EFA (50): Economics

In the final instalment of our 50-part series, Economics for Amateurs (EFA), we ask a question that should perhaps have been the subject of our first instalment. But better late than never. So, what exactly is economics?

When I was first studying economics — at school in England in the 1970s — one of our standard textbooks was the classic work Economics, by Paul A. Samuelson, who died last December at the age of 94. In his preface, Samuelson wrote:

• "Economics is an important subject. Economics can also be an exciting subject. How could it be otherwise, when it deals with the great issues of unemployment, inflation, poverty and wealth, mere material growth and life-enhancing advancement."

Later in the book, Samuelson gives this definition:

• "Economics is the study of how men and society end up choosing, with or without the use of money, to employ scarce productive resources that could have alternative uses, to produce various commodities and distribute them for consumption, now or in the future, among various people and groups in society..."

A more recent textbook, Economics, by David Begg, Stanley Fischer and Rüdiger Dornbush, put the same idea more succintly:

• "Economics is the study of how a society decides what, how, and for whom to produce."

Yet another book, Economics for Dummies, has this to say:

• "Economics is the science that studies how people and societies make decisions that allow them to get the most out of their limited resources. Because every country, every business and every person deals with constraints and limitations, economics is literally everywhere."

Indeed. Economics really is everywhere. It looks, as Samuelson says, at all the "great issues". One could add to his list transport, health, education, foreign trade, currencies, taxation, government, football, and many more areas. Indeed, the principles of economics have even been applied to such questions as whom to marry and whether or not to have children.

In another textbook I used, Microeconomic Theory, Richard (Lord) Layard and Alan A. Walters agree with other authors when they write:

• "Economics is about making the best of things. In other words, it is about choice subject to constraints."

But my favourite comment on economics comes from Layard and Walters in their introduction:

• "Economics is meant to be useful."