A Hi st o r y of Ec o n omi c T h ou g h t - C h a p t e r 3 – P a ge 1
cyni c i s s o meone w h o kn ow s t h e p r ic e of
e v e r y t h i n g a n d t h e v a l u e o f n o t h i n g .
Osca r W i ld e [ 1 8 5 4 - 1 9 0 0 ]
Chapter 3
THE EVOLUTION OF MICROECONOMIC THOUGHT
n every society, choices must be made about what things should be produced, how
they should be produced and who should get them. Even Daniel Defoe’s [1659-1731]
Robinson Crusoe [1719] must choose how the resources available to him are to be
allocated. With the appearance Friday, the problem becomes more complex. Since
humans tend to be social animals they must devise processes and institutions to
coordinate and integrate individual behavior within the context of their societies. From
the Greeks to the present, in documents from the world's great and not so great
religions to writings that profess to be amoral, the topics of how these choices are
made and how resources are allocated have been debated.
Economic theory is not a static body of "truths." Rather, it is an expression of a
perspective about economic activities during a particular historical period. While the
body of economic theory influences the course of history, it is at the same time shaped
by the forces of history. The economic activities in each society and the economic
explanations and justifications of those activities are guided by beliefs, values,
ideologies and technology prevalent in that society.
Microeconomics is the study of decisions, relationships and behavioral patterns of
individuals, families, organizations (firms, not-for-profit organizations, etc), industries
and markets. At one level, microeconomics may be used as a tool to aid in the decision
making process. It may be used as a tool to optimize some economic variable such as to
maximize utility, benefits, profits, net return, or to minimize some variable such as cost
per unit. At another level, economics is a social science that provides the context to
understand and interpret the world about us;