The Nature of the Beast: What is Economics?

This is the first in a series of articles I've planned with the intention of improving my understanding (and hopefully yours as well) of economics. The reasons for such a series are fairly obvious. The last few years have seen an economic storm hit us the likes of which haven't been seen in the better part of a century. And it looks like the much vaunted recovery is running out of steam. Such a disaster leads naturally to the asking of certain questions. Such as, "How long will it take to recover?" Or, "Will we recover?" "Will this happen again?" And, of course, "How did this happen in the first place?"

Like everyone else I've heard a lot of different people try to answer these questions. Some of the answers sounded good. Some of the answers sounded bad. And some of the answers sounded as if they'd been produced under the influence of powerful psychedelic drugs. After awhile though I realized that however I felt about the answers I didn't have any better handle on the situation. And that's because I didn't have any basis for actually judging the answers.

This is the part where I give my credentials and explain my expertise for writing these articles. This'll be short, since I don't have any. I have zero formal training in economics, and outside of a few half-remembered books read several years ago my informal training (really informal) is pretty sparse. I'm working to rectify that now. Though I don't expect to become an expert, I hope to at least learn enough to judge what the experts are saying, and whether those experts have all that much expertise.

So to get to the meat of it, "What is economics?" I could be cute and say economics is the study of economies. But while that is true, it isn't exactly helpful for our current purposes. Merriam Webster says it is ": a social science concerned chiefly with description and analysis of the production, distribution, and consumption of goods and services", which is clear as mud to me. After looking around I found the best short definition was provided by Lionel Robbins, "Economics is the science which studies human behavior as a relationship between given ends and scarce means which have alternative uses." But even this could benefit from a little explication.

When most people hear the word scarce they think there isn't very much of something, or that we're about to run out. When an economic says something is scarce he simply means there isn't enough of whatever it is for everyone to have as much as they would like and so some way has to be found to apportion it out. Figuring out the best way to do that and what effect the various methods have on the society in which they are used is a large part of what economics is about. Example: Inhabitable beachfront property.

There are tens of thousands of miles of it around the world, so most people wouldn't really consider it scarce, but there still isn't enough for everyone who wants to build a house on the beach to be able to do so. So to an economist it is "scarce". That's also why it's so expensive, but that's getting into the mechanics of a price coordinate system, which is the subject for another article.

http://www.merriam-webster.com/dictionary/economics

http://www.econlib.org/library/Enc1/bios/Robbins.html