This article will help you to learn about the difference between static economics and dynamic economics.
Difference between Static Economics and Dynamic Economics
Difference # 1. Time Element:
In static economic analysis time element has nothing to do. In static economics, all economic variables refer to the same point of time.
Static economy is also called a timeless economy. Static economy, according to Hicks, is one where we do not trouble about dating.
On the contrary, in dynamic economics, time clement occupies an important role. Here all quantities must be dated. Economic variables refer to the different points of time.
Difference # 2. Process of Change:
Another difference between static economics and dynamic economics is that static analysis does not show the path of change. It only tells about the conditions of equilibrium. On the contrary, dynamic economic analysis also shows the path of change. Static economics is called a ‘still picture’ whereas the dynamic economics is called a ‘movie’ of the market.
Difference # 3. Equilibrium:
Static economics studies only a particular point of equilibrium. But dynamic economics also studies the process by which equilibrium is achieved. As a result, there may be equilibrium or may be disequilibrium. Therefore, static analysis is a study of equilibrium only whereas dynamic analysis studies both equilibrium and disequilibrium.
Difference # 4. Study of Reality:
Static analysis is far from reality while dynamic analysis is nearer to reality. Static analysis is based on the unrealistic assumptions of perfect competition, perfect knowledge, etc. Here all the important economic variables like fashions, population, models of production, etc. are assumed to be constant. On the contrary, dynamic analysis takes these economic variables as changeable
Now we can sum up by saying that static and dynamic approaches of economic analysis are not competitive but complementary of each other. Statics is simpler and easier while dynamics is nearer to reality. It is useful to study some economic problems through the static analysis while others may be studied through the dynamic approach.