What is Economics?

Economists, like the other social scientists Psychologists, Sociologists, and Political Scientists are concerned with uncovering the secrets of human society. In fact it would be safe to conclude the divisions between disciplines is often blurred, that economics cuts across topics normally considered within the realm of the other social sciences. Economists, like psychologists, are very much concerned with the study of human behavior, human judgment, and well-being. (JEL, March 1998).  Economists also share with sociologists an interest in the history and structure of human society - in issues of poverty, crime, and discrimination. As one student put it, "Economics is the study of how the world works."

To see the breadth of economic analysis we need look no further than the list of BIG stories which students identified. The link to economics of some of the stories - Middle East oil, NAFTA, the Japan crisis and Asian stock markets should be obvious to most of you. Other stories, such as China, the internet, a vaccine for AIDS and a cure for Alzheimer's, overpopulation, and environmental clean up have very strong economic components that may be a little less obvious.

What separates economics from the other social sciences is not the subject matter.  It is also not the method of analysis.  In each of the social sciences there has been an effort to employ the scientific method - the development and testing of theories and hypotheses. We are all professional observers of the "real" world whose job it is to make order out of what may appear as chaos, to explain why things happen. The development and testing of hypotheses is a critical part of that exercise. This is why some think of Economics as a "bunch of theories."

There may be, however, one minor difference in terms of the method of analysis in the social sciences.  Economics tends to be a bit more mathematical than the other social sciences.   This explains why many think of economics as "lots of graphs." Because we will rely on some graphs during the semester, we will take a little time to review some of the basics of graphical analysis, but there will certainly be fewer graphs and possibly more tables than you will find in many of the other economics courses.

If it is not method or subject, what then is it that is unique about economics?   We will call it perspective.  Economists tend to begin with the premise that scarcity exists - it has always existed and it will always exist.  At the individual level scarcity means individuals must make choices - precisely the subject matter of much of what you study in microeconomics.  You are certainly aware of the need to make choices.

At the society level, scarcity means that solutions need to be found to three basic economic questions: What will be produced? How will it be produced? and Who will get it? Economics is the study of the systems that have been devised to solve these three basic questions - what we will call an economic system.  During this semester we will be focusing our attention on the current economic system in the United States, but first we will take time to examine alternative economic systems, and alternative perspectives on the systems that will help you better understand the economists' approach.