The Philosophy of Economics: What is Economics – Deconstructing a Discipline

 

~ Work by Ford Madox Brown

~

Defining economics is becoming increasingly difficult. The scope of the discipline of economic studies seems to be ever expanding into new uncharted territories. Currently, economic principles are used in many diverse ways. For example, economic models and theories are sometimes used in criminology to predict criminal behaviour!

 

The word ‘economics’ and ‘economists’ come from Xenophon’s[1] work called Oikonomikos. Translated literally, Oikos means household. Oikonomikos means Household Management. Xenophon’s work, however, was more of a treatise on managing an agricultural estate (Backhouse, 2002). Hence, the work should really be translated as Estate Management. At the time of its publication, Xenophon’s work was revolutionary. It stressed on the importance of efficient organization that comes from efficient management. This efficiency then translates into a higher level of productivity and output.

 

One particular keynote of Xenophon’s work was stressing that ‘without defence the fruits of agriculture would be lost; and without enough agricultural output the country could not be defended (Backhouse, 2002).’ Therefore, the people in charge of national defence and those improving the land must be separated to create a check and balance (one group ensuring the other is functioning properly). This is probably one of the first documented evidence of an economic ‘trade-off’ in the management of a state.

 

Putting origin of English words and literal Greek translations aside, we need to examine the more modern definition of economics. Aristotle claims that a good definition has two parts; standing on two solid feet: first, it assigns the object in question to a class or group whose general characteristics are also its own; and secondly, it indicates wherein the object differs from all the other members in its class (Durant, 2005).

 

The first leg of the definition of economics is simple. Economics is a social science. It involves the study of individuals, and the society as a whole. As a branch of science, economics uses scientific methods of observation and experimentation combined with statistics and historical data to form conclusions or theories on human behaviour.

 

The second leg of defining economics lies in its focus rather than its method and general objectives. How does economics differentiate its boundaries from other social sciences? To be precise, economics is the social science that analyzes human behaviour as a relationship between the production, distribution, and consumption of goods and services (Michel-Kerjan & Slovic). In other words, economics is a social science that concerns itself with the complex web of human activities involved in producing, distributing, and consuming goods and services.

 

Going a little deeper, you will realize that economics is the science of scarcity. Why do we concern ourselves with the production, distribution, and consumption of goods and services? The problem is that human beings have unlimited wants but the world only have limited resources to satisfy these wants. This mismatch of supply and demand is the central core to the study of economics.

 

Below are two famous definitions of economics as the science of scarcity:

 

Lionel Robbins:

“Economics is the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses.”

 

Paul Samuelson:

“Economics is the study of how societies use scarce resources to produce valuable goods and services and distribute them among different individuals (Samuelson & Nordhaus, 2010).”


[1] Xenophon was a student of Socrates.

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