Micro and Macro: The Economic Divide

Abstract: The rapid evolution of the economic life between the nation and the world has led to the intensification of
the social division of labor amid the increasing interdependence between them that led to the transformation of the
economy as a priority both vertically and horizontally. From this perspective, in the following lines we try to pass
through the influence of the relationship between micro, macro and mono-economics.

I. INTRODUCTION

The special rapidity with which globalization has spread throughout the world has led some economic specialists
to appreciate that "... we are experiencing profound transformations that will rearrange the politics and economy of
the next century. There will be no national economies when this process is over. All that remains within borders will
be the people who will make the nations ... "1. In fact, everything related to economic activity will belong to a global
economy in which the national will be very difficult to identify. Also in the opinion of the same specialist, people's
well-being will depend on the success of big corporations and not on the success of each nation.
Due to the intensification of the division of labor and the increasing interdependencies between the various
social activities, the contemporary economy has been prioritized both vertically and horizontally. As an essential
component of the contemporary economy, in the context of vertical prioritization, microeconomics functions as an
essential component of the economy, expressing all the processes, phenomena, acts and behaviors of individual
economic agents, households, businesses, banks, administrations in the interaction of all they. As such,
microeconomics represents the "bottom floor" of the national economy system2.
Macroeconomics is the processes, actions, acts and economic skills of the whole economy regarded as an
aggregate or as a system (Romania's national economy).
The Mondoeconomy resides in the processes, actions, acts and behaviors of the economic subjects and the
international community viewed both from the point of view of the economic links between the national economies
and as a whole considered on a planetary or zonal-international scale.

II. VISIONS BETWEEN MICRO AND MACRO IN THE PROCESS OF ECONOMIC DEVELOPMENT

Why the divide?

It was not always this way. In fact, from the late 18th century until the Great Depression of the 1930s, economics
was economics—the study of how human societies organize the production, distribution, and consumption of goods
and services. The field began with the observations of the earliest economists, such as Adam Smith, the Scottish
philosopher popularly credited with being the father of economics—although scholars were making economic
observations long before Smith authored The Wealth of Nations in 1776. Smith’s notion of an invisible hand that
guides someone seeking to maximize his or her own well-being to provide the best overall result for society as a
whole is one of the most compelling notions in the social sciences. Smith and other early economic thinkers such as
David Hume gave birth to the field at the onset of the Industrial Revolution.
Economic theory developed considerably between the appearance of Smith’s The Wealth of Nations and the Great
Depression, but there was no separation into microeconomics and macroeconomics. Economists implicitly assumed
that either markets were in equilibrium—such that prices would adjust to equalize supply and demand—or that in
the event of a transient shock, such as a financial crisis or a famine, markets would quickly return to equilibrium. In
other words, economists believed that the study of individual markets would adequately explain the behavior of
what we now call aggregate variables, such as unemployment and output.
The severe and prolonged global collapse in economic activity that occurred during the Great Depression
changed that. It was not that economists were unaware that aggregate variables could be unstable. They studied
business cycles—as economies regularly changed from a condition of rising output and employment to reduced or
falling growth and rising unemployment, frequently punctuated by severe changes or economic crises. Economists
also studied money and its role in the economy. But the economics of the time could not explain the Great
Depression. Economists operating within the classical paradigm of markets always being in equilibrium had no
plausible explanation for the extreme “market failure” of the 1930s.
If Adam Smith is the father of economics, John Maynard Keynes is the founding father of
macroeconomics. Although some of the notions of modern macroeconomics are rooted in the work of scholars such

1
Robert Reich, „The Work of Nations”, in Mark Lewis, Robert Fitzgerald, Charles Harvey, The growth of nations. Culture,
competitiveness and the problem of globalization, Bristol Academic Press, Bristol, UK, 1996, p. 11.
2
See Constantin Popescu, Dumitru Ciucur, Dan Ilie Morega, Competitive Microeconomics, Economic Publishing House,
Bucharest, 1997, p. 89.
as Irving Fisher and Knut Wicksell in the late 19th and early 20th centuries, macroeconomics as a distinct discipline
began with Keynes’s masterpiece, The General Theory of Employment, Interest and Money, in 1936. Its main
concern is the instability of aggregate variables. Whereas early economics concentrated on equilibrium in individual
markets, Keynes introduced the simultaneous consideration of equilibrium in three interrelated sets of markets—for
goods, labor, and finance. He also introduced “disequilibrium economics,” which is the explicit study of departures
from general equilibrium. His approach was taken up by other leading economists and developed rapidly into what
is now known as macroeconomics.
Coexistence and complementarity
Microeconomics is based on models of consumers or firms (which economists call agents) that make
decisions about what to buy, sell, or produce—with the assumption that those decisions result in perfect market
clearing (demand equals supply) and other ideal conditions. Macroeconomics, on the other hand, began from
observed divergences from what would have been anticipated results under the classical tradition.
Today the two fields coexist and complement each other.
Microeconomics, in its examination of the behavior of individual consumers and firms, is divided into
consumer demand theory, production theory (also called the theory of the firm), and related topics such as the nature
of market competition, economic welfare, the role of imperfect information in economic outcomes, and at the most
abstract, general equilibrium, which deals simultaneously with many markets. Much economic analysis is
microeconomic in nature. It concerns such issues as the effects of minimum wages, taxes, price supports, or
monopoly on individual markets and is filled with concepts that are recognizable in the real world. It has
applications in trade, industrial organization and market structure, labor economics, public finance, and welfare
economics. Microeconomic analysis offers insights into such disparate efforts as making business decisions or
formulating public policies.
Macroeconomics is more abstruse. It describes relationships among aggregates so big as to be hard to
apprehend—such as national income, savings, and the overall price level. The field is conventionally divided into
the study of national economic growth in the long run, the analysis of short-run departures from equilibrium, and the
formulation of policies to stabilize the national economy—that is, to minimize fluctuations in growth and prices.
Those policies can include spending and taxing actions by the government or monetary policy actions by the central
bank.
Bridging the micro/macro divide
Like physical scientists, economists develop theory to organize and simplify knowledge about a field and to
develop a conceptual framework for adding new knowledge. Science begins with the accretion of informal insights,
particularly with observed regular relationships between variables that are so stable they can be codified into “laws.”
Theory is developed by pinning down those invariant relationships through both experimentation and formal logical
deductions—called models.
Since the Keynesian revolution, the economics profession has had essentially two theoretical systems, one
to explain the small picture, the other to explain the big picture (micro and macro are the Greek words, respectively,
for “small” and “big”). Following the approach of physics, for the past quarter century or so, a number of
economists have made sustained efforts to merge microeconomics and macroeconomics. They have tried to develop
microeconomic foundations for macroeconomic models on the grounds that valid economic analysis must begin
with the behavior of the elements of microeconomic analysis: individual households and firms that seek to optimize
their conditions.
There have also been attempts to use very fast computers to simulate the behavior of economic aggregates
by summing the behavior of large numbers of households and firms. It is too early to say anything about the likely
outcome of this effort. But within the field of macroeconomics there is continuing progress in improving models,
whose deficiencies were exposed by the instabilities that occurred in world markets during the global financial crisis
that began in 2008.
How they differ
Contemporary microeconomic theory evolved steadily without fanfare from the earliest theories of how
prices are determined. Macroeconomics, on the other hand, is rooted in empirical observations that existing theory
could not explain. How to interpret those anomalies has always been controversial. There are no competing schools
of thought in microeconomics—which is unified and has a common core among all economists. The same cannot be
said of macroeconomics—where there are, and have been, competing schools of thought about how to explain the
behavior of economic aggregates. Those schools go by such names as New Keynesian or New Classical. But these
divisions have been narrowing over the past few decades (Blanchard, Dell’Ariccia, and Mauro, 2010).
Microeconomics and macroeconomics are not the only distinct subfields in economics. Econometrics, which
seeks to apply statistical and mathematical methods to economic analysis, is widely considered the third core area of
economics. Without the major advances in econometrics made over the past century or so, much of the sophisticated
analysis achieved in microeconomics and macroeconomics would not have been possible.

As such, the above-mentioned visions of the economic development process in general, we identify them
throughout the economic thinking from the moment of its emergence to the present. It is imperative to consider a

2
certain historical alternation, since supporting and promoting economic policy of one or other of them has an
objectively privileged motivation and is not a simple option
We believe that it is worthy to emphasize that both the micro and the macro vision have been envisioned and
used since ancient times by bourgeois classics. Thus, if bourgeois classicism focuses on microeconomics, in general,
on the action and personal interest of economic agents, the macroeconomic concern for a certain balance in this
dimension is met by the physiocrats, prioritizing Fr. Quesnay. As Mark Blaug thinks "Quesnay's economic picture,
published 3-4 years after Cantillon's" Essay ", was regarded in its time as a top achievement of the physiocratic
school"3.
The first economist to analyze the economy through mathematical correlations at macro level is Fr. Quesnay,
and some of his conclusions are still valid today. As is known, this Quesnay's economic score was later rediscovered
by Marx who will develop and analyze social reproduction schemes in both their simple and widespread form.
The microeconomic vision has been and remains, however, the main way of addressing reality by the concept of
liberalism and economic neo-liberalism starting with the classics, continuing with marginalism, and today by all the
schools of neoliberalism or contemporary neoclassicism.
The microeconomic concept that emphasizes the business entity, does not consider it as acting in isolation. It has
to fit within its economic, macroeconomic structure. That is why it is important to bear in mind that "the enterprise
within the market economy is a 'whole' closely linked together by a particular problem, through an appropriate
enterprising and successful spirit. However, they do not form a 'closed system'. This is not true either for the
decisions to maximize profit according to the principle of rationality, or for the independence of the decisions -
related to the enterprise policy - to the people in the enterprise and the environment. On the face of both, the
enterprise must prove to be appropriate as a social organization"4.
In the context of free market economies, the macroeconomic vision will be restored by J.M. Keynes, starting
from the necessity to solve some deficiencies of the market economic mechanism and whose perenniality would,
according to his own appreciation, question the existence of capitalism. In fact, in this context, the macroeconomic
vision is associated with State interventionism without, however, affecting the private initiative. Moreover, we are in
favor of the opinion in the literature that "The Keynesian Economy Lesson teaches that the automatic adjustment
mechanism of competition leads us to achieve full employment and price stability"5.
Otherwise, Keynes's macroeconomic vision was imperative for responding to economic policy requirements
such as the elimination of unemployment and full employment, the achievement of economic equilibrium by
equalizing global supply and demand, and the achievement of an appropriate public-private relationship and others.
Considering that for economically and technically advanced economically advanced economies, the emphasis is
now on microeconomics, yet what is specific is the link between macroeconomics and microeconomics. This can be
argued by the fact that if the emphasis in development is put on the private initiative, the action of the private or
public economic agent, at the same time a series of correlations, not only sectoral but also in the national economies,
is required. In fact, macroeconomic equilibrium needs to ensure adjustment, harmonization of flows in the economy,
to ensure the independent functioning of the economic mechanism. Priority at the moment, what is to be
remembered, is the fact that, as a result of the concurrent appearance and persistence of negative processes,
imbalances, precarious situations that jeopardize the macroeconomic equilibrium, government measures aim at
ensuring these equilibria, a mandatory condition for good functioning of economic aggregates, regardless of their
size.
Economics is split between analysis of how the overall economy works and how single markets function
Physicists look at the big world of planets, stars, galaxies, and gravity. But they also study the minute world of
atoms and the tiny particles that comprise those atoms.
Economists also look at two realms. There is big-picture macroeconomics, which is concerned with how the
overall economy works. It studies such things as employment, gross domestic product, and inflation—the stuff of
news stories and government policy debates. Little-picture microeconomics is concerned with how supply and
demand interact in individual markets for goods and services.
In macroeconomics, the subject is typically a nation—how all markets interact to generate big phenomena that
economists call aggregate variables. In the realm of microeconomics, the object of analysis is a single market—for
example, whether price rises in the automobile or oil industries are driven by supply or demand changes. The
government is a major object of analysis in macroeconomics—for example, studying the role it plays in contributing
to overall economic growth or fighting inflation. Macroeconomics often extends to the international sphere because
domestic markets are linked to foreign markets through trade, investment, and capital flows. But microeconomics
can have an international component as well. Single markets often are not confined to single countries; the global
market for petroleum is an obvious example.
The macro/micro split is institutionalized in economics, from beginning courses in “principles of economics”
through to postgraduate studies. Economists commonly consider themselves microeconomists or macroeconomists.
3
Mark Blaug, Economic Theory in Retrospective, The Didactic and Pedagogical Publishing House R.A., Bucharest, 1992, p.
59.
4
Reinhard Blum, A third way, "Alexandru Ioan Cuza" Publishing House, Iasi, 1994, p. 115.
5
Mark Blaug, the quoted work, p. 704.

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The American Economic Association recently introduced several new academic journals. One is
called Microeconomics. Another, appropriately, is titled Macroeconomics.
Today, more than ever, unlike the past, as well as the achievement of the overall economic equilibrium, namely
the consistency of all the elements of the economic system and, first of all, between supply and demand for goods
and services, to achieve the social balance, addressing the entire population and, above all, the labor force, including
the ecological balance that should support an optimal relationship between man and the environment.
For an optimal blending of the micro and macroeconomic vision, we must take into account that it depends on
the quality and qualification of those who deal with the destiny of the economy, the knowledge of the conditions, the
evolution at regional and global level.
Stimulating and using the macroeconomic vision is at the same time a means of promoting a particular
development strategy over a medium or relatively long term. Naturally, this involves learning from one's own
experiences or other states of the past, but at the same time knowing and noticing new requirements and trends
wherever they take place. After the appreciation of the specialists in the field, macroeconomics can be correlated
with all the other coordinates of the existence of a nation so that it can exist, develop, assert itself not only as a
stand-alone entity but also with an important contribution to the development of human society in its entirety 6.
The integration into the economic policies of elements of microeconomics and macroeconomics must now not
only correspond to the requirements of welfare growth, which, ultimately, is the meaning of growth and economic
development.
As such, the following appreciation is considered correct: "Social well-being, organic development no longer
arises in a major society and lightened by obedience to the destiny of the anonymous forces of nature and the
market, but by using and directing them in decision-making processes of both market economy, as well as political
and democratic, corresponding to the people's representations about the public good"7.

III. CONCLUSIONS

In conclusion, in order to optimize the micro-macro-economy relationship, it is imperative to pay attention to the
three levels alike. Besides, if we have to think, act, we live globally, yet we must not forget that as long as national
states, national economies have an essential role, macroeconomic balances remain the main levers of the functioning
of regional and global economies.
This must be conjugated with a greater dose of realism in everything we do, combine matter with the spirit,
become more human. We say this because, more and more, human values are losing more and more wealth, money,
with multiple negative consequences for humanity.
This reality is synthesized by David C. Korten: "In modern societies, where access to almost all essential
elements for survival depends on money, money became the ticket of life itself. Through a kind of psychological
transfer, the instinctual love of human life becomes love of money. Ban becomes an object of adoration. This gives
them almost total power to those who have the means to create and allocate money, dominating the unseen and
silent of their temples in heaven, over those who have to serve them in exchange for the money on which their very
life depends"8.

IV. BIBLIOGRAPHY

1. Blaug M., Economic Theory in Retrospective, The Didactic and Pedagogical Publishing House R.A., Bucharest,
1992.
2. Blum R., A third way, "Alexandru Ioan Cuza" Publishing House, Iasi, 1994.
3. Korten D. C., Great Turning - From the Empire to the Terrestrial Community, Antet Publishing House,
Bucharest, 2007.
4. Pîrvu C. D., Pârvu V., Economic theory of rupture, Universitaria Publishing House, Craiova, 2010.
5. Popescu C., Ciucur D., Morega D. I., Competitive Microeconomics, Economic Publishing House, Bucharest,
1997.
6. Reich R., „The Work of Nations”, in Mark Lewis, Robert Fitzgerald, Charles Harvey, The growth of nations.
Culture, competitiveness and the problem of globalization, Bristol Academic Press, 1996.

6
Cristian D. Pîrvu, Vasile Pârvu, Economic theory of rupture, Universitaria Publishing House, Craiova, 2010, p. 74.
7
Reinhard Blum, the quoted work, p. 337.
8
David C. Korten, Great Turning - From the Empire to the Terrestrial Community, Antet Publishing House, Bucharest,
2007, p. 119.