Economics and Ethics
Economics often is regarded as the most successful of the social sciences in developing a scientific theory of social behavior. Therefore, economics is a science with manifest ethical implications.
General Equilibrium Theory
Contemporary economic theory is based on the general equilibrium model first outlined by the nineteenth-century Swiss economist Léon Walras (1834–1910) and perfected in the post–World War II era by Kenneth Arrow (b. 1921; winner of a Nobel Prize in economics in 1972) and others. The Walrasian general equilibrium model includes firms, which transform production inputs (land, labor, natural resources, capital goods such as buildings and machines, and intermediate goods produced by other firms) into outputs (including consumer goods and services) by using a technologically determined production function that summarizes the most technically efficient way to transform a specific array of inputs into a particular output or array of outputs. The only other actors in the general equilibrium model are individuals and government. Individuals supply labor to firms and own the land, natural resources, and capital, which they supply to firms, and also are consumers who use the income they derive from supplying inputs to production to purchase goods and services that they then consume.
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