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Circulation in macroeconomics.

Macroeconomics (from the Greek prefix makro- meaning "large" and economics) is a branch of economics dealing with the performance, structure, behavior, and decision-making of an economy as a whole, rather than individual markets.  This includes national, regional, and global economies.

CONTENT : A–F , G–L , M–R , S–Z , See also , External links


Quotes are arranged alphabetically by author.


  • Macroeconomics is the branch of economics that deals with the whole economy and the big picture. The behavior of smaller units within the economy including households, firms, and consumers is covered within microeconomics.
    • David Anderson, Cracking the AP Economics Macro and Micro Exams: 2004–2005 (2004), p. 225.
  • The dictionary defines "economics" as "a social science concerned chiefly with description and analysis of the production, distribution, and consumption of goods and services." Here is another definition of economics which I think is more helpful in explaining how economics relates to software engineering.

    Economics is the study of how people make decisions in resource-limited situations.

    This definition of economics fits the major branches of classical economics very well.

    Macroeconomics is the study of how people make decisions in resource-limited situations on a national or global scale. It deals with the effects of decisions that national leaders make on such issues as tax rates, interest rates, foreign and trade policy.

    Microeconomics is the study of how people make decisions in resource-limited situations on a more personal scale. It deals with the decisions that individuals and organizations make on such issues such as how much insurance to buy, which word processor to buy, or what prices to charge for their products or services.

    • Barry Boehm, "Software engineering economics," Software Engineering, IEEE Transactions on 1 (1984), p. 4.
  • Inflation is bad for growth—this has become one of the most widely accepted economic nostrums of our age. But see how you feel about it after digesting the following piece of information.

    During the 1960s and the 1970s, Brazil’s average inflation rate was 42% a year. Despite this, Brazil was one of the fastest growing economies in the world for those two decades—its per capita income grew at 4.5% a year during this period. In contrast, between 1996 and 2005, during which time Brazil embraced the neo-liberal orthodoxy, especially in relation to macroeconomic policy, its inflation rate averaged a much lower 7.1% a year. But during this period, per capita income in Brazil grew at only 1.3% a year.

    If you are not entirely persuaded by the Brazilian case—understandable, given that hyperinflation went side by side with low growth in the 1980s and the early 1990s—how about this? During its ‘miracle’ years, when its economy was growing at 7% a year in per capita terms, Korea had inflation rates close to 20%-17.4% in the 1960s and 19.8% in the 1970s. These were rates higher than those found in several Latin American countries … Are you still convinced that inflation is incompatible with economic success?.

    • Ha-Joon Chang, "Mission impossible?; Can financial prudence go too far?, There is inflation and there is inflation," ch. 7 of Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism (2008), pp. 139–140.
  • Gore Vidal, the American writer, once described the American economic system as 'free enterprise for the poor and socialism for the rich'. Macroeconomic policy on the global scale is a bit like that. It is Keynesianism for the rich countries and monetarism for the poor.
    • Ha-Joon Chang, "Keynesianism for the rich, monetarism for the poor," ch. 7 of Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism (2008), p. 142.
  • Macro-economic policy had accelerated the "expulsion" of landless peasants from the countryside leading to the formation of a nomadic migrant labor force moving from one metropolitan area to another.
    • Michel Chossudovsky, "IMF Shock Treatment in Peru," ch. 14 of The Globalization of Poverty and the New World Order (2nd ed., 2003), p. 200.
  • Macro-economic reform undermined the legal economy, reinforced illicit trade and contributed to the recycling of "dirty money" towards Peru's official and commercial creditors.
    • Michel Chossudovsky, "IMF Shock Treatment in Peru," ch. 14 of The Globalization of Poverty and the New World Order (2nd ed., 2003), p. 225.
  • So-called macroeconomics has never been real economics but rather an endless series of engineering-type models purporting to guide politicians in centrally planning an economy.  In the bizarro world of macroeconomics all capital is the same, and all workers are the same, as one big lump, expressed as 'K' and 'L' in the models.  Relative prices and their role in allocating resources in a market economy are mostly ignored, while 'economic aggregates' are said to influence 'the' price level.

    In macroeconomics it is taken as a given that markets are incapable of allocating resources in an acceptable way; that's why there is supposedly a need for macroeconomic central planning in the first place.  No such 'failures' are assumed on the part of the macroeconomic central planners.


  • Accounting for the artificial boom and the consequent bust is not part of Keynesian income-expenditure analysis, nor is it an integral part of monetarist analysis.  The absence of any significant relationship between boom and bust is an inevitable result of dealing with the investment sector in aggregate terms.  The analytical oversight derives from theoretical formulation in Keynesian analysis and from empirical observation in monetarist analysis.  But from an Austrian perspective, the differences in method and substance are outweighed by the common implication of Keynesianism and monetarism, namely, that there is no boom-bust cycle of any macroeconomic significance.
  • To take what might seem an "objective", macro-economic approach to the origins of the world economy would be to treat the behavior of early European explorers, merchants, and conquerors as if they were simply rational responses to opportunities—as if this were just what anyone would have done in the same situation. This is what the use of equations so often does: make it seem perfectly natural to assume that, if the price of silver in China is twice what it is in Seville, and inhabitants of Seville are capable of getting their hands on large quantities of silver and transporting it to China, then clearly they will, even if doing so requires the destruction of entire civilizations. Or if there is a demand for sugar in England, and enslaving millions is the easiest way to acquire labor to produce it, then it is inevitable that some will enslave them.
  • Most macroeconomics of the past 30 years was spectacularly useless at best, and positively harmful at worst.
    • Paul Krugman, Lionel Robbins Lecture at the London School of Economics (June 2009).
  • It is likely that many modern economists would have no difficulty accepting Hayek's statement of the problem (of macroeconomics) as roughly equivalent to their own. Whether or not this is so, I wish … to argue that it should be so, or that the most rapid progress toward a coherent and useful aggregate economic theory will result from the acceptance of the problem statement as advanced by Hayek.
    • Robert Lucas, Jr., "Understanding Business Cycles," in Studies in Business-Cycle Theory (1981), p. 216.


  • If you were going to turn to only one economist to understand the problems facing the economy, there is little doubt that the economist would be John Maynard Keynes.  Although Keynes died more than a half-century ago, his diagnosis of recessions and depressions remains the foundation of modern macroeconomics.  His insights go a long way toward explaining the challenges we now confront.
    • N. Gregory Mankiw, "What Would Keynes Have Done?" in New York Times (28 November 2008).
  • The field of economics is traditionally divided into two broad subfields.  Microeconomics is the study of how households and firms make decisions and how they interact in specific markets.  Macroeconomics is the study of economy wide phenomena.  A microeconomist might study the effects of rent control on housing in New York City, the impact of foreign competition on the U.S. auto industry, or the effects of compulsory school attendance on workers' earnings.  A macroeconomist might study the effects of borrowing by the federal government, the changes over time in the economy's rate of unemployment, or alternative policies to promote growth in national living standards.  Microeconomics and macroeconomics are closely intertwined.  Because changes in the overall economy arise from the decisions of millions of individuals, it is impossible to understand macroeconomic developments without considering the associated microeconomic decisions.
  • Professor Ohlin also made an important contribution to what now might be called the macro-economic aspects of a country's balance of payments. In 1929 in the Economic Journal he engaged in a famous controversy with Keynes on the problem of transferring payments from one country to another across the foreign exchanges. In this he laid stress upon the income-expenditure effects of the reduced spending power in the paying country and of the increased spending power in the recipient country. In doing so he made use of the usual distinction between a country's imports and exports; but in addition he emphasised the importance of the less usual distinction between a country's domestic non-tradeable goods and services and its tradeable, exportable and importable, goods. I made some use of this latter distinction in my Balance of Payments; but looking back I regret that I did not let it play a much more central role in that book
  • During the relatively brief period in the late 1960s when economists were pondering the possible obsolescence of business cycles, the scholarly discipline of macroeconomics showed signs of becoming fragmented into speciality areas devoted to components of the then popular large-scale econometric models-for example, consumption, investment, money demand, and the Phillips curve. But more recently the revival of severe real world business cycles, together with the revolutions associated with Milton Friedman's monetarism and Lucas's classical equilibrium models, has brought about a revival of interest in economic analysis that focuses on a few broad aggregates summarizing activity in the economy as a whole-nominal and real income, the inflation rate, and the unemployment rate.
    • Robert J. Gordon, ed. The American Business Cycle: Continuity and Change, 1986. p. 2


  • The basic economic principles involved in discussions of the national economy are not overly complicated but two crucial misconceptions need to be guarded against: (1) the fallacy of composition and (2) assessing economic activity as if it were a zero-sum game, in which what is gained by some is lost by others. There are also sometimes misconceptions of the nature of government, leading to unrealistic demands being made on it and then hasty denunciations of the "stupidity" or "irrationality" of government officials when those demands are not met.
    • Thomas Sowell, Basic Economics, 4th ed. (2010), Ch. 18. Government Finance
  • A central concern of macroeconomics is the upswings and downswings in the level of real output called the business cycle. The business cycle consists of alternating periods of economic growth and contraction. Business cycles are inherent in market economies.
    • Irvin Tucker, Macroeconomics for Today, (2008), p. 150.

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