98. Definintion of Economics

C.M. Heydenrych - Lecurer in Economics. Mancosa. December 2015

Economics is the social science that describes the factors that determine the creation of value through the production, trading, allocation and consumption of goods and services. According to many web resources the term comes from the Ancient Greek οἰκονομία from οἶκος (oikos, "house") and νόμος (nomos, "custom" or "law"), hence "rules of the house hold for good management".

One might find the term "distribution" in some definitions. I prefer not to use the term since it carries the connotation that the products are "handed out" in some mechanical way without the dynamic concept of voluntary exchange playing a key role. The technical definition however is something else: Samuelson (1948) defines Economics as the "study of how societies use scarce resources to produce valuable commodities and distribute them among different people." He then defines distribution as the way total output, income, or wealth is distributed among individuals or among the factors of production (such as labour, land, and capital)(Samuelson and others, 2004). Distribution in this latter sense relates more to the statistical distribution or spread among the different categories of people.

Also let us briefly look at what we mean by a "social science" - it is the scientific study of hum an society and social relationships - how individuals behave in relation to others.

The Oxford English Dictionary defines the scientific method as "a method or procedure that has characterized natural science since the 17th century, consisting in systematic observation, measurement, and experiment, and the formulation, testing, and modification of hypotheses."

It is at this very point that two distinctive approaches in looking at economics emerge. One group that say that human actions cannot be studied in the same way as we do with phenomenon in the natural world (Austrian School) and others that say that we can and should (Keynes and others).

Since I believe that there is nothing else than the natural world and therefore we should use the same methodologies as the physical sciences, but also that one should be careful in ones application not to confuse the essential differences between the natural world and humans. The distinction would be similar to the distinction found in the natural sciences between quantum mechanics and Newtonian principles. There is a place for each in practice and it is unlikely that a unified theory would be found.

REFERENCES Paul A. Samuelson, Economics (New York: McGraw-Hill, 1948) Samuelson Paul A. Samuelson and William D. Nordhaus (2004). Economics, 18th ed., [end] Glossary of Terms, "Distribution."

Question: Give, or create a textbook definition of economics and discuss (8).