Foundational Economics

As a foundational branch of economics, microeconomics focuses on the economic behavior and decision-making of individual units, such as households, firms, and individuals. It analyzes how these agents interact within specific markets for goods and services, examining the forces of supply and demand that determine prices and quantities. Core concepts include consumer choice theory, production costs, and various market structures (e.g., perfect competition, monopoly), providing a bottom-up view of how resources are allocated in an economy.

Macroeconomics is the branch of economics that studies the behavior and performance of an economy as a whole, focusing on aggregate variables and economy-wide phenomena. Rather than analyzing individual markets or agents, it examines key indicators like Gross Domestic Product (GDP), unemployment rates, inflation, and interest rates to understand the forces that drive business cycles and long-run economic growth. A central focus of macroeconomics is the analysis of how governments and central banks can use fiscal and monetary policy to pursue major economic goals such as price stability, full employment, and sustainable prosperity.

Economic History is the academic discipline that studies how economies and economic phenomena have evolved over time. It applies economic theory to understand historical events and, conversely, uses historical evidence to test, refine, and inform economic models. By examining the long-run development of institutions, technology, trade, and living standards, this field provides crucial context for the origins of modern economic systems, investigating major transformations like the Industrial Revolution, the Great Depression, and the rise of globalization to understand the roots of contemporary prosperity, inequality, and policy challenges.

The History of Economic Thought, also known as Economic Doctrines, is the study of the evolution of ideas about how economies function. It traces the development of economic theories from ancient philosophers through major schools of thought such as Mercantilism, the Classical school of Adam Smith, the critiques of Karl Marx, the Keynesian revolution, and the rise of Neoclassical and behavioral economics. By examining how thinkers have grappled with fundamental questions of value, wealth, distribution, and the role of government in response to the social and political contexts of their times, this field provides crucial context for understanding the origins and assumptions behind contemporary economic policies and debates.

Mathematical economics is the application of mathematical methods to represent economic theory and analyze economic problems. By translating economic concepts—such as utility, production, and market equilibrium—into formal models using calculus, matrix algebra, and optimization techniques, this approach provides a rigorous and precise language for economic analysis. It moves beyond intuitive or verbal arguments to allow for the formal derivation of testable hypotheses, the systematic analysis of complex interdependencies, and the study of economic dynamics, thereby forming the foundational framework for much of modern economic theory and econometrics.

Statistics for Economics is the application of statistical methods to collect, analyze, interpret, and present economic data, providing the essential framework for empirical analysis in the field. It equips economists with the tools to move beyond theoretical models by enabling them to test hypotheses, quantify relationships between economic variables (such as inflation and unemployment), and forecast future trends using techniques like probability theory, sampling, and regression analysis. This discipline is fundamental for understanding real-world economic phenomena and for making evidence-based policy recommendations.

Econometrics is the branch of economics that applies statistical methods to empirical data in order to test economic theories, inform policy decisions, and forecast future trends. It serves as the crucial bridge between abstract economic models and real-world observation, using techniques like regression analysis to quantify the relationships between economic variables. By doing so, econometrics allows economists to move beyond theoretical claims to measure the actual magnitude and statistical significance of effects, such as the impact of education on income or of interest rates on investment, thereby providing empirical evidence for the entire discipline.

Game theory is the study of mathematical models of strategic interaction among rational decision-makers, providing a framework for analyzing situations where the outcome for one "player" depends not only on their own actions but also on the actions of others. As a foundational tool in economics, it is used to understand behavior in contexts like oligopolies, auctions, bargaining, and public goods, by analyzing the strategies, payoffs, and information available to each participant. The goal is often to identify an equilibrium, such as the famous Nash Equilibrium, which represents a state where no player can benefit by unilaterally changing their strategy, thus offering predictions about the results of competitive or cooperative interactions.