What is economics about
Economics is as old as the human race: it is probably the first art which man acquired. When some cavemen went out to hunt while others remained to defend the fire, or when skins were traded for flint, we had economics.
But, economics as an academic discipline is relatively new: the first major book on economics, Adam Smith's The Wealth of Nations was published in 1776. Since that time the subject, such as microeconomics, international economics and econometrics as well as many compiting schools of thought.
There is an economic aspect to almost any topic we care to mention-education, religion, employment, housing, transport, defense, etc. Economics is comprehensive theory of how the society works. But, as such, it is difficult to define. The great classical economist Alfred Marshall defined economics as „the study of man in the everyday business of life“. This is rather too vague a definition. Any definition should take account of the guiding idea in economics which is scarcity.
Scarcity-the limited nature of society's resources
Virtually everything is scarce; not just diamonds or oil but also bread and water. One only has to look around the world to relise that there are not enough resources to give people all they want. It is only very poor who feel deprived; even the relatively well-off seem the sense that there are not enough to fill everyone's wants to the point of satiety.
The most important problem in economics is that while the wants of individuals and societies must be satisfied by limited resources, the wants themselves are not limited; rather, they are endless. We are never satisfied by limited resources, the wants themselves are not limited; rather, they are endelss. We are not satisfied with what we have. Individuals are forever lured by more tempting foods, more cleverly engineered computers, more up-to-date fashions. Societies continually desire safer highways, more cancer research.
Sarcity is of course relative to time and fortune. Our generation has many more services and goods to choose from than our parents and grandparents did. The quantity an quality of goods and services may have grown from primitive to modern times, but the supply of resources needed to produce them is limited, and human wants are not.
Therefore, each society has to choose how to make the best use of scarce resources. The great American economist Paul Samuelson said that every economi society has to answer three fundamental questions,
„What?“, „How?“ and „For whom?“.
What? – What goods are to be produced with the scarce resources: clothes, food, cars, submarines, television sets, etc.?
How? – Given that we have basic resources of labour, land, etc., how should we combine them to produce the goods and services which we want?
For whom? – Once we have produced goods and services we then have to decide how to distribute them amongst the people in the economy.
Scarcitiy of resources is at the core of all economic problems. Not being able to get all of what they want, individuals and societies must make choices, and a primary role of economists is to analyse scarcity and the progress of choosing.
Thus, people, scarcity, and choice are the three vital ingredients in the definition of economics. It is the human science which studies the relationship between scarce resources and the various uses which compete for these resources.