The combined assumptions of maximizing behavior, market equilibrium, and stable preferences, used relentlessly and unflinchingly, form the heart of the economic approach.
Ever since Adam Smith, economists have devoted a great deal of thought and effort to gaining a better understanding of how markets work. Much of the power of economics is rooted in the fact that a single set of assumptions and a single set of analytical concepts (demand, supply, price, quantity) have proven useful in explaining behavior in such diverse settings as commodity markets, labor markets, foreign exchange markets, and so on. In recent years, economists led by Gary Becker (1964, 1976, 1981) .have been using the market paradigm to obtain new insights about many so-called nonmarket phenomena such as marriage, divorce, fertility, health, education, and crime.