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What is Economics?


Study Economics

Economics has changed drastically throughout the years. The field used to be intimately connected with politics and morality, and has since grown into the study of scarcity and choice. With many subdivisions and mathematical formulas to aid people in the field, economics is now as mature and complex as any other social science out there.

If you are an international student who has ever stopped and wondered "what is economics?", then you are in the right place. Many people think it is just a study of how people spend money. In reality, that is only a tiny fraction of what is actually a very large field of study. Economics is a social science about how people use and exchange limited resources like food, labor, minerals, and, yes, money. As an even shorter definition, one could say it is the study of scarcity and choice.

A Brief History

The way we study economics today is a far cry from the way people studied it in the past. When Aristotle wrote about the subject over 2000 years ago it was more of a philosophy than anything else. He believed that economics, politics, and morality were firmly joined together, and that the goal of economics was to help people lead morally good and fulfilled lives. This is even reflected in the etymology of the word "economics", which comes from ancient Greek words meaning "rules of the household".

Our modern view of the subject comes mostly from several 18 and 19th century thinkers, one of the most famous of those being Adam Smith. The thinkers of that time helped the field become much more analytical and rigorous than it was in previous centuries. Their work has since been expanded upon and economic analysis is now extremely complex and aided by mathematical formulas which helps extract trends from massive amounts of data. The information provided by economic analysis can help families, businesses, and governments better manage their resources in whatever ways they see as beneficial.

Subdivisions of Economics

International students pursuing an economics degree will quickly realize there are many different ways to divide economics. The biggest and most common distinction made is between microeconomics and macroeconomics. The former examines how families and businesses manage resources, while the latter examines how economies as a whole manage their resources.

You can also break up economics into "positive" and "normative". Simply put, positive economics is about how things are, while normative economics is about how things ought to be. In other words, positive economics might use theory to explain how a country went bankrupt, while normative economics might use it to explain what steps can be made to prevent a country from going bankrupt.

A third way people split up the field is to make a distinction between rational and behavioral economics. Rational economics, also known as rational choice theory, assumes that people want more of something they find good, not less and make decisions based on reason. This might seem like a common sense notion, but it has been challenged in part by experiments done by behavioral economics. Behavioral economics studies the psychology behind people's economic choices through experimentation, and has shown that those choices can sometimes be based on our complex and sometimes irrational psychology.

Terminology

A good way to answer the question "what is economics" is to look at the terminology. This allows you to not only see what things are important to economists, but also how economists perceive the world. International students who decide to go to school for an economics degree, will quickly realize that there are many new words to remember. Not only that, but many words you already know will be used in different ways, requiring you to effectively relearn them. The word "money" can be used very broadly in everyday language, but means something very specific to economists. If you see someone living in a mansion, you might say "that person has a lot of money". An economist, however, might not be convinced. This is because economists use the term "money" to refer to someone having a lot of liquid (something that is not tied up) assets (something you own that can be traded for value). It is therefore possible for someone living in a mansion to not have much money, in the economic sense, at all.

Summary

The question of "what is economics" is a big one, and this article is only meant to give a very brief summary of what is actually the in the important and in depth field of study. The question is ongoing, even for people with an economics degree. The best way to learn about it is to take a class in economics, and discover what it is about first hand.


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