What is the economy?

We explain what the economy is and what is its object of study. In addition, its importance and the different branches or types of economy.

1. What is the economy?

The  Economy (or  Economic Sciences ) is a social science whose scope of interest is the ways in which a society organizes itself to meet its material and intangible consumption needs , through a cycle of production, distribution and exchange of goods that ideally perpetuate over time.

The Economy, in other words, is the study of the modes of organization and distribution of scarce goods that each society requires and therefore produces or acquires through different strategies, in order to meet the greatest amount of demand from a finite number of tangible or intangible assets.

That said, we could deduce that the Economy tries to understand the processes of production and consumption of any human group, to aspire to an ideal distribution and management of resources. This has allowed him to apply to various areas of study and work with other specific disciplines , such as Law , Administration , business, politics , war , science and a long etcetera.

At the same time, the Economy uses tools and processes from various areas of knowledge, such as psychology , philosophy , history , etc. to help you in your understanding of the economic dynamics of societies. It is a multidisciplinary knowledge that dates back to the time of Classical Antiquity (especially Aristotle).

Economic systems:

• Capitalism.
• Socialism.
• Communism.

2. Object of study of the economy

The object of specific study of the Economy can be defined around three main axes:

• The processes of extraction, production, distribution , exchange and consumption of goods and services that a society requires.
• The possible models of satisfaction of the infinite human needs from the finite set of available resources.
• The way in which people and societies survive, trade, prosper and operate financially.

In this way, the Economy is interested in a very wide range of objects of study, ranging from the pricing mechanisms of the goods and services available in a community , the behavior of financial markets and their impact on society, the trade internationally, the intervention of the state in domestic markets, the distribution of income and methods of combating poverty, to theories of growth and economic cycles and their impact on the societies that star.

3. Types of economy

Economics is a broad and complex discipline, in which numerous types or classifications can be distinguished, such as:

• Theoretical economy and empirical economy . The first pursues rational models of economic functioning and equilibrium for different societies, while the second confirms or refutes such models through their application or the economic history of nations.
• Microeconomics and Macroeconomics . The first refers to the choices of economic agents (individuals, companies and governments ) in order to meet their needs and scarcity. The second, on the other hand, contemplates the economy as a national system, when not global and international, that analyzes trade balance totals, general trends and data at a panoramic level.
• Normative economy and positive economy . This distinction is based on the fact that the former contemplates the duty of the economy, while the latter studies economic behavior as something alive and present, changing.
• Orthodox and heterodox economy . A differentiation of academic type, in which the first is established in the triad rationality-individualism-balance and is the most commonly taught in universities, the traditional one; while the second includes a different and heterogeneous set of currents of economic analysis and prefers the approach based on institutions-history-social structure.