Rizal Technological University

The Historical
Foundation of
SocialScience and
its Branches

PRESENTED BY RANDOLF SURCA

 WHAT IS ECONOMICS?
Economics
The eco was derived from the Greek oikos, which
means an extended family unit in the house that
consists of the members of family, farmlands, slaves,
and all the property. It is being manage by the oldest
male of the family who has the responsibility in
agriculture and to ensure that everything is running
well.

While the nomy term came from the Greek

noimos that means management, law, and principle.
Forming the word oikonomos, the meaning of
management of home.

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 According to Investopedia, economics is a social science
that is concerned to the production, distribution and
consumption of goods and services. It studies how
individual, businesses, governments, and nations choose
where to allocates their resources.

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Father of Economics
Adam Smith

In the year 1776, economics considered

as a separate discipline when Adam
Smith, a scottish philosopher and the
Father of Modern Economics, published
"An Inquiry to the Nature and Causes of
the Wealth of Nations".

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 This book is the first full-scale treatise in economics. It contains attack on
the protectionism of mercantilis. He was inspired by French writers who
has the same hatred on mercantilism.

Protectionism is a policy protecting domestic industries against foreign

competitors by putting tariffs, import quotas, or other restrictions. Smith
believe that government should not interfere in businesses by putting
tariffs, quotas, or other means of restrictions.

Smith also analyzed the capitalism as a governor of human activity. He

observed that each individual has self-interest and it seems that they are
guided by an “invisible hand” that create social and economic prosperity
for all.
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Dismal Science of Karl Marx
and Thomas Malthus

Thomas Malthus predicted that if

population continue to grow the food
supply won't meet the demands. However,
he was proven wrong as the technological
innovations continue to rise to keep with
the growing population and demand.

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The increased focus on scarcity made Karl
Marx to declare that ways of production
were the most important part of any
economy. But Marx, as a communist and
not in favor of capitalism, didn't expect the
flexibility of it as he became convinced
that a class war would happen due to
instabilities he saw in it.

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 Instead of the usual thing of having a clear owner and
worker class in capitalism, investing came where both
owners and workers hold the interests of both parties.
However, despite of wrong prediction of Marx, he
accurately predicted that businesses will grew longer
and powerful where free-market is allowed.

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Marginal Revolution
Economists turned their attention asking more
specific questions about how markets operate
and how market prices are determined after the
ideas of wealth and scarcity developed in
economics. A major development in economic
theory emerged known as marginalism.
Marginalism is an economic principle stating that
economic decisions and behavior happens based
on incremental units, rather than categorically.

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 For example, the diamond-water paradox by Adam Smith, diamonds
had a little practical use value that makes its price higher than water
which has many uses and essential for human survival. People value
diamonds and water for their marginal use value. Diamonds are rare
while water always falls out of the sky for free.

This concept was used to derived the laws of supply and demand
today. Economics is essentially the science of how people use and
value economic goods to meet their limitless want and needs with
only limited and scarce resources available. That is why marginal
thinking is important in all areas of economics and remains a central
concept in economics.

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Inclusion of Numbers
Some economists used mathematical modeling
to express concepts statistically instead of just
explaining in prose. First is General Equilibrium
Theory . It was developed by the French
economist Leon Walras in late 19th century. It
analyzes the economy as a whole instead of
analyzing single markets. Considering that
economy is a network of interdependent
markets. This theory seeks to prove that all free
markets are moving towards general equilibrium

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However, markets didn't necessarily reach
equilibrium but only moving towards it. As in 1889,
Walras wrote, "The market is like a lake agitated by
the wind, where the water is incessantly seeking its
level without ever reaching it".

While Alfred Marshall introduced many concepts

mathematically that are still not widely understood.
Concepts such as economies of scale, marginal
utility, and the real-cost paradigm.
The theories developed by Walras and Marshall led
in having statistical methods applied to economic
data in 20th century.

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Keynesian and Microeconomics
A British economist named John Maynard Keynes
developed developed a new branch of
economics known as Keynesian economics or
otherwise called Macroeconomics. Keynesian
macroeconomics presents the economy in large-
scale like the rate of unemployment, aggregate
demand, or average price level inflation of all
goods.

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 His theory says that governments can be powerful players in the
economy that can save it from recession by implementing policies,
manipulating government spending, taxing, and money creation to
manage the economy.

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That's all! Thank
you!

PRESENTED BY RANDOLF SURCA