A New Perspective
1. 1.1 How do economists approach microeconomic policy? INTRODUCTION: MICROECONOMICS VERSUS MACROECONOMICS Economics often seems to follow fashions. In the early twenty-ﬁrst century, one current fashion focused on the emergence of a so-called ‘new economy’ or knowledge economy based on information technology, E-commerce and globalization. Questions arise as to whether this new economy has rendered obsolescent established economic models and requires a new economics. Other fashions in economics have centred on the relative importance of state intervention in the economy, ranging between the extremes of complete socialism and central planning on the one hand, and laissez faire capitalism on the other. The former Soviet Union is a good example as it attempts the transition from a centrallyplanned economy to a private enterprise market economy. Other current issues have emerged to attract the interest of both economists and governments. These included international terrorism and conﬂicts in Afghanistan and Iraq which were the focus of defence economics; the challenges to international competitiveness from the growth of both China and India which attracted the interests of industrial and trade economists; concerns about the economic impacts of pandemics (for example, bird ﬂu) and global warming; the economics of enlarging the European Union; and international concerns about subsidies to agriculture in rich nations and major disagreements between the EU and USA involving subsidies for large civil jet airliners (Airbus and Boeing). The debate about the relative importance of micro- and macroeconomics is a further example of fashions in economics. For many years after...
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