Economics is the study of the production, distribution,
and consumption of goods and services — the economy. Economists attempt to
understand the economy and the way it responds to various influences, such as
changes in federal interest rates. Economics is considered a social science.
Modern economics began in 1776, with the publication of
Adam Smith's Wealth of Nations.
This was the first comprehensive defense of the free market, and continues to
be an influential work to this day. Central to the work was the concept of the
"invisible hand", the idea that the market, while appearing chaotic,
is actually guided to produce the right amount and variety of goods and
services. If there are insufficient goods, there will be great economic
incentives to produce more; if there are surplus goods, there will be an
economic incentive to produce less or different types of goods. Smith's work
was so influential that previous tentative schools of economics were abandoned
after its publication.
Economics is a field that can be broken down into a
variety of different schools, divisions, and methods of analysis, although the
primary two methods are macroeconomics — the study of economies in aggregate —
and microeconomics — the study and modeling of individual agents in an economy.
Economists have worked out theories of markets which approximate real-world
trends and behaviors.
Most economists advocate a laissez-faire economy,
meaning an economy with minimal government intervention. They point to the
collapse of the Soviet Union as an example of a failed economy with too much
central control, and the success of the United States as a model of a
laissez-faire economy. Unfortunately for economists, polls of laypeople
frequently shows they approve of limited government interventions in the
economy.
Another basic tenet of economic theory is that, through
self-interest among large numbers of agents, broader social interests may be
served in the long run. When people focus on being as productive and possible
and providing goods and services in sufficient demand, they do benefit, but so
do others who utilize those services, and the public sector, which takes money
off the top through taxes.