1.2 – What is Economics?
Learning Objectives
By the end of this section, you will be able to:
- Define economics in three different ways
- Describe pluralism as it applies to the study of economics
- Discuss the interrelationships of economic theory, policy, politics, and ideology
If you were to consult a dictionary for a definition of economics, you’d probably get something like Merriam-Webster’s: “a social science concerned chiefly with description and analysis of the production, distribution, and consumption of goods and services.” But, if you asked an economist, she might reply with something quite different.
For instance, many economists will define economics as the study of the allocation of limited resources over unlimited wants. Others would be more inclined to say it’s the study of social provisioning, of the development of political economies rooted in social, political, natural, and cultural processes.
The next three chapters will use these definitions as part of an explanation for how different groups of economists do economics differently. For this chapter, it’s fine simply to accept the dictionary definition of economics as the study of the production, distribution, and consumption of goods and services.
But why, then, do we need other definitions? In short, because economics is not the unified theory of the universal laws of economic activity that many assume it is. Economics is not like physics, where the law of gravity and the speed of light are scientific facts to be discovered and understood as isolated and unchanging facets of reality. (In fact, that wouldn’t even be a good way of describing physics–not, at the very least, in the conspicuous absence of a Grand Unified Theory, or GUT.)
No, the field of economics is really a collection of different approaches, different methods and theories, and different policy prescriptions. Sometimes these may come into agreement with each other, and sometimes they may be fundamentally contradictory. And because of this it only makes sense that we should study the subject pluralistically. Pluralism, here, simply means the coexistence and participation of multiple theoretical perspectives economics. Throughout this text, you will learn about not one but two broad perspectives. We’ll call these ‘orthodox’ and ‘heterodox’, and you’ll come to learn more about what they mean as you progress through this book.
It can be disappointing to learn that economics can’t tell us the one right theory of how exactly the economy works and, by implication, what we should (or shouldn’t) do to make it better. But just because we want for certainty doesn’t mean we can’t make progress in our understanding. Indeed, if we take a step back from our desire for definitive universals, we can see that there is value in the process of learning and advancing our admittedly limited knowledge about the economy.
Astrophysicist Carl Sagan famously observed: “we are a way for the cosmos to know itself.” Sagan may have read the works of philosopher John Dewey, who argued that an important characteristic of human societies–and Dewey put science and democracy front and center here–is their ability to understand themselves and, as a result of that understanding, to change themselves. Thinking in these terms, Dewey’s take on people, individually and collectively, focused on how they identified and then solved the problems they faced.
All that may sound simple enough on paper, but in practice it’s not. As Joan Robinson, one of the most influential economists of the 20th century, wrote:
“Discussion of an actual problem cannot avoid the question of what should be done about it; questions of policy involve politics…. Politics involve ideology; there is no such thing as a “purely economic” problem that can be settled by purely economic logic; political interests and political prejudice are involved in every discussion of actual questions. The participants in every controversy divide into schools…and ideology is apt to seep into logic. In economics, arguments are largely devoted, as in theology, to supporting doctrines rather than testing hypotheses.” (1977, p. 1318)
We could take Robinson’s arguments here as an indictment of how economics is usually done and, in all candor, we wouldn’t be wrong to do so. Just the same, we could think of Robinson’s observation here as pointing to the difficulties of doing economics right, a recognition of the complexity and ever-potential bias involved when you’re studying a social system of which you yourself are a part.
And this is what makes economics such an exhilarating field of study.
So, if you chose to take an economics course to better understand how to run a business, forget it. If you chose to study economics to help you pick a career, forget it. If you just wanted to win an argument at the next family gathering, forget it. Forget all that and consider how amazing it would be to be a small part of a world that’s ultimately trying to understand itself.
But wait! Don’t actually forget those things. Because all of those reasons to study economics and others are also part of this complex world, part of what matters to people–you or others. So rest assured, there is ample room for any number of reasons to study this subject.
References
Robinson, Joan. 1977 “What Are the Questions?” Journal of Economic Literature, Vol. 15, No. 4, pp. 1318-39.