What Is Economics

  • Posted on June 14, 2017 at 1:06 pm

It never fails that when I ask people to describe the field of economics, the typical response is that it is the study of money or how to earn money. Moreover an ever increasing number of people regard economics as a form of politics or perhaps political science. Grading on the simple pass/fail basis all would of course fail.

Economics is mistaken for finance by some and politics by others. The later tends to sting a bit. Nevertheless, perhaps the confusion is understandable. After all economics must by necessity address matters common to both areas of understanding. Such has been the case since inception. Be that as it may the fact remains that, economics is best described as the study of human behaviour.

-What?- you say. -What about money, debts, saving, budgets?- Well economics certainly involves all those things and economists have been known to go on for hours on the pros and cons of public policy decisions. But at its core economics is the study of how flesh and blood human beings (not abstractions thereof) and the institutions they engender actually respond to various types and degrees of stimuli. Economics addresses financial implications without addressing the organization of financial data which is best suited to financial experts. Economics addresses the incentives and/or disincentives resulting from public policy and not necessarily the policies themselves which is best suited to politicians. Hence the economist focuses not so much on the tax rate as on the manner in which said rate affects human behaviour which in turn has a direct even if long term effect on the overall state of social institutions. Most importantly, economics answers the ever-ellusive -Why?- Why does an increase in demand drive prices higher? Why does welfare (corporate and social) incentivize licentiousness on the part of the recipient? Why do even good ideas generate diminishing returns over time? Why do certain policies produce results at odd with the intensions of those who author them? Why?, Why?, Why?, ad nauseum.

The problem is not that the confusion exists. Rather it is the fact that it causes the layperson to misconstrue economic laws for political rhetoric. This is particularly problematic when one is confronted with Austrian Economics for the -Austrian- is always deemed to be championing the political views of a specific politician and/or political party.

How to correct the problem? Well, I’ll leave that to the social theorists. I’m only an economist.

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