Sunday, May 8, 2011

What is economics

Economics is a new science and according to Heilbroner (1999) the  first economist was Adam Smith who lived in the late eighteenth century.  Economics is also called the “dismal” science, a phrase coined by  Thomas Carlyle in reaction to the pessimistic predictions of another  economist, Malthus (Dixon, n.d.). The phrase is also appropriate due to  most economists being absolute pragmatists and never promising anything  except every advantage having an associated disadvantage.

Economics Defined

Economics is formally defined as “the study of how human beings  coordinate their wants and desires, given the decision-making  mechanisms, social customs, and political realities of the society”  (Colander, 2004, p. 4). With this broad definition economists focus on  the coordination of wants and desires, thus differentiating the science  of economics from earlier, pre-economic science eras.

The addition of markets, hence capitalism, spurred the creation of  the science of economics. What changed with markets? Primarily the way  survival was assured. Heilbroner (1999) points out that until self-gain  became a motivating factor between buyers and sellers, tradition and  authority assured survival.

Traditions were passed down from generation to generation and  authoritarian rule dictated what needed to be created, grown, or  converted. Not until capitalism freed people from these traditions and  central authorities no longer dictated what would and would not be sold  or bartered was there any need for the science of economics. The advent  of the market system, and its subsequent reliance on profit or gain,  necessitated the study of economics, which was also called political  economy.

Microeconomics Defined

Microeconomics can be thought of as “the study of individual choice,  and how that choice is influenced by economic forces” (Colander, 2004,  p. 14). Microeconomics differs from macroeconomics due to the scope of  macroeconomics. Macroeconomics is the study of entire economic systems,  what most people would call economics. Big names like Adam Smith, Karl  Marx, and John Maynard Keynes come to mind. Microeconomics on the other  hand is the study of choice, specifically the choices individuals and  businesses make when allocating resources, generally money.

Microeconomics includes principles such as opportunity cost, market  failures, price theory and the law of supply and demand. Microeconomics  can be broken down into several disciplines including, financial  economics, political economy, and labor economics. Microeconomics is  intertwined with macroeconomics, and can not be separated from it. The  economy is based on individual decisions, but those decisions are based  on the economy or perception of it (Colander, 2004, chap. 1).


Colander, D. C. (2004). Economics (5th ed.). Boston: McGraw-Hill/Irwin.

Dixon, R. (n.d.). Thomas Carlyle attacking the 'political  economists'. Retrieved June 12, 2008, from

Heilbroner, R. (1999). The worldly philosophers : the lives, times,  and  ideas of the great economic thinkers (7th ed.). New York: Simon  &  Schuster.

Colander, D. C. (2004). Economics (5th ed.). Boston: McGraw-Hill/Irwin.

Dixon, R. (n.d.). Thomas Carlyle attacking the 'political economists'. Retrieved June 12, 2008, from

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