What is Economics?

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What is Economics?

When asked to state what economics is, most people confuse the definition of the term with what they perceive it to be. These perceptions hold that it revolves around money and will most likely base their arguments on the prosperity of a country or the wealth status of the people. Conclusions are then made basing on this that the economy is either good or bad. True money is just a product but this is not the proper meaning of the term. It does not relate in any way to politics or morality since it does not dictate any political viewpoint or moral position.

Economics is the science of how human decisions allocate resources. To understand this definition better, it is wise to break it down to the simplest form of the terms. First, the term science refers to study of cause and effect, which is associated with understanding the relationship between variables, both dependent and independent. This can be easily interpreted in the way that we might intend to make a change to one thing but another change occurs too in the process. Science refers to a field that studies human resolutions. It focuses on how the decisions made by a person have an effect on another person causing him/her to make certain choice. The same applies to how the decisions made by the government as the independent variable influence or even change the citizens’ choices as the dependent variables.

The second part to lay emphasis on is the human decisions. In economics, it subsists only if there is a cause and effect connection between our definite choices and other factors that we control. The four laws that govern human decisions are freedom, liberty, scarcity and self-interest. Freedom is said to be the physical capability to choose. The mind has to be alert, voluntary and mindful for it to exercise independence. A habit in doing something is associated with it since it is a conscious and voluntary thing that can be alternated for something else. Liberty is known to measure the free and separate choices or alternatives that the human freedom recognizes. Most people may have fewer liberties but exercise more freedom and vice versa.

Scarcity states that we have fewer liberties to choose from and this is limited because of time and our mortality. Self-interest dictates that decisions are mostly based on selfishness. It is viewed as the most powerful independent variable that causes us to make the ultimate choice. Thirdly, the allocation of resources refers to the determination of who gets what in the environment that we live in. it can be viewed as who gets to work in a luxurious office, who gets to own a piece of property among others. Scarcity also revolves around the allocation of resources. The fact that we cannot own everything we want leads us to choose or decide to have particular things, which in turn determine the unavailability of other things. Allocation therefore determines how much of the essential resources we produce and who gets what.

Economics therefore is the process of how humans achieve the set objectives through the decisions that they make. This has to do with consideration of the freedom available for choice, the liberties at hand, the scarcity to be addressed and the individual self-interest. It is a means through which moral and political goals are accomplished. Money is created in the process of exercising economics. In the same way, it is not about production or out put since these are the outcomes of the people who practice it.