Site icon Blessing Associates

Living Economics: Macroeconomics v. Microeconomics

*The game referenced in this article is ‘The Tribez‘ offered by Game Insight UAB.

The study of economics has historically been divided into two primary areas of study — Macroeconomics and Microeconomics.

Fortunately many of the fundamental concepts overlap. For example, both courses cover incentives, the circular flow diagram, supply and demand charts. . . The main difference between Macro and Micro lies in the perspective and focus:

Economics

Resources are scarce (there are rarely enough resources available for everything we wish to do with them), making it necessary for us to better understand how humans use scarce resources and why those decisions are made.

Economics is thus the study of how resources are created, gathered, traded, and divided. Economists seek to improve the management of resources by individuals, companies, and governments for more effective and efficient use. The more efficiently we utilize our resources, the less we struggle with scarcity.

*You can find more about the introduction to economics in general via our previous article.

A key factor in careful resource management is value-based decision making. Which resources do people value? How much? Which do they value more? What are they willing to sacrifice? Resources cannot be effectively managed until their true value to each person is known.

Video courtesy of “Crash Course: Economics”

Macroeconomics

Macroeconomics (宏观经济学) centers on the bigger picture (macro), assessing how countries and governments create, gather, trade, and divide resources domestically and internationally.

A country’s unique system of managing resources is called their economy. Each country has its own ideals about how the economy should work. The global economy is a much larger, intricate system wherein countries and forces interact – either cooperating or competing in the management of resources internationally.

Key issues include

In addition to the standard economic discussions (trade-offs, profitability, equilibrium), macroeconomics will also dive into

How can the government manage resources to ensure maximum happiness for everyone?

Macroeconomic decisions lie everywhere within society:

Is this an example of wise economic decision-making?

Microeconomics

Microeconomics (个体经济学) hones in on the details (micro) and adopts a more personal perspective, analyzing how individuals and companies interact and facilitate the creation, gathering, trade, and division of primarily privately-owned resources.

Key issues can include:

Microeconomics looks at factors including:

Why Does Economics Matter?

Whether a country is Socialist or Capitalist . . .
Whether a country has a large middle class or significant class divide. . .
Whether the military is large or small. . .
Whether your company includes insurance in your benefits. . .
Whether fire safety mechanisms are required in factories . . .
Whether education is a priority . . .
Whether information is distributed freely or limited . . .
Whether infrastructure is safe or left to decay . . .

These are all economic decisions — choices made about resources and how they will be used.

Economics determines what resources are available for the poor. Whether the country is open to international trade or not. Whether the population increases or decreases. Whether the environment is protected or exploited. Whether there is a minimum wage. Whether farmers operate in a free market or under price controls. Whether taxes are high or low. . . .

If these choices are not made properly, it truly is the difference between life or death.

Stronger economies, those built on solid economic theories and decisions, tend to result in:

Unfortunately not all countries (or economies) are created equal in terms of resources on hand.

Countries that have more natural resources (e.g. U.S., Russia, and China) tend to have larger economies. Countries with greater diversity of resources tend to be more stable and find greater opportunities for international trade. Countries with highly valuable or highly limited resources (e.g. natural gas, oil, gold) tend to be more profitable annually. Countries that have positive historic relations may find it easier to trade their resources globally.

Craig Anthony (2019) ’10 Countries with the Most Natural Resources’

Conversely, it is not always true that a country rich in natural resources will automatically be financial or economically successful. Examples of this are scattered throughout history. . . consider France who wasted its wealth for years on wars, colonialist efforts, and a wealthy nobility until it found itself in the middle of the French Revolution. India whose innumerable resources have done little to mitigate the continued social inequality. Venezuela whose economic collapse into utter poverty and civil chaos has been the talk of newspapers for the past several years by now.

There are many reasons why economies with substantial resources may find themselves suffering:

Economists hope to mitigate those issues and help countries reach their full potential.

Exit mobile version