Economics is more than just the flow of money; it’s the key to understanding our choices and the structure of society. Let’s explore together why economics matters, from our personal lives to society at large.
What is economics studied?
What are the benefits of knowing economics? To answer this question, let’s first look at what economics is about. It’s called economics, so you could say it studies the economy. However, the scope of economics is much broader than that, but if we were to summarize what it studies in one word, it would be people’s choices.
It studies how people with different desires and tastes make choices, and all of these are the subject of economics. For example, the everyday choices we make, such as choosing what to make for dinner or buying food at the market, to the big life choices we make, such as getting a job, going to school, getting married, educating our children, buying an apartment, etc.
In addition to personal choices, other kinds of choices are also the domain of economics. Just as an individual chooses whether or not to apply for a job, a business (company) chooses whether or not to hire a person. When businesses make and sell goods, they have to choose which goods to make and decide how much to charge for them. And governments set taxes and make policies and regulations. These are all choices that economics is interested in and studies.
However, if we narrow down the basic concerns of economics, understanding the economic system is the starting point for the study of economics. People have different tastes and want to buy different goods, and companies produce different kinds of goods in order to make a profit. The way in which these demand and supply sides are linked and goods are distributed is the primary concern of economics, which is called the economic system.
In most countries, the production and distribution of goods is organized through markets and prices. Therefore, the market economy is the first thing that economics deals with. In the process, you’ll learn about the perspectives of both consumers and producers, followed by the role of the government, which plays an important role in a market economy. You’ll also learn about different economic environments, such as how the choices of individuals and firms change in a monopolistic market, and what governments do when approaching a national economy.
Why study economics?
The study of how individuals, businesses, and governments act with a purpose is the foundation of economics. Individuals care about fulfilling their needs, and businesses care about increasing their profits, and they want to make the best choices to do so. So studying economics can help us develop an eye for judging what is a good choice when we have to make decisions.
It’s a common misconception that economics only deals with rational people, but that’s not true. Due to its broad scope and complex models, economics simplistically assumes that humans are rational, when in fact, it also studies conscientious choices, choices that prioritize social rules, and irrational choices. On the contrary, it is more important to learn and realize what a rational choice is while studying economics. Because we are human, we make irrational choices, but when we realize what the better choices are, we can actually make those choices.
And in the process, you’ll learn to understand and affirm people’s desires. We all want to have more, we all want to live better, we all want to make more money. Other disciplines either don’t address this enough, or they talk about it in terms of other human goals, such as peace of mind or restraint of desire.
Economics accepts these desires as natural, which is why it is sometimes misunderstood that economics views humans as selfish, but in fact, as much as economics studies choice, it also takes into account many other human characteristics, morals, customs, laws, and conscience. As a result, economics can help us better understand what it means to be human.
Beyond humans to society
Knowing economics can help us better understand the society we live in. First, because economics helps us understand people, it also gives us a better understanding of societies made up of people. In particular, it helps us think in advance about how people will react to changes in policy, and this understanding allows organizations, companies, and governments to be more sophisticated when making policies.
Knowing economics also allows you to understand the economic system, which is a major component of a society, and this allows you to better understand society as a whole and the national economy. The market economy is an important component of a society, and economic inequality and the role of large corporations are important to understanding society as a whole. Therefore, economics is also important for those studying business administration or public administration.
Secondly, economics helps us to understand the characteristics of national economies. For example, you’ll know how to interpret the national economy and what economic indicators like GDP, inflation, and balance of payments mean. As a result, you’ll know what policies governments should choose and how individuals, households, and businesses should respond to changes in national economic conditions.
Economics also provides answers for building a better society. Different people will have different ideas about this. Some people will value overall efficiency, while others will value equity among people more. From an economic point of view, material abundance is usually valued, but it doesn’t explain all of a people’s happiness. By studying economics, you will be able to formulate logical and organized opinions about what policies and measures you think are necessary to create a better society. Economics is a great tool for refining your ideas, building stronger logic, and anticipating possible side effects.
Some people say that the market economy itself is wrong. It’s not perfect, and it has its drawbacks, such as inequality. However, every industrialized country in the world has adopted a market economy, and those that have not have failed.
One side exploits economics’ tendency to recognize people’s desires and the market economy’s ability to achieve good resource allocation without government intervention to dogmatically argue that government is the root of all evil and should not intervene in the market. The other side argues that mainstream economics is wrong because it serves the interests of vested interests, and that a new economics can help people pursue happiness.
Both are wrong. Economics is a tool for analyzing the choices of economic agents and the economic system, and different people have different ideas of what an ideal society should look like, so the tool can be used differently. Economics can be used to make more logical arguments for the development of society. Since no other economic system has been proven to replace the market economy, current mainstream economics, which analyzes the market economy best, can make the most logical and sophisticated arguments in the field of economics and in areas related to people’s choices.
Limitations and hopes of economics
Sometimes economics has clear answers, and other times it doesn’t. If there were a clear answer, people would have already solved the problem and come to a conclusion. As history has proven, the market economy is the best economic system. Unfortunately, economics has limited answers to social problems that many people have yet to solve. People often have different ideas about the economic solutions, especially due to differences in values.
However, economics is a highly logical discipline that is best able to analyze problems with people’s choices and problems with economic systems. By learning economics, you will be able to make better choices, gain a deeper understanding of other people and society, and be able to present and evaluate logical alternatives to create a better society. I hope that more people will be able to utilize the tools of economics and the logic of economics for a better life and a better society, and I hope that “The Global Economy Story” blog will contribute to that goal.
