What is Economics?

The first question is “what is economics?”

Some might say that Economics is about demand and supply, or about the study of the most efficient means to allocate scarce resources. Well, both definitions are right on the mark. In fact, economics can be defined in many ways. To the untrained eyes, economics might be just what the former two definitions suggest. However, being correct does not imply completeness. I, personally, think economics is about almost everything we encounter daily. Anything ranging from the least significant to the utmost importance. Wondering what to buy for your dog’s birthday? You might think about opportunity cost or your dog’s maximum utility (think of utility as happiness, though happiness is not exactly the right definition but it comes close), and that is economics. Of course, a flower per se is not economics, but how we use it is certainly about economics. Economics might not be able to explain why or how the universe exists in the first place, but it can explain how we can utilize its very existence for our survival in the very long run (millions of years ahead). For instance, we can find alternative resources here on earth or seek ways to exploit resources from other planets. This might sound far-fetched, but it is not impossible.

Simply put, all I would like you to understand is that economics is not merely what it is viewed to be by the majority of people. It is not just about money, interest rate, inflation, or unemployment. The real economics encompasses a whole lot more.

For exmaple, we all know that one of the core assumption of mainstream economics is absolute human rationality which is not true no matter how you look at it. Traditional economics only involves saving, loaning, investing, spending and wasting, but none of the generosity of human (i.e. sharing) is mentioned. Also, mainstream economics does not look much into how a nation’s economy is related to its tradition and culture, how a person’s surrounding might have a considerable impact on his/her economic decisions. For instance, a stimulus package might increase consumption in the culture of consumerism, but it might have an opposite effect on the one favouring saving like in Japan. So I believe that there is no one-fit-all policy, and that, being an economist is more than just about applying the theories you have learnt, but it is more about being able to identify and critically analyse the unique characteristics of each situation before modifying and/or applying the learned theories.

In conclusion, I want you to be flexible when thinking economics. Do not jump into the water without realizing its depth. The vast ocean of economics contains more than you have ever imagined. I believe this blog will serve you well intellectually because economist or not, the understanding of economics will give you the edge in life as a whole.

I welcome you to my world, Economind.