So what is economics?

So what is economics?

One afternoon, I asked a friend what she was studying. She answered art history, and without much more, I felt like I had a pretty good idea of what her studies entailed. Being the polite friend she is and was, she reciprocated the question back to me, and in order to avoid any perception that I was just a (boring) accountant, rather than respond with commerce, I told her that I was studying economics. She asked if I enjoyed it, and I told her of course. I had been studying economic since highschool, and would be continuing to do so for years to come. She then paused for a second, and tentatively asked what exactly economics was. I then paused.

Economics has been a favourite subject of mine for nearly six years now, and I have no doubt that working in economics is what I want to do. I’ve drawn countless supply and demand graphs, discussed trade policy and budget outcomes on end, and finally worked my head around how the RBA, ESAs and OMOs all tie in together to produce monetary policy. But can I provide a succinct answer to what economics is all about? Is it the “study of the economy”? Well yes, but that’s the response I expect (and have received) from my 14-year-old brother. Is it finding the equilibrium, what governments do and setting interest rates? Also yes, that’s part of what we learn, but not quite the nice simple definition that I was after.

Eco word cloud 1

Is this economics?


Following my brief pause, all of this spilled out in an incoherent mess of ideas, words and splattering. Before she could question my first language (English) or where I was born (Carlton), I stalled and asked her what she thought economics was.  She responded by querying whether it was similar to accounting (grrrr) and maths or buying stocks and stuff. I did recognise that they were all related, but told her quite explicitly no; accounting is accounting, and “stocks and stuff” is more finance. Unfortunately, or fortunately, the conversation from there took a turn, and I didn’t have to further embarrass myself in a field in which I claim a better-than-average understanding.

Following my previous distress, I consulted the ever-reliable and all-knowing World Wide Web. According to Google, economics is the branch of knowledge concerned with the production, consumption, and transfer of wealth. Now that is a strong concise definition, but does this really encompass the field of economics? Does this dictionary-approved definition provide much more than my poorly thought out rant? What is central to supply, demand and governments is the market, defined as a platform for trade between any parties, along with the underlying choices we make and the behaviours that we express.

Which brings me to the end, my answer to the question, and maybe finally something worth reading. Economics is not just the study of its namesake; sure we analyse consumers and firms, and the flows of capital and income, but at the bare level, economics revolves around learning how to appreciate the consequences and costs of our choices, and hence become better decision-makers. Well-informed, economically-rational decisions reduce waste and promote gains by any measure: currency, output, utility, happiness, shoes or cheesecake – whatever you want. Whether one utilises this in their climb up the corporate structure, the social governance of the state, or merely in their interactions within the community; by and large a greater appreciation for economics contributes in sums to society.

This is what I consider economics to be, and why I chose, and continue to choose economics as the pillar of my studies. I definitely don’t expect, nor do I wish, for every student to follow in the path of the economist, but I do hope you make the most of your economics, and that you are able to apply what you have learnt in the classroom out into the real world – that’s the cornerstone of education.