What is economics?

Question

It has been disturbing me since the first year of college that the meaning of economic is express too much as it is too less. "Study of scarcity, utilize the limited resources to satisfy unlimited human wants" this sentence explains not quite clear to me, it has more application than utilize the resources. Someone on the internet always said that economics is everything but for me, I cannot fully understand that word "everything is too vague" I barely use it in real life because of all those assumptions of "ceteris paribus", "rational behavior". Make everybody in the industry better off is it the main goal? I don't know

So please the person who knows the answer, the insight, please answer this question.

What actually is the goal of economics and its meaning(not definition) ?

Answer 1

Economics is a science still in growth! Try to sit back and forget about the "meaning" thing for a while. After you took enough courses and immersed into enough literature, then you will have your opinion about economics, which will answer your question. Don't be abducted by the premature thought or some false idea of justification. A similar situation is that many people would ask what mathematics is, especially some pretentious "philosophers" who probably cannnot or won't sit down and do a math proof themselves. They thus have no way to know what mathematics is and hence lose their ground to have a discussion over the activity of mathematics. Certainly one would argue that they have every right to do what they are trying to do. I don't disagree. But the truth is that my claim is not contradicted by the quoted fact; what I am saying is the implication "if you want to know what economics (or mathematics, as in my example) is about, then you want to first do it and get a feeling of it.". This has nothing to do with whether one has a right or not.

There are a lot of "definitions" provided by those who have climbed the mountain so very earlier. You can try M. Friedman or P.A. Samuelson or Michael D. Intriligator (in his book entitled Mathematical Optimization and Economic Theory, if I am not mistaken), for example. But you will feel empty after you read those "definitions" and regret to have spent so much time in vain to understand economics in this way. I would say that the definitions they give probably are the crystals of their wisdom towards economics; this often gives a delusion that one can take this "pill" and a shortcut will open up. No. I am afraid things do not go this way. The "definition" won't come to you if you don't first lay down to pursue it... Cheers. My two cents. Too long for the comment section. But it feels strong to me to share here.

Answer 2

Economics is a social science. The meaning lays in the word itself: οἰκονομία (oikonomía, “management of a household, administration”). In economic science is a houshold the freely choosen frame of a given research. It can be a single individual or the whole globe. Mostly it is a firm or the economy of an country. The goal of the management is to adapt the houshold to the environment and fulfill the requirements for a viable existence.
Different schools of economic thoughts are formed around various core ideas. Currently the most prominent school is concerned with efficient allocation of scarce resources. Other schools are build around the study of real world institutions, gender or lack of knowledge. A question, which is shared between most of these schools, is, how to realize demand of goods match supply.
Economic science is closely linked with economic history. In an economy where exchange happens in markets and where an universal unit is used to communicate costs and values, economics will answer questions about these topics. Ecological economics for example broadens the view of the economic world and tells us that energy and diversity of live also matters.

Answer 3

Economics is the study of how people make choices when their choices are limited in some form. That is it. That is the goal. It is not generally descriptive, although neuroeconomics is in a very practical sense descriptive. When an economist sees someone purchasing an orange, they see that as a solution to a problem. All of economics is about reverse engineering the solutions people use, such as buying an orange.

Since ethics, costs, and practicality don't allow an actual determination of each specific reason every single thing is purchased, economists reduce the model set down to variables that are general enough to describe what is happening in the system. For example, the orange could have been purchased to practice juggling because it costs less than a juggling ball. For someone else, it could be for lunch. Economists talk instead about the utility of the orange, preferences, needs and wants. Because utility and the change in utility usually wash out in the process, and certainly preferences do, they focus on the observable variables.

Some assumptions, such as ceteris paribus, are not economic assumptions, they are the standard assumptions used in mathematics when dealing with partial derivatives. Unfortunately, since most business students never see a partial derivative the assumption isn't helpful in everyday life. Rationality in economics is defined as knowing the ordering of your preferences and acting on it, although rational behavior, which is a conclusion and not an assumption, is a bit more than that.

It boils down to choice. Hiring someone is a choice. Firing someone is a choice. We study unemployment, but it is the artifact of those individual choices. We also study smoking, sex, and green bean consumption. Anywhere choice is involved economics is involved as long as there is some limit that could prevent choosing "everything." The goal is understanding. It has no meaning unless you provide it with one.

Answer 4

Theoretical propositions in introductory economics typically assume that people do not make wrong choices. Like most other assumptions, this enables to teach some core concepts and relevant math without worrying about 10 or 100 complicating factors.

Regarding your more general concerns, you can refer to debate about whether simple models are better to illustrate a theory or whether complex models should be preferred. (More likely, simple models are better for some situations and complex models are better for other situations.) Also, anything on the subject of "market imperfections" should provide a decent outline recognizing well-established reasons that main assumptions may not in fact be satisfied.

Much of the rest of the study of economics after core micro, macro and statistics courses deals with the extremely numerous exceptions and extensions upon basic theory.

To answer your question in particular, as opposed to what may underlie frustrations with the field in general, micro and macro must be considered separately:

Microeconomics is concerned with how individuals, households and businesses make decisions, in particular when faced with multiple options and differential costs and benefits.

Macroeconomics is concerned with understanding how this adds up at the aggregate level, mainly for the purpose of being able to provide a desirable level of macroeconomic stability which enables individuals and businesses to plan their affairs, while leaving plenty of space for old industries to die and for new technologies and innovations to be able to access financial, human and physical inputs to be able to grow.

From a public policy perspective, both micro and macro are to be used to improve the capacity and/or well-being of individuals, and the long-term production potential of the nation.

From a business perspective, these tools are to be used to understand competition and/or the macro context so that they can evaluate opportunities and risks in a competitive market. (It should be noted here that economics and finance are two distinct fields.)

From an individual perspective, knowledge of economics can contribute to well-informed, or alternatively overconfident, political participation. For example, many people who are not troubled by the simplifying assumptions that you recognize in introductory economics will then go on with extreme confidence in declaring that 'any tax cut is a good tax cut' (just check your textbook exercises on the effects of a tax on the sum of consumer surplus + producer surplus) or 'any government spending is a waste'. These declarations can be contrasted with (slightly) more nuanced argumentation such as 'the benefit of a tax must exceed its downsides' (and moreover the least undesirable tax is to be preferred) or 'government should only be involved in activities that are produced in insufficient quantity or quality by the marketplace' (e.g., building bridges and charging low or no tolls to use them).