• What is Economics?

    This post originally appeared on The Finance Buff.

    On the EconLog blog, Bryan Caplan reignited a debate about economics that occurs in every discipline: what is the discipline about? What is economics? It’s a good question and fun to ponder, especially because the traditional definitions are all horribly wrong. Economics today is not just about allocation of scarce resources, the study of choices, or the analysis of consequences of policy. Those are part of economics, but economics is much more.

    Caplan’s musings were picked up by Russ Roberts at Cafe Hayek and folded into Roberts’ search for examples of “where people had to give up their prior beliefs about how the world works because of some regression analysis.” Caplan also sparked a discussion on orgtheory.net about the relationship between economics and sociology. Is the former just the latter plus math?

    As it turns out, I’ve been working on my own definition of economics and I posted a version of it as a comment to Caplan’s post. Neither he nor anyone else has reacted to it (yet). Here’s my slightly more refined version.

    Definition. Economics is the study of the causes and consequences of actions and conditions of humans and their societies and institutions.

    This definition is a work in progress. To improve it, I would like to hear from Caplan and others as to what my definition leaves out that is critical or includes that is excess.

    • If you throw all the books (in the old library) on the floor and sort them again, would you come up with the same categories? Probably all study of human society and interactions is “sociology,” but studies tending toward human organization (including government) are the subfield of “political science” and studies tending toward allocation of scarce resources (money, labor) are “economics.”

      This assumes that they all use similar methodologies and modes of thinking. Some other fields (history, journalism) overlap on some subject matter, but do not use the same modes of thinking. Cable news is so entertaining, but it’s not “sociology,” “political science,” or “economics.”

      The reason that the sociology, political science, and economics seem to be separated into distinct disciplines is based on history and precedent, reinforced by academic departments.

      So, your definition sounds like sociology to me!

    • @303 – Your comment is a welcome one. The idea of scrambling the books is a good way to illustrate the degree to which discipline boundaries are somewhat arbitrary.

      Nevertheless, there is a “know it when you see it” type distinction between the core of the various disciplines. A great deal of it is methodological convention. Economics and sociology may address similar questions but in the former you do it *this* way and in the latter you do it *that* way. I think your answer as to why (reinforced history/precedent) is as good as any. It is certainly in the same family as my line of thought.

      Finally, is this definition exercise of any value? Sure, some. Worth a great deal of time. I don’t think so.

    • Well I don’t know much about economics but I do know Malaysia’s economy is booming and we have China to thank ! We in Malaysia are enjoying high growth and high inflation, I do not understand all this complaining. We have to thank China for our strong growth as our economy was going down until March 2009 and China rescued us by buying our commodities. Currently there is strong job market, 2 jobs for every worker, we have to import in foreign labour to do jobs that locals do not want to do ! We have high inflation, an example is a local dessert called “cendol” selling for $1.20 in local currency a month ago, is now selling for $ 1.80 in local currency. Thats a hefty increase, so don’t complain, enjoy the boom !