associated with the production, use, and management of resources'.[1]
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.
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 (automation,
accelerator of process, reduction of cost functions), 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 being replaced in some
parts of the world with universal access to education). A given economy is the
result of 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 human practices and transactions. It does not stand alone.

A market-based economy is one where goods and services are produced and exchanged
according to demand and supply between participants (economic agents) by barter or
a medium of exchange with a credit or debit value 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 is low-carbon, 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 and resource
efficiency, and prevent the loss of biodiversity and ecosystem services.[2] A gig
economy is one in which short-term jobs are assigned or chosen via online
platforms.[3] New economy is a term referred to the whole emerging ecosystem where
new standards and practices were introduced, usually as a result of technological
innovations.
Contents
1 Range
2 Etymology
3 History
3.1 Ancient times
3.2 Middle ages
3.3 Early modern times
3.4 Industrial Revolution
3.5 Recognition of the concept of “the economy”
3.6 Late 20th – beginning of 21st century
4 Economic phases of precedence
5 Economic measures
5.1 GDP
6 Informal economy
7 Economic research
8 See also
9 References
10 Bibliography
11 Further reading
Range

This map shows the gross domestic product (GDP) for every country (2015).
Today the range of fields of study examining the economy revolves around the social
science of economics, but may include sociology (economic sociology), history
(economic history), anthropology (economic anthropology), and geography (economic
geography). Practical fields directly related to the human activities involving
production, distribution, exchange, and consumption of goods and services as a
whole are engineering, management, business administration, applied science, and
finance.

All professions, occupations, economic agents or economic activities, contribute to

the economy. Consumption, saving, and investment are variable components in the
economy that determine macroeconomic equilibrium. There are three main sectors of
economic activity: primary, secondary, and tertiary.

Due to the growing importance of the economical sector in modern times,[4] the term
real economy is used by analysts[5][6] as well as politicians[7] to denote the part
of the economy that is concerned with the actual production of goods and services,
[8] as ostensibly contrasted with the paper economy, or the financial side of the
economy,[9] which is concerned with buying and selling on the financial markets.
Alternate and long-standing terminology distinguishes measures of an economy
expressed in real values (adjusted for inflation), such as real GDP, or in nominal
values (unadjusted for inflation).[10]

Etymology
The English words "economy" and "economics" can be traced back to the Greek word
οἰκονόμος (i.e. "household management"), a composite word derived from οἶκος
("house;household;home") and νέμω ("manage; distribute;to deal out;dispense") by
way of οἰκονομία ("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.[11]

History
Ancient times

Storage room, Palace of Knossos.

See also: Palace economy
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 developed a large-scale economy based on commodity
money, while the Babylonians and their neighboring city states later developed the
earliest system of economics as we think of, in terms of rules/laws on debt, legal
contracts and law codes relating to business practices, and private property.[12]

The Babylonians and their city state neighbors developed forms of economics
comparable to currently used civil society (law) concepts.[13] 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. The Shekel referred to
an ancient unit of weight and currency. The first usage of the term came from
Mesopotamia circa 3000 BC., and referred to a specific mass of barley which related
other values in a metric such as silver, bronze, copper etc. A barley/shekel was
originally both a unit of currency 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, where the
present English word 'economy' originated, many people were bond slaves of the
freeholders. The economic discussion was driven by scarcity.

Middle ages

10 Ducats (1621), minted as circulating currency by the Fugger Family.

In Medieval times, what we now call economy was not far from the subsistence level.
Most exchange occurred within social groups. On top of this, the great conquerors
raised what we now call venture capital (from ventura, ital.; risk) to finance
their captures. The capital should be refunded by the goods they would bring up in
the New World. The discoveries of Marco Polo (1254–1324), Christopher Columbus
(1451–1506) and Vasco da Gama (1469–1524) led to a first global economy. The first
enterprises were trading establishments. In 1513, the first stock exchange was
founded in Antwerpen. Economy at the time meant primarily trade.

Early modern times

The European captures became branches of the European states, the so-called
colonies. The rising nation-states Spain, Portugal, France, Great Britain and the
Netherlands tried to control the trade through custom duties and (from mercator,
lat.: merchant) was a first approach to intermediate between private wealth and
public interest. The secularization in Europe allowed states to use the immense
property of the church for the development of towns. The influence of the nobles
decreased. The first Secretaries of State for economy started their work. Bankers
like Amschel Mayer Rothschild (1773–1855) started to finance national projects such
as wars and infrastructure. Economy from then on meant national economy as a topic
for the economic activities of the citizens of a state.

Industrial Revolution

Sächsische Maschinenfabrik in Chemnitz, Germany, 1868

Main article: Industrial Revolution
The first economist in the true modern meaning of the word was the Scotsman Adam
Smith (1723–1790) who was inspired partly by the ideas of physiocracy, a reaction
to mercantilism and also later Economics student, Adam Mari.[14] He defined the
elements of a national economy: products are offered at a natural price generated
by the use of competition - supply and demand - and the division of labor. He
maintained that the basic motive for free trade is human self-interest. The so-
called self-interest hypothesis became the anthropological basis for economics.
Thomas Malthus (1766–1834) transferred the idea of supply and demand to the problem
of overpopulation.

The Industrial Revolution was a period from the 18th to the 19th century where
major changes in agriculture, manufacturing, mining, and transport had a profound
effect on the socioeconomic and cultural conditions starting in the United Kingdom,
then subsequently spreading throughout Europe, North America, and eventually the
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 started to replace the system of mercantilism (today:
protectionism) and led to economic growth. The period today is called industrial
revolution because the system of Production, production and division of labor
enabled the mass production of goods.

Recognition of the concept of “the economy”

The contemporary concept of "the economy" wasn't popularly known until the American
Great Depression in the 1930s.[15]

After the chaos of two World Wars 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 (1912–2006) who pleaded for a global free trade and are supposed to be the
fathers of the so-called neoliberalism. However, the prevailing view was that held
by John Maynard Keynes (1883–1946), who argued for a stronger control of the
markets 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 (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

ESET (IT security company) headquarters in Bratislava, Slovakia.

With 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 economy was mainly based on subsistence farming.

The industrial revolution phase lessened the role of subsistence farming,
converting it to more extensive and 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 societies phase there is a growing part played
by services, finance, and technology—the knowledge economy.
In modern economies, these phase precedences are somewhat differently expressed by
the three-sector theory.[citation needed]

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 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 industries). Their separate evolution during
the Industrial Revolution phase is dealt with elsewhere.
Tertiary stage/degree of the economy: Involves the provision of services to
consumers and businesses, such as baby-sitting, cinema and banking. (A shopkeeper
and an accountant would be workers in the tertiary degree.)
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
There are a number of concepts associated with the economy, such as these:

Consumer spending
Exchange rate
Gross domestic product
GDP per capita
GNP
Stock Market
Interest rate
Government debt
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

Black market peddler on graffiti, Kharkiv

Main article: Informal economy
An informal economy is economic activity that is neither taxed nor monitored by a
government, contrasted with 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 which 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 economics, economic
sociology, economic anthropology, and economic history.

See also
icon Business and economics portal
Business ethics
Capitalism
Ecological economics
Econometrics
Economic equilibrium
Economic history (includes list by country)
Economic system
Economic union
Economics education
History of money
List of economic communities
List of economists
List of free trade agreements
Macroeconomics
Microeconomics
Non-market economics
Socialism
Supply and demand
Thermoeconomics
World economy
References
James, Paul; with Magee, Liam; Scerri, Andy; Steger, Manfred B. (2015). Urban
Sustainability in Theory and Practice: Circles of Sustainability. London:
Routledge. p. 53.
"Archived copy" (PDF). Archived from the original (PDF) on November 11, 2013.
Retrieved October 26, 2014.
"How governments should deal with the rise of the gig economy". The Economist.
Retrieved October 8, 2018.
The volume of financial transactions in the 2008 global economy was 73.5 times
higher than nominal world GDP, while, in 1990, this ratio amounted to "only" 15.3
("A General Financial Transaction Tax: A Short Cut of the Pros, the Cons and a
Proposal" Archived April 2, 2012, at the Wayback Machine, Austrian Institute for
Economic Research, 2009)
"Meanwhile, in the Real Economy", Wall Street Journal, July 23, 2009
"Bank Regulation Should Serve Real Economy", Wall Street Journal, October 24, 2011
"Perry and Romney Trade Swipes Over ‘Real Economy'", Wall Street Journal, August
15, 2011
"Real Economy" Archived February 9, 2018, at the Wayback Machine definition in the
Financial Times Lexicon
"Real economy" definition in the Economic Glossary
• Deardorff's Glossary of International Economics, search for real.
• R. O'Donnell (1987). "real and nominal quantities," The New Palgrave: A
Dictionary of Economics, v. 4, pp. 97-98.
Dictionary.com, "economy." The American Heritage Dictionary of the English
Language, Fourth Edition. Houghton Mifflin Company, 2004. October 24, 2009.
Sheila C. Dow (2005), "Axioms and Babylonian thought: a reply", Journal of Post
Keynesian Economics 27 (3), p. 385-391.
Charles F. Horne, Ph.D. (1915). "The Code of Hammurabi : Introduction". Yale
University. Retrieved September 14, 2007.
François Quesnay. An Encyclopedia of the Early Modern World- preview
entry:Physiocrats & physiocracy. Charles Scribner & Sons. Retrieved February 24,
2014.
Goldstein, Jacob (February 28, 2014). "The Invention Of 'The Economy'". NPR -
Planet Money. Retrieved April 6, 2017.
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, Marxists.org
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
Wikimedia Commons has media related to Economy.
Wikivoyage has a travel guide for Economy.
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.
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