Economics is the study of how to achieve the largest possible welfare or benefit given a limited amount of resources, examining and teaching people how to use scarce resources in an attempt to satisfy their wants. This can be further drilled at various different levels, incurring Microeconomics and Macroeconomics.
Mostly looked at as the science of choice, Economics is also known as the “dismal science” in that it claims we can never get all that we want and that economic problem is a problem forever – we cannot even come close to solving them. On the contrary, scientific problems arise to be solved.
The study of economics is classified as social science because it is associated with human problems and deals with human behavior, at least certain aspects of it. Consequently, it is not an exact science that yields indisputable results, but easily finds differing and even conflicting views and conclusions along the way.
Key concepts that lay the groundwork of modern Economics include:
- Rational self-interest but limited rationality
- Scarcity and opportunity cost
- Comparative advantage
In definitions of Economics, economists usually find them each concerned with different approaches. However, there are 3 distinct definitions that are particularly famous from very unique perspectives.
By Alfred Marshall, a British economist whose ideas have helped shape modern economic analysis and governed for half a century, Economics is:
… the study of mankind in the ordinary business of life; it examines that part of individual and social action which is most closely concerned with the attainment and the use of the material requisites of well-being. Thus it is on the one side a study of wealth; and on the other, a more important side, a part of the study of man.
Lionel Robbins, another famous British economist, proposed one of the earliest contemporary economics definitions that go as follows,
Economics is a science which studies human behavior as a relationship between ends and scarce means which have alternative uses.
From Frank H. Knight, a neoclassic economist of Chicago school in America, economics is the study of
… the social organization of economic activity.
Yet as N.Gregory Mankiw, an inspiring economics professor at Harvard put it,
Economics combines the virtues of politics and science. It is, truly, a social science. Its subject matter is society – how people choose to lead their lives and how they interact with one another. But it approaches the subject with the dispassion of a science.
Economics is a lot more lively than many people have believed. It’s basically about decisions making which we do every day. And we live by participating in daily economic activities, influencing other people by making choices in our own interest, and at the same time are subject to all other people’s choices. On the grand scale, we each make decisions as either an individual or a group to form the big picture of an economy. As a happy person who neatly manages his or her life, you should know about Economics more than you think. This site and any other economics books do no more than sorting out and reinforcing your understanding of the governing ideas already in your head.