Economics as a social science
What is economics?
Economics is a social science as it is concerned with the study of human behaviour. It looks at how humans behave in markets, in firms, and in countries or economies. It also looks at how these economies interact. The 'humans' we are studying may be consumers, workers, decision-makers in firms, or members of the government.
The subject of economics has been defined in different ways. Here are some examples from famous economists:
- Adam Smith (1723-90) considered economics in terms of wealth and regarded his work as "an inquiry into the nature and causes of the wealth of nations".
- John Stuart Mill (1806-73) saw economics as the "practical science of the production and distribution of wealth".
- Thomas Carlyle (1795-1881) regarded economics as the "dismal science".
- Herbert Davenport (1861-1931) - economics is "the science that treats phenomenon from the standpoint of price".
- Alfred Marshall (1842-1924) - economics is "on the one side a study of wealth; on the more important, a part of the study of man".
- Lionnel Robbins (1898-1984) - "the science which studies human behaviour as a relation between ends and scarce means which have alternative uses".
Micro & macroeconomics
Firms, households and governments have differing objectives. In economics we are concerned with how the behaviour of these groups influences the others, and the success with which they achieve their objectives. This study, the study of the behaviour of component parts of an economy, we call microeconomics. We also look at aggregates of economic activity, and see how and why economies interact. This is the study of macroeconomics.
Thus, two more definitions to be remembered:
- Microeconomics is concerned with the individual component parts of the economy. It is the study of the behaviour of firms and consumers and the determination of market prices and quantities. It is the study of how scarce resources are allocated between alternative uses.
- Macroeconomics is the study of aggregates (totals) of economic activity. It looks at how economies work and behave as a whole, and is concerned with such factors as the overall price level and the rate of inflation, the level of employment and unemployment, the rate of growth of the total output of the economy, aggregate demand and supply and the balance of payments.
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