What is Economics?

One of the questions I like to ask my student during the first week of class every year is “What is Economics?” The answers are always interesting to read, because unlike many other high school classes, Econ is one of those subjects students sometimes have no idea what it’s all about when they sign up for the class. Below are some of the definitions of “Economics” students shared in their first day survey this week:

“Economics is the study of money flow between either countries or individual companies.”


“My definition of Economics is the control of money by a person, organization or nation.”



“Economics is a complex system that determines and justifies global prices, currency values, and ultimately the success of a nation.”



“I’d say Economics is the study of how humans use resources including income, investments, taxes and the economy.”



“I think economics is the study of investments and money. Especially income and outcome, and taxes in the government.”



“The study of the distribution of wealth and how humanbeings tend to handle wealth.”



“A bunch of old men moaning about all of the potentially free lunch oppurtunities they had missed in their youth, passed off as the behaviour of markets.”



As you can see, most students do not yet have a clear definition of the subject in their heads when they start the course, which is perfectly understandable! So I thought I’d start the year off by sharing my definition of economics.





Please read the following introduction to Economics then answer the discussion question that follows.

So what IS Economics, anyway? Well, look around you. What do you see? From here in my house in Surrey, I see a new housing block being built. I can count three yellow cranes swinging their arms hauling construction materials around their respective sites. Beyond the cranes I see beautiful woodland stretching up a hillside with green sheep pastures and quaint farm houses scattered here and there. I see a church steeple and the rooftops of the businesses down in the village below. I can just see the tops of cars racing along the M25.



Now ask yourself, how did things get to be this way?





Why are new buildings going up in the midst of Europe’s deepest recession in decades?





Why are farmers still able to graze sheep on hillsides when 100 square meter condos are selling for a million francs just below their fields?





Why are the ancient woodlands of the North Downs still standing even as development has encroached into most of the region’s forests and natural ecosystems?





How do normal people make enough money to live comfortably in this expensive part of the UK?





Where do the things we buy come from?





Who built this computer I’m typing on and what will I be doing for a living in twenty years?

One of my favorite quotes that to me sums up what economics is all about comes not from an economist, but from the civil rights leader Martin Luther King. In 1967 King wrote:

Did you ever stop to think that you can’t leave for your job in the morning without being dependent on most of the world? You get up in the morning and go to the bathroom and reach over for the sponge, and that’s handed to you by a Pacific islander. You reach for a bar of soap, and that’s given to you at the hands of a Frenchman. And then you go into the kitchen to drink your coffee for the morning, and that’s poured into your cup by a South American. And maybe you want tea: that’s poured into your cup by a Chinese. Or maybe you’re desirous of having cocoa for breakfast, and that’s poured into your cup by a West African. And then you reach over for your toast, and that’s given to you at the hands of an English-speaking farmer, not to mention the baker. And before you finish eating breakfast in the morning, you’ve depended on more than half the world. This is the way our universe is structured, this is its interrelated quality.

Economics is about all the questions I posed above and it’s about all the interactions King describes. Economics is about solving one major problem faced by all human societies going back thousands of years. Economics is about the problem of scarcity.





Scarcity is the natural phenomenon arising from the fact that all the world’s resources are physically limited in quantity.

Limited resources alone would not pose a problem if it were not for one characteristics of human beings that makes us truly unique in the animal kingdom. The fact that we have desires and wants beyond our basic physical needs. In the face of humans’ practically unlimited desires and wants, the limited nature of the earth’s limited natural resources gives rise to conflicts regarding the allocation of those resources. Economics is the social science that deals with the allocation of earth’s scarce resources among the competing wants and needs of society. Economists provides society with various tools and techniques for efficiently allocating our scarce resources.

Discussion question:

Scarcity of resources has given rise to countless conflicts among and between societies throughout history. Identify one conflict from the past or present that you think the problem of scarcity gave rise to.



Some say that many of the environmental problems our world faces to day can be solved by economics. If that’s the case, then they must have to do with scarcity. Identify one environmental problem and explain how it relates to scarcity.



Time is one of the scarcest resources. Explain how the decisions you make regarding your limited time in and out of school can be considered economic decisions.

Mr Bentley