In the last couple months, I have struggled to find something to write about. It hasn’t been that I’ve had nothing to write about, quite the opposite, I’ve had far too much to write about. My notebooks and planner have been overflowing with ideas about blog posts, op-eds, and scholarly articles. Unfortunately, I didn’t have a system in which I could divulge this ever-growing heap of ideas and prompts into something others could comprehend. Thanks to the suggestion of a good friend, I’m going to focus on putting many of these ideas on Optimal Economics (OE). Starting with this post:
What is Economics?
If you’re reading this blog, I assume that you have an idea as to some of the things that describe economics. It’s the Dismal Science, the study of the economy, a study of scarcity, etc., etc…
Unfortunately, those descriptions barely scratch the surface of what economics is; in fact, economics is everywhere. Economics pervades everything we as humans and our institutions do. (Many, like Walter Williams, would say that even animals observe the laws of economics because even insects and vermin are utility-maximizers.) Every choice you make has an economic undertone. Every choice is made from you weighing your options and then acting upon them. Even if you act upon impulse, you’ve made the choice of not carefully thinking about your next more; therefore, you’ve decided that weighed your option to weigh other options and went with the most immediate plan of action.
Through the course of my academic career, I have often heard the field of economics described as being one the following:
- Economics is the study of scarcity and how people make choices in a world of scarcity.
- Economics is the study of how people mitigate risk.
- Economics is the study of human action.
Which one of these is the correct definition for economics?
The answer is all three of them. Every choice a person makes is an action, specifically, a Human action. Every action must be made within a realm of constraints. Our world, having a limited amount of mass, area, and resources, is by definition one of scarcity. In order to deal with this scarcity, humans must determine the associated risks with using any number of scarce resources to satisfy their means, or actions.
If we lived in a world without scarcity, such as the Marxist utopia, the laws of economics need not abide; however, such a world is not only inconceivable, it is impossible according to the current laws of physics (the First Laws of the Conservation of Mass and of Energy). We do not possess the technology or the universe-altering techniques to allow our world to be free from scarcity, thus free from risk, thus free from human action.
From the view of the innocent bystander, I do not think we would want to live in a world where there was no human action. Yet, we do not live at the other extreme proposed by Thomas Malthus. Humans are inherently creative and solve seemingly insolvable problems. Every individual has the ability to make a sequence of choices, that combined with their own creativity, can make the world a better place. The choice to save a larger percentage of one’s income could lead to a bank lending out more money which in turn would lead to capital investment and potentially higher standard of living for everyone within a given economy. Your choices impact not only today, but tomorrow, the day after that, the day after that and so on. Human minds, social constructs, and institutions are not directly bound by the laws of physics, and every choice has the potential to be far-reaching in its consequences. Furthermore, being self-interested has so far, on the aggregate, been found to be beneficial to society. It’s because of our great capacity to overcome that we were able to rise above the limits set by Malthus and that we as humans will be able to overcome whatever issues we as a species will face next.
Economics tells the how and the why we have succeeded at becoming the dominant species on the Earth.