Microeconomics vs Macroeconomics - Which Class Should I Take First?
When you're just beginning your studies in economics, you'll come across two very important subjects – microeconomics and macroeconomics. It's highly likely that you'll study both of these topics as you learn more about economics, as they are foundational to the subject. However, you might be in the position where you have to choose a class in economics to study now, before specialising later on – and in that case, should you take a class in microeconomics or macroeconomics first? Which will give you the best starting point for your studies in economics? We're going to discuss this question today, so you can learn a little about each subject and decide which you should study first.
What's the difference between macroeconomics and microeconomics?
Before making any decisions about which classes to take, you need to understand what each subject refers to. Microeconomics is the study of economic systems on a small scale – meaning it is about the way in which economic theories play out when they are applied to an individual, a group, or a company. Macroeconomics, on the other hand, looks at the entire economy of countries or of the world. For example, microeconomics in practice would include the study of supply and demand for a particular product or service, or examination of how a particular piece of legislation would effect a business which operated in that area. Macroeconomics examines economics on the larger scale, seeing how economic theories apply to governments and international organisations such as NATO. Examples of the kind of topics studied in macroeconomics would include the gross domestic product of a country, or the economics of imports to and exports from a country.
Both micro- and macroeconomics deal with similar issues, but on different levels. In fact, the same topics of study can be relevant to both subjects. For example, consider the issue of cost of living in a particular area, and its relation to inflation. This is related to microeconomics – because it's about how much people have to spend on housing, food, entertainment and so on – and can therefore be described on the individual level. But it's also an important topic in macroeconomics, as inflation is effected by things like the interest rate, which is set by the state. It can therefore also be analysed on the national level as a subject of macroeconomics.
The relevance of microeconomics and macroeconomics to economics in general
The two fields are often connected, then: investigating the microeconomic parts of a facet often reveals some important clues about the macroeconomics, and vice versa. One rough way of thinking about this is that microeconomics is 'bottom up', looking at how individual choices effect economic systems, while macroeconomics is 'top down', looking at how economic systems effect the people living within them. In order to understand a complex economic issue such as how and when a state should adjust the inflation rate, you need to understand the basic principles of supply and demand and the way in which people make economic decisions, which would be microeconomics. Then you would need to understand how these principles apply to monetary systems and the financial market, and how the economy of a country fits into the international economic system, which would be macroeconomics.
Another factor is that in microeconomics, there is little in terms of competing schools of thought; that is to say, economists generally agree on the principles. The same, unfortunately, can't be said for macroeconomics, the definition of which has changed several times - and often drastically - since its inception. Debate is still strong when it comes to macroeconomic principles and especially in terms of forecasting. This can sometimes make it a more challenging, if perhaps more intellectually stimulating, area of study.
Should you take microeconomics or macroeconomics first?
Taking into account all of the above, most economics students are better off studying microeconomics first, and then progressing on to macroeconomics. That way, the principles of economics can be learned on an individual level, before being applied to the wider society and world. However, some would argue the principles of economics are better understood if first seen in practice – as in, first one must understand the financial system in order to make any sense of economics as a topic. These people would argue it can be helpful to study macroeconomics before microeconomics.
Helpfully, you might find your university roles both subjects into one unit such as an Introduction to Economics course. Any of these options will allow you to learn what you need to progress in your economics studies, but in general, most students will opt to begin with studying microeconomics first.
A final point would be that microeconomics is generally more mathematical and macroeconomics less so. However, there will maths involved in macroeconomics, meaning having the mathematical foundation from microeconomics may be useful. In the end, if you're planning on taking both it may be worth studying macroeconomics initially. However, if you're only planning on taking one of the two, pick whichever you find more interesting.
You’ve all heard the term before, countless times no doubt. But what does it really mean? Well, the biggest clue is in the title. MACROeconomics is a branch of economics that looks at the economy as a whole, specifically, at its structure, performance, and behaviour. It does so by considering aggregate changes to phenomena like gross domestic product (GDP), inflation, price indices, national income and unemployment rates.
Standing in contrast to macroeconomics, microeconomics looks at the choices made by economic actors - be they people, firms, or whole industries - and how they affect the allocation of scarce resources. Primarily, this involves investigation into why goods and services assume different values and understanding how changing economic conditions can alter the decision-making of economic actors.
The INOMICS Questionnaire: Fratzscher vs Rossi-Hansberg
Esteemed economist, Princeton Professor, and friend of INOMICS, Esteban Rossi-Hansberg, generously took time out of his busy schedule to take part in the second INOMICS Handbook Questionnaire. Opposite him, in his customary role of quizmaster, was Professor Marcel Fratzscher, president of the DIW Berlin, and one of Germany’s leading voices in macroeconomics. Keeping with tradition, and as a nod to the heavyweight reputations of those involved, we dubbed the encounter ‘Fratzscher v Rossi-Hansberg’.