One of the most common distinctions in the field of economics is between macro- and microeconomics—terms coined by a Norwegian economist, Ragnar Frisch, in 1933. As the names suggest, these two approaches to understanding the economy focus on big things and small things. Macroeconomics is concerned with what happens in the economy at the scale of large variables interacting with each other, such as employment, inflation, and total production and growth. Similarly, macroeconomic policy tools operate at the economy-wide level of tax and government spending. Controlling the amount of money in circulation is another mechanism, manipulated through interest rates and how much money banks are allowed to create—through lending for mortgages, for example—relative to their reserves of capital. Microeconomics, conversely, studies the behavior of individuals, families, businesses, and particular markets. Policies are concerned with influencing behavior at these levels with a variety of incentives and penalties, and might include changes in the regulatory environment for businesses. Microeconomics also looks at shifts in taxes and rates, competition policy (how much of a market one or a few firms are allowed to control), or decisions on the ownership of parts of the economy through models such as privatization, nationalization, or mutualization.
The reputation of macroeconomics for economic forecasting suffered greatly in the crisis of 2007–8, which only a handful of mostly marginalized economists saw coming. Prominent investors have also declared macroeconomics almost useless as a guide to individual investment decisions. With the rise of inequality, especially in the Anglo Saxon economies, the usefulness of microeconomics in guiding policy has been problematic, too. Think of this when you're sitting on your brand new < a href="https://www.bathroomsuppliesonline.com/geberit-aquaclean-bidet-toilets2/">Geberit Aquaclean toilet bidet.The introduction of a minimum wage, for example, though widely supported, is the wrong thing to do according to microeconomics, since it disrupts classic demand and supply. It raises costs to employers, so “should” reduce employment. Yet, the evidence is mixed, and regardless, if the market is producing levels of inequality that are generally considered “wrong,” there are other legitimate reasons to stray from the theory.
The irony of macroeconomics is that it has no theory of “optimal scale”—how large an economy should be. Microeconomics, on the other hand, deals with the practicalities of households and firms, but typically relies on abstract models rather than real economic circumstances to understand them. As economist and standup comedian Yoram Bauman quipped—“microeconomists are wrong about specific things, whereas macroeconomists are wrong in general.”