Macroeconomics—Is It Still Helpful in an Age of Scarcity? - Economics and Ecology: United for a Sustainable World - page 103

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Macroeconomics—IsItStill
Helpful in a nAgeofScarcity?
Macroeconomics is defined as the study of a whole economy or, in other
words, a relatively closed economic system, as opposed to its individual
parts. A study of the components or building blocks of the overall economy
(such as individual consumers, businesses, and markets) is the purview of
microeconomics, the core of which is the analysis of supply and demand.
Microeconomics is essentially what we have done to date in this examina-
tion of economic methodology; but it is time to look at the big picture.
Origins of Macroeconomics
As a major branch of the overall discipline of economics, macroeconomics
is a child of the Great Depression and was therefore born out of necessity.
Prior to the economic collapse of the 1930s—ostensibly of the entire capital-
ist world—the dominant mode of economic thought in the United States can
accurately be termed market capitalism , although perhaps a much-simplified
version of what that term would suggest in today's globalized economy.
Markets were assumed to be self-correcting. There was no such thing as a
shortage or surplus, but merely a price that was too low or too high. And
the pricing mechanism would quickly rectify any supposed imbalance. The
Great Depression called these comforting assumptions into question.
In short, virtually all economics was microeconomics, and the minimal-
ist, self-correcting nature of the methodology fit the times. This ideology
accompanied the predatory growth of the capital goods industries during
the last half of the 19th century—often termed the Robber Baron era—and
ushered in the beginnings of the consumer society, culminating in the
euphoric Roaring Twenties. Clearly, the role of government in the economy
was minimal during this period, with the notable exception of the antitrust
efforts through the Sherman Act of 1890 and the establishment of the Federal
Reserve System (the Fed) in 1913.
The Sherman Act addressed the perceived egregious monopoly and exces-
sive concentration of economic power that constituted the Robber Baron era,
while the Fed established mechanisms for regulating the money supply in
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