Thursday, 30 August 2012

What Is Economics?

Since I'm reviving this blog, I thought I'd start a fresh in some ways. I therefore have decided to open up this new era of the blog with the simple, yet very difficult to answer question of what economics actually is.  It's a very ambiguous subject in regards to how you'd define it, the study of what exactly? I've encountered a good example of just how difficult it is to define the subject recently during my search for a university. The fact that different universities place the subject in different areas is the said example. The University of Birmingham, for example, place the study of economics within the business school - giving the subject a more monetary focus. However, this contrasts from the University of Warwick whom place economics within the faculty of social sciences - looking more at wants and scarce resources. This differentiation from the universities suggests that Economics is a broader subject than some may have first imagined.

Let's look at a few potential ways of defining economics. One definition could well be 'the human science which studies the relationship between scarce resources and the various uses which compete for these resources'. If we analyse this definition somewhat we could agree that this definition holds true. Economics could most definitely be classed as a human science. It's not an art and studying it will almost always involve looking at the action of humans. The relationship between scarce resources and the uses of resources is also looked at in the study of Economics. One of the first things you learn about as a beginner economist is the basic economic problem of scarce resources and unlimited wants. So, you wouldn't be wrong to define economics in this particular way.

Another definition I've come across is that 'economics is the science of production and consumption, or the use of goods and services'. Production and consumption are definitely involved in the study of economics, these link back to the scarce resources problem that occurs due to consumption being higher than production. However, I feel using 'the use of goods and services' in a definition for the subject is a bit lacklustre and doesn't quite do it justice. But that isn't to say this definition is wrong, as it most certainly isn't. Along with the likes of 'economics is the study of how to improve society'. Economics does look at how best to allocate scarce resources to improve society partly, but not all for that reason. These two definitions aren't incorrect, I just think they don't get the whole point of the subject across.

This debate wouldn't be complete without a token definition relating somehow to money! 'Economics is the study of wealth'. Well, there it is, the study of wealth. Somewhat true of course, the economy is measured in terms of money, goods and services are normally purchased using money and a lot of people evaluate their position in life by how much wealth they have. But what actually is money? It's a medium for exchange when buying goods, a unit of account for placing a value on things and a store of value when saving. So technically, anything could have ended up being money instead of coins and notes as long as it was in scarce and controlled supply, stable and able to keep its value, divisible without loss of value and portable.  Money does play a big part in the economy, some would even say the economy revolves around money with the flow of income and what not, but I'm still not entirely convinced the subject can be classed as the study of wealth.

I could go on and on, reeling off lists of different definitions of 'Economics', but I won't of course, you have better things to do than read that. I'll leave it there and hope I've successfully got the point across that I was trying to make -Economics is a very broad subject and therefore very difficult to define whilst accurately including everything the subject covers. If i was being asked, I'd class it as the study of scarce resources. I question you to have a think about how you'd define the subject!
That's all from me for now, thank you for reading!

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