An Introduction to Economic Dynamics

1 INTRODUCTION TO ECONOMIC DYNAMICS

DOI: 10.4324/9780429324406-1

The modern economy is a complex system comprising heterogeneous agents such as individuals, firms, and governments interacting with each other directly and indirectly in the market place. The main aim of Economics, as a subject of study in the Social Sciences, is to understand the workings of the economies and to explain the underlying mechanisms that drive such complex systems. Classical economists, such as Adam Smith, who is considered as the father of economics, emphasised the role of an individual agents’ self-interest in seeking their own gain in the market as the mechanism driving the self-regulating nature of the modern economies, as if regulated by an invisible hand. ...