Understanding Endogeny in Economics

Endogeny refers to a situation where a particular factor or variable is produced within a system or model, rather than being introduced from outside. In other words, endogeny means that the factor or variable is internally generated, rather than being exogenously determined.

For example, in an economic model, an endogenous variable is one that is determined within the model itself, such as the level of consumption or investment by households and firms. In contrast, an exogenous variable is one that is determined outside of the model, such as changes in government policies or external shocks like natural disasters.

Endogeny is an important concept in economics because it helps to determine the behavior of economic systems and the impact of different policies and interventions. By understanding which variables are endogenous and which are exogenous, policymakers can better design policies that are tailored to the specific needs of the economy.