On the Definition of Economics

10 May 2013

Occasionally, I am confronted with the question of the nature of economics.

A great many people believe that they know what economics is. Many of these people have inferred a definition for economics from references in the popular media and from politicians to the economy, and from popular media presentations of or about various people labelled economist. Some people have taken one or two courses in high school or in college about something called economics, and have presumed that whatever definitions were given in their textbooks were uncontroversial.

Well, the fact is that the popular media do no better job in representing economics than they do in representing those subjects with which you (my reader) have a real familiarity. High school economics textbooks are often disasters written by people who aren't economists. First-year college textbooks often over-simplify things. And when a respected economist attempts to define economics, while his definition may be embraced by a great many other respected economists, it will be challenged by still other respected economists! (I'll define what I here mean by economist below. If you must have a definition right now, then take it to mean one who has received a degree or appointment by which he or she has been so labelled!)

Tromping where angels fear to tread, I am going to tell you how I define economics.

Economics is a cluster of studies. The studies that I have in mind concern these questions:

How do individuals allocate the resources at their disposal?How are prices formed?How are resources allocated within a community?
How should individuals allocate the resources at their disposal?How should prices be formed?How should resources be allocated within a community?
They are clustered because significant theories (propositional structures) hold that these studies have important inter-relationships.

(And now I'll define economist to mean someone who engages in more than casual study of any one or more of these areas.)

Someone may come along and show some serious flaw in my definition. But, on the expectation that it works, I'm going to discuss it.

There's a whole bunch of things not explicitly mentioned in my definition that lay-people associate with economics. That's because those things are particular cases of more general concepts. For example, households, firms, industries, bourses, and nations are each sorts of communities. There are economists whose studies concern social orders in which all of these communities exist, but the presumption of such a social order is not intrinsic to economics. Business administrators may find economics useful, but they also may find mathematics useful. Neither is simply a hand-maiden of business studies.

Not everyone who has attempted or attempts scientific or scholarly consideration of these questions accepts the existence of the inter-relationships described by the aforementioned theories. In some cases, they may subscribe to theories which accept significant inter-relationship, but on some very different theoretical basis. In some cases, researchers may claim that, where other theories see a bilateral causality, there is just a one-way causality. For example, these economists may insist that, while prices inform individual decisions, those prices are formed without regard to individual decisions.

Further, even economists who accept that these studies are all importantly inter-related don't necessarily spend much-if-any effort studying in all areas. Indeed, some may confine themselves to just one area. For example, every one of the living economists who are widely known to lay-people are macroeconomists, which is to say that they are concerned with the behavior of aggregates such as prices levels, employment rates, and GDP. But, as a share of economists more generally, macroeconomists are a tiny minority. Most economists don't like macroeconomics. It is signally ignorant to ask a typical economist what the stock-market is going to do most days, because that's outside of his or her area of concern.

You surely noticed that the first row of question were non-normative, while the second row were corresponding normative questions. Some economists would insist that there is very little to be said normatively. On the other hand, often a sort of normative theory is used to approximate non-normative theory, as when it is assumed that individuals have complete, transitive, and acyclical preferences.

For what it's worth, the words economy and economics comes to us from the Greek stems ὀικ-, referring to the household, and νομ-, referring to the law or to custom (with the -ic- from the adjectival suffix -ικ-). Greek ὀικονομ[ικ]- referred to management of the household and of its resources.

Transliterated into Latin, ὀικονομ[ικ]- became oeconom[ic]- and entered English thus. Somewhere along the line, the initial o fell silent.

In English, œconomy referred to resource management, typically at the the level of the household, that was wise, frugal, or perhaps tight-fisted, or to a savings realized by such management (a definition that still has some currency to-day); and œconomist to a manager who was wise, frugal, or tight-fisted. Conceptualizing a political community as household, the term political œconomy began to be used in reference to the sorts of management in which political authorities might engage. (German has a very similar term, Nationalökonomie.)

The initial o began to fall away from œconom-; and, in part because of the currency of political [o]economy, [o]economist became increasingly dissociated from thoughts of households or of other work-a-day management, and more concerned with a sort of philosophical or scientific study (though not, as it happens, before The Economist got its name).

Eventually, peculiar association of economics with the literal household was so forgotten that, when a term was wanted with the original sense, the philologically redundant home economics was adopted, with only quiet laughter off in the distance.

A few people now-a-days call themselves oeconomist, spelled in that archaic manner, as a way of asserting that they are or seek to be wise practical managers of resources. That's not, however, why I label myself thus.

Although my published work doesn't look simply modernistic but in fact hyper-modernistic, I'm sympathetic to much of the criticism of modernism in economics; I think that we need to reconsider some of the work done before the era of modernism. My œ is a way of saying that there's something deliberately old-fashioned to my thinking.


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