Applied Economics is undoubtedly one of the most important subjects within the broader subject of economics. Applied economics refers to the branch which is associated with the applications of the economic principles and gives more light to the economic policies as a result. Applied Economics as a subject grew stronger only during the late 19th century and early 20th century. The term was first coined by Keynes in 1917. The period was witnessing the First World War and that’s when the theory of applied economics developed. Applied Economics as a subject was seen with many benefits as it became a pathway to understand the basic economic principles and provided a thorough understanding. With time, another major scholar Joseph proposed during the 1950s the basic postulate which surrounds the definition. According to him, applied economics is a subject which is mixed with other social factors and thus, in turn, is a social science which has connections with other major parameters. The scope of applied economics thus, increased and many scholars stressed its importance in determining various other related aspects. Even subjects of accounts were considered to be dependent on economics in one way or the other. Determining the meaning of applied economics is important and so is the tracking of its evolution.
Applied Economics was not the first development of economics, which is associated with Adam Smith, who in 1776, wrote ‘wealth of nations’ and paved the way for the development of the classical theory of economics. Applied Economics was not evident till the 20th century when Keynes proposed a complete theory to support the practical aspect of the subject.
Keynes theory was popularized and was known as Keynesian Theory. According to Keynes, applied economics was contrary to the classical thought and it contradicted the fact that laissez-faire must be promoted but not at the expense of the Government losses. The period also witnessed a great economic crash during 1929, which further boosted the development of the concept. Roosevelt worked upon the idea of the applied economics and put the best of government restrictions to pull the economy of the USA to a steady level. Following the same, after the Second World War, the concept of Applied Economics grew further up and scholars connected the concept to the pure economics and focused on the application part which led to the development of applied economics as a subject of individual importance.
There are certain concepts which are closely related to applied economics. Beginning from Demand and Supply, the same may be called as a basic policy of the economic policy, yet the application part has its own implications. Applied economics allows any institution to study what the implications the same must have on the countries supplies. Based upon the same is the extension theme of inflation, which may happen to any economy. Inflation can be of any type ranging from general to risky one, where even the lives of people can get hampered.
Inflation may lead to losses and to protect the economy from the losses, the parameters of applied economics is pertinent.
Following the same is the derivation of the policy of diamond and water paradox, which states that anything with same importance may have different values based on their utility in one’s life. Cost and benefits are another factors which are connected with the subject of applied economics connected to the benefits of the consumers and if the prices are low, the benefits of the same can be accrued by the customers.
Applied Economics, as a subject, has its own implications and practical benefits. Applied economics depends upon some of the major principles, including external factors which might cause a change in the end result of what is coming and how the same might bring a change to the factor. Other major factors include the policy of elasticity, which is also a way of testing one variable in the presence of others to check the sensitivity or the alteration it brings to the variable. Elasticity might or might not bring a change and this is what is determined by applied economics. Also, connected with the same is the predictions which can be made for any economy. Predictions can be made only with experiments and allocation of budget is one major example of how the Government allocates funds to each department by making a prediction of the tax accruals.
Depending upon the predictions is one another way to make economic policies. The economic policies govern the system of any economic part and determine the country’s growth. Applied Economics enables people to derive factors which are useful for economic growth. For any economy to grow, the policies are important and as a result, to steer the growth, the genesis is the applied economic part which deals with the application of the policies properly to reach to the desired results.
Would you like to read more about this topic? This book might interest you: Applied Economics.