The whatness of something, What is it that makes economics distinct, different from other forms of enquiry. What is its essence? Most introductory textbooks give you several definitions and some may go into the fact that it was labeled the ‘dismal science’ until economists decided it was not about wealth, but welfare. The welfare definition is attributed to Alfred Marshall who defined economics in this way:
“Political Economy or Economics is a study of mankind in the ordinary business of life. It examines that part of individual & social action which is most closely connected with the attainment & with the use of material requisites of well-being“.
So it became about human wants, efforts and satisfaction. Perhaps the most oft quoted definition though came from Lionel Robbins, a british economist who is identified with the rise of the London School of Economics as an institution of worth and renown.
“Economics is a science which studies human behavior as a relationship between ends and scarce means which have alternative uses”
If we are to accept this as a valid and substantially accurate statement, then we must accept the following:
1. Economics is a science
2. Our subject is human behaviour
3. We study the subset of human behavior which can be explained as a relationship between resources and their uses.
4. The resources are scarce and each resource can be used in multiple ways.
Now as regards the third proposition, it can be argued that all of human behavior can be seen as a relationship between resources and their uses. Our most basic resource, and possibly the one that is both available to each and every human, and yet most precious is time, because it is bounded by our mortality.
Now as an aside, the classical economists tried to fomalise and quantify this resource by calling it labour time, and tried to create a standard unit by which all things could be measured. An attempt that was ultimately to fail. This failure was to sound the death knell for classical theory. It was in its essence an attempt to build a formal structure using an axiomatic approach. The axiom being that all value arises from human labour.
Returning to our discussion of Robbins definition, let us examine the fourth proposition. Resources are scarce and they have alternative uses. I think that we can rephrase the definition in this way: Economics is the science of Choice.
Now the defintion states merely that Economics studies the way in which humans make choices. And yet it seems logical that if there are alternative uses, then surely there must be some way of evaluating these alternatives, otherwise we would never be able to make them. The human cognitive process remains a mystery for the most part, but we must possess some faculty which allows us to decide between alternative uses for a resource. Now much as a five year old is capable of judging the trajectory of a ball and catching it, without the slightest knowledge of high school mathematics, humans do not need econonomics to make economic decisions. So is economics an attempt to understand how we know what we know?
This would make economics a descriptive science. A study which allows us to understand a little more about the way we function. But it is held to be more than that. It is meant to be prescriptive. Economics is finally not about individual choices, but about the choices made by society or a collection of individuals. And this is where it becomes necessary for us to be able to evaluate alternatives. And this is where it gets vey very complicated.
How do we choose what is best for society? I shall leave you with that question.
The restriction that time places on our choices is key and I think directly complicates how we begin to evaluate the alternatives for a society versus an individual. The individual consistently opts for short term benefits, whereas the optimum for a society may actually be long term benefits. I'd be curious to see how you integrate political systems into this discussion, given how certain forms of government optimize the individual choice versus the societal choice – e.g., democracies tend to support individual short term gains versus enlightened dictatorships.
I think that is in fact the one key trade-off. This dichotomy is present in the firms decision-making process as well. Management is often interested in short term spikes in share value, whereas owners or share holders may prefer longer term value creation. The dicussion about democracy versus enlightened dictatorship is a little bit more involved though, although i agree that dictatorships are more efficient at achieving long term value creation for this reason.
several thoughts, but i will just react to the discussion above first… the long term goal in a democracy is democracy itself. one would be missing the whole point if this isnt understood. taht good ought to be done, is done, and will be done is a twin end. that is how contracts work.
dictatorship and good. well i dont understand the connection.
enlightened dictatorship and good.. thats a socratic myth possibly.
about definitions – economics is a science that studies human behaviou…. vs economics studies human behaviour…. thoughts?
Not necessarily Dictatorships are more effective, because all power relies on the decision of one mind (Centralization of power and policies). Sometimes Dictators, are more populists than actual country developers, they use repression to impose one idea (this affects the health of a economy). I believe that Democracies can be more effective because people can react and protest to bad governments, while in Dicatorships, society must sacrifice freedom of speech. "…The repeated elections are essential in popular systems, because there is nothing as dangerous as leaving a citizen too long in power. The people become accustomed to obey him and he is accustomed to command, from which originates the usurpation and tyranny…" Speech of Angostura – 1819 – Simón Bolívar. I believe in today's world, the need of freedom is part of the human behavior, so it affects directly in Economics.