The new economics textbook.

The new economics textbook C.M. Heydenrych

Last updated 28 June 2015

Macroeconomics: The field of economics that studies the behavior of the aggregate economy. Macroeconomics examines economy-wide phenomena such as changes in unemployment, national income, rate of growth, gross domestic product, inflation (price levels) economic development and economic growth.

Economic developmentThe term economic development has changed in meaning since Lord Robbins defined it as "I shall use it (term economic development)in relation to movements in real income per head and to potential in this respect - real income being conceived as a stream of availability of goods and services." Today the term economic development is a normative concept i.e. it applies in the context of people's sense of morality (right and wrong, good and bad). The definition of economic development given by Michael Todaro is an increase in living standards, improvement in self-esteem needs and freedom from oppression as well as a greater choice. The most accurate method of measuring development is the Human Development Index which takes into account the literacy rates & life expectancy which affect productivity and could lead to Economic Growth.

The main credit for putting economic development on the map as a subject for general analysis belongs undoubtedly to Adam Smith. The Wealth of Nations is one of the great seminal works of world literature and as such has many aspects, as social philosophy, as economic history as well as political economy.(Robbins,1968)

It may be true, as some commentators have urged, that in the last analysis, Smith's prescriptions regarding policy were inspired as much by a concern for justice as by concern for the increase of riches. (Robbins, 1968)

UNEMPLOYMENT

This is undoubtedly one of the key issues confronting the SA economy today (2015).

There are many labels used to describe the different types of unemployment that occurs - let us have a look at a few:

Structural unemployment focuses on the structural problems within an economy and inefficiencies in labor markets. It also includes unemployment resulting from industrial reorganization, typically due to technological change, rather than fluctuations in supply or demand. Changes that cause a skills gap are part of this phenomenon.

Schumpeter coined the phrase "creative destruction" when talking about the effect that entrepreneurial activity has on the production process. Every new innovation makes obsolete the previous way of doing things and puts those involved in it out of work! The motor car put the buggy whip maker out of a job, the computer has put the typewriter repairman out of work, and so on.

Frictional unemployment is the time period between jobs when a worker is searching for or transitioning from one job to another.

Cyclical unemployment is a type of short to medium term unemployment that occurs when there is not enough aggregate demand in the economy to provide jobs for everyone who wants to work. Also called recessionary or depressionary unemployment

Classical unemployment occurs when real wages for a jobs are set above the marketing clearing level.

The natural unemployment rate represents the hypothetical unemployment rate that is consistent with aggregate production being at a long-run level.

Regulatory constraints on economic growth Quesnay and his disciples saw the French economy burdened with a load of regulations which they regarded as inimical to productivity, and their analysis was directed to show why this was so and how the removal of these regulations would lead to greater prosperity (Robbins, 1986)

References

Robbins, Lord: THE THEORY OF ECONOMIC DEVELOPMENT IN THE HISTORY OF ECONOMIC THOUGHT (BEING THE CHICHELE LECTURES FOR 1966, REVISED AND EXTENDED) MACMILLAN -ST MARTIN'S PRESS. First edition 1968.