Economists develop economic models to explain consistently recurring relationships. Their models link one or more economic variables to other economic variables (see “Economic Models,” p. 8). For ...

Discover the concept of underconsumption, its role in economic theory, and real-world examples like the auto industry during ...

I n the epilogue of their blockbuster book Mostly Harmless Econometrics (2009), Josh Angrist and Steve Pischke write, “If applied econometrics were easy, theorists would do it.” As academic jokes go, ...

Economic theory has evolved into a multifaceted discipline that not only articulates the fundamental principles governing resource allocation and decision‐making but also integrates classical ideas ...

Incentives are part of our daily life and can affect everything from what we eat to how we parent our children to how we perform at work. Many everyday incentive behavior is rooted in economic ...

Keynesian economics is a theory whose premise is that aggregate demand is a primary driver of the economy and employment. Keynesian economics is an economic theory, and the basic premise is that ...

Clay Halton is a Business Editor at Investopedia and has been working in the finance publishing field for more than five years. He also writes and edits personal finance content, with a focus on ...

There is an old joke in economics about two economists walking together down the sidewalk. One of them stops the other and says, “Look! There’s a $100 bill lying there on the ground!” As he stoops to ...

Ironically, an acatallactic pseudo-theory of money that emerged from a school of thought that rejected theory in favor of an ...

We don't always behave the way economic models say we will. We don't save enough for retirement. We order dessert when we're supposed to be dieting. We give donations when we could keep our money for ...