Economic statics

Economic statics

As far as economic analysis is concerned the techniques of economic statics and dynamics come to occupy a very important place in economic analysis. In the early days, the writings of the economists were mostly static and the laws expounded were independent of the time element. Adam Smith considered the economic system strictly within the framework of private property. However, since 1925, dynamic technique has been used in the fields of economic theory. English writers like Robertson, Keynes and Harberier laid great stress on dynamic analysis.

The meaning of economic statics:

Statics and Dynamics are synonymous to stationary and change. The concept of dynamics (or change) cannot be understood without knowing the meaning of statics. The definition of economic dynamics must follow from the definition of economic statics, while defining the one and another.

Static economics is called as economics of stationary states. It is a hypothetical state in which economic phenomena are beyond the influence of external economic forces. Therefore, it may be described as a closed economic system, outside the influence of economic forces. Various economic quantities remain unaltered. The size and composition of population are static, since the forces governing population operate in such a manner whereby the birth rate and death rate counter balance and keep the population static. Similarly, in a static economy, the stock of goods maintains a stationary state as the rate of consumption and the rate of production are constant and the market forces remain in equilibrium. A static economy is not a stand still economy. In practice, the economy cannot come to a halt.

The statics of economics and the statics of physical science are entirely different. In the latter, it is complete rest and motionless, but in the former, it is moving, operating, accumulating etc. but the movement is at an uniform speed or at a constant rate.

« A static economic system may be compared to a ball rolling at a constant speed, neither gaining momentum nor losing speed ».

Another important feature of economic statics is the discussion of economic phenomena independent of the time element. It tries to establish functional relationship between two variables whose values relate to the same point of time or period of time. This means that the study aims at static relationship between relevant variables. The three quantities namely; demand, supply and price refer to the same point of time. If there is a slight change in time, the relationship shall come to be static. Or to put it in the other way, the passage of time is ignored and a trial is made to establish the relationship between the variables relating to the same point of time. The problems in economic statics are those connected with equilibrium conditions which do not involve any change in the time element. It is the case of other things remaining the same and the following are some examples:

The functional relationship between the price and demand;
The theory of rent;
The law of diminishing marginal utility;
Price-output analysis under monopoly;
The doctrine of comparative cost;
The marginal analysis and
The distribution of national income in the economy.

All the above mentioned belong to economic statics on account of the facts that they lend themselves easily to static analysis.

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