What Is Macroeconomics?

How to use this starter kit Conventional theories of macroeconomics

What is macroeconomics?

The economy

The English word ‘economy’ derives from the Greek words eco or öiko and nomos, meaning household accounts or household management. It is the management of resources within a collective space. What differs is how that management happens and the tools available for sharing associated costs and benefits across the collective, and this depends on whether we are talking about a household, local community, country, or the global economy.

The term ‘economy’ is presented as a domain of numbers, statistics, ‘a mathematical version of reality’,¹ and a specific domain of expertise. But when one thinks about it in its original Greek meaning, it becomes clear that economics is an entrenched part of our lives at all levels.

In terms of the economy, we talk about resources, goods and services, their production, distribution, and consumption. We talk about the decisions and the related behaviours of individuals, sectors, countries, etc. However, what is often hidden when talking about the economy is that the economy is also about power; whether in the household, or at the national or global levels. What resources are available, who controls their distribution, whose needs are met, and whose demands are prioritised – these are all political decisions about power. Furthermore, this concentration of power in the hands of one or a few, for years and decades, has created and continues to exacerbate intersecting lines of oppression. This happens through its interactions with other systems of oppression such as patriarchy, colonialism, militarism, to name just a few.

However, the way the economy and economic decisions are presented disregards their strong connection to our daily lives, their indivisible link to power and politics, and their contributions to the forms of oppressions experienced by the overwhelming majority of the world’s population. They are presented as mathematical, neutral, rational decisions that only aim to increase the efficiency of markets.² For example, we know that not all economic decisions are ‘rational’, neither at individual nor at state level; there are many other determinants to the economic decisions given.

Moreover, questions that are gravely overlooked include: who gains or loses power due to economic decisions, who carries the burden imposed by them, what part of society will be empowered through them, and what part will be disenfranchised. The answers are almost always to the detriment of the most marginalised parts of society, including women and girls.

These questions are critical to economic policy making and encouraging democratic participation in these processes. To an extent, these questions have remained unasked, whether as an ideological choice or through lack of knowledge of the decades of research in this area. This ultimately serves the status quo and those who benefit from the current economic system. This process is further facilitated by shrouding the economic status, policies, and decisions with mathematical formulations, numbers, and claims to ‘scientific’ economic expertise.

This detachment from our daily narratives works to make us trust these economic decisions as ‘neutral’ or non-ideological, discourage us from questioning them, and dissuade any form of resistance that might arise if the actual political intentions behind the policies were understood. Thus, a strong form of resistance and activism includes understanding economic concepts, their connections to and effects on our lives, and challenging and transforming them to help achieve gender equality.

Macroeconomics

Macroeconomics is the branch of economics that concerns itself with the big picture. It helps us to see patterns and trends, and lets us make predictions on a national and/or global scale. Macroeconomics is more about the holistic picture of entire economies (whether international, regional, or national). It looks into ‘aggregate’³ issues such as economic growth, inflation, interest rates and currency exchange rates, government borrowing, taxation, budgetary spending, gross domestic production, and overall employment.⁴

So when we talk about the status of the economy in our country, or wonder if the overall unemployment rate will decrease anytime soon, or if there will be tax increases because government spending is increasing day by day, it is macroeconomics and related data that lets us make these predictions. It brings together the decisions made by diverse actors, and makes predictions on their overall effect on the country or the world.

Microeconomics is macroeconomics’ counterpart, and looking at it can make it easier to understand macroeconomics. Unlike macroeconomics, microeconomics looks deeper into individual markets within entire economies. Microeconomics largely covers consumer behaviour, supply of and demand for goods, and labour in specific sectors. It concerns itself with decisions given by individual actors such as people, households, or companies. Some issues, such as employment, have both macroeconomic and microeconomic aspects to them.

How to use this starter kit Conventional theories of macroeconomics

Footnotes

1
A phrase coined by Neil Postman in Technopoly: The Surrender of Culture to Technology (1992).
2
‘Market’ can be defined as a system where the exchange of goods and services occurs.
3
Aggregate: a whole, formed by combining several separate elements.
4
These terms will be explained in more detail in the following sections of this starter kit.