In the texts of Unit IX we can find the following ideas: «Economics is about everyday life. (Economics touches everything we do. We are all amateur economists at work or at home»; «Economics provides an answer to many questions»; «Economics helps consumers and workers make better buying and employment decisions. An understanding of economics makes for better financial decisions. Economics is also vital' to business.»
And, at the same time, one can hear: «Economics is extremely useful as a form of employment for economists. An economist is an expert who will know tomorrow why the things he predicted yesterday didn’t happen. Ask five economists, and you’ll get five different answers».
Sometimes people say that economists and ordinary folk disagree about what economics is all about. So, what is economics? What is it all about?
Economics is a social science that seeks to analyze and describe the production, distribution, and consumption of wealth. The areas of investigation in economics overlap with other social sciences, particularly political science, but economics is primarily concerned with relations between buyer and seller.
In spite of many practical benefits, economics is mainly an academic, not a vocational, subject. Unlike accounting, advertising, and marketing, economics is not primarily a how-to-make-money area of study. Knowledge of economics will help you run a business or manage your personal finances. But that is not its primary objective. Instead, economics ultimately examines problems and decisions from the social, rather than the personal, point of view. The production, exchange, and consumption of goods and services are discussed from the viewpoint of society’s best interest, not strictly from the standpoint of one’s own pocket- book.
Economics is a field full of controversy, and even the definition of the field has been a subject of controversy.
What is economics? We might take our definition from the father of modern economics, Adam Smith. He entitled his famous book An Inquiry into the Nature and Causes of the Wealth of Nations. That is not a bad description of the subject matter of economics, but many modern economists have tried to find a more logical or scientific definition.
Smith was, in many ways, the founder of modern economics. He wrote at a time when the industrial revolution was just beginning to transform European society. He observed that, in his own society, economic development could bring about a widespread prosperity, and yet other countries, and even some districts of an advanced country such as Britain, could lag behind in poverty. It was never difficult to account for poverty — poverty had been the condition of most people since the time immemorial — but what could account for this prosperity? This was the question Smith put to himself, and in his time it was the central question of economics.
We will be inquiring into the nature and causes of the wealth of nations, and that inquiry will be our definition and our answer to the question, «What is economics?».
What does it mean to study the nature and causes of the wealth of nations? In his great book, An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith took this question as his first subject: what is it that causes production of goods and services to increase with time, so that nations become wealthy rather than poor? According to Smith, it is «the great multiplication of the productions of all the different arts,... which occasions in a well-governed society», it is «the universal opulence which extends itself to the lowest ranks of the people». Smith’s objective was to learn more about the «multiplication of productions». For him this was the point of economics.
• What leads to growing production? Modern economists present different causes of growing production, and the list of them looks like this: increase in quantities of resources available;
• discovery of new technologies;
• increases in the division of labour and specialization',
• improvements in the allocation of existing resources;
• increases in the rate of use of existing resources.
Among the enumerated causes of growing production, modern economists attach special importance to resources.
