Scales of Economics
Microeconomics is the study of individual decision-making behaviors by households and firms (businesses) which affect the supply, demand, and the prices of goods and services.
Macroeconomics is the study of large-scale economic dynamics of a region or nation-state. Measures in this sphere include gross production, income, employment, and overall price level.
The best-known macroeconomic figure is GDP (gross domestic product), which is a monetary estimate of the value of all final goods and services produced in an economy for some period (usually yearly or quarterly). GDP deliberately leaves out business-to-business transactions involved in production stages, as well as ignoring sales of used goods. Hence, GDP is a laughably rough approximation of economic activity. (China does not even pretend to reliably measure its GDP; other countries are merely more pretentious.)
GDP is increasingly a poor measure of prosperity. It is not even a reliable gauge of production. ~ The Economist magazine in 2016
GDP does not consider socioeconomic inequalities or quality of life, notably environmental and social conditions. GDP therefore says nothing about how well people get by.
The figure below shows relative national GDP per capita in 2017; lighter is lower, darker higher.
Though some of the same concepts traverse both realms, there is an unbridgeable gap between micro- and macroeconomics. The focus of microeconomics is ultimately the decisions of individuals at ground level, whereas macroeconomics is a bird’s-eye view of the aggregate. Each has its own fictions.
The term political economy originated in moral philosophy as the unified study of economics and politics. Its meaning evolved in the 18th century into the study of the economies of states (polities) before being supplanted by economics at the end of the 19th century, owing to Alfred Marshall’s influential 1890 textbook on the subject.
Politics remain integral to how markets work, as governments set the stage upon which markets perform. Economics is a sociopolitical dynamic.
The old adage – if you want to know what is going on, follow the money – applies equally to economics and politics. Corruption is, after all, a political dynamic fueled by economic interest.