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What is economics?

Updated: Jan 22, 2021

Economics is the study of how society manages its scarce resources.

In most societies, resources are allocated not by an all-powerful

dictator but through the combined actions of millions of households and firms.


Therefore, economics:

  • Study how people make decisions: how much they work, what they buy,

how much they save, and how they invest their savings.

  • study how people interact with one another. For instance, how the multitude of buyers and sellers of a good together determine the price at which the good is sold and the quantity that is sold.

  • Finally, economists analyze forces and trends that affect the economy as a whole, including the growth in average income, the fraction of the population that cannot find work, and the rate at which prices are rising.

The study of economics has many facets, but it is unified by these three central ideas.

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Ben Kwan
Ben Kwan
Jan 12, 2021

I'd love to see more on the site about the intersection of ethics and economics. What standards exist to determine whether something is a benefit or a cost? Would a charitable donation be considered the former or latter, for example?

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