Edited by Cheyenne Cheng
Written by Steven Spear, Jr.
According to the Oxford Dictionary, economics is defined as, “the branch of knowledge concerned with the production, consumption, and transfer of wealth.” This definition implies that economics is only about wealth. But it is much more than that. I like the definitions of the following two British economists:
From Alfred Marshall, “on the one side, a study of wealth, and on the other and more important side, a part of the study of man.”
From Lionel Robbins, “the science which studies human behavior as a relationship between ends and scarce means which have an alternative use.”
My personal definition is similar to Robbins’s: the study of human behavior as it relates to making decisions on the allocation of scarce resources. Money is the first resource that people name, but housing, labor, and education are also common resources.
The biggest misconception of economics is that it is the “study of money.”
I polled ten of my friends with the question: “What is economics?” I instructed them not to look up a definition and answer with their first thought. Nine of them gave the “study of money” answer (or something similar), and one gave a partially correct answer. She said, “Study of economies; watching how products and money are exchanged and how outside forces affect that change; studying how one economy affects another.” She acknowledged that choices must be made (see the underlined section), and that those choices have external influences.
The misconception that economics only refers to money is understandable: We usually only hear the word “economics” in the context of something money-related (the stock market, the Federal Reserve, GDP growth, etc.). There were even some economists who argued that any definitions of economics should be limited to market analysis. Throughout the last few decades, however, economics has expanded its sphere of influence. Economists have begun applying economic principles (such as efficiency and rational choice) to non-market related fields such as psychology and education.
Economics imperialism refers to the economic analysis (weighing costs and benefits of decisions) of seemingly non-economic issues. “We do not say that the production of potatoes is economic activity and the production of philosophy is not. We say rather that in so far as either kind of activity involves the relinquishment of other desired alternatives, it has its economic aspect. There are no limitations of the subject-matter of Economic Science save this” (Robbins 16).
Read about how we will use economics in the previous article.
Robbins, Lionel (1932). An Essay on the Nature and Significance of Economic Science, p. 16