What Does Economics Study?
And Why Should You Care?
Economics is the science that studies how people and societies make decisions that allow them to get the most out of their limited resources. And because every country, every business, and every person has to deal with constraints and limitations, economics is literally everywhere.
For instance, you could be doing something else right now besides reading this book. You could be exercising. Watching a movie. Talking with a friend. The only reason you should be reading this book is if it’s the best possible use of your very limited time.
In the same way, you should hope that the paper and ink used to make this book have been put to their very best use and that every last tax dollar that your government spends is being used in the best possible way and isn’t being dissipated on projects of secondary importance.
Economics gets to the heart of these issues, analyzing individual and firm behavior, as well as social and political institutions, to see how well they perform at converting humanity’s limited resources into the goods and services that best satisfy human wants and needs.
Framing Economics as the Science of Scarcity
Scarcity is the fundamental and unavoidable phenomenon that creates a need for the science of economics. Without scarcity of time, scarcity of resources, scarcity of information, scarcity of consumable goods, and scarcity of peace and goodwill on Earth, human beings would lack for nothing.
Indeed, without scarcity, your life would be like that of the hard-partying couple in the Eagles’ song “Life in the Fast Lane.” That is, you’d have “everything,
all the time.”
Sadly, though, scarcity is a fact. There isn’t nearly enough time or stuff to satisfy all desires, so people have to make hard choices about what to produce and consume so that if they can’t have everything, they at least have the best that was possible under the circumstances. Economics gets deep into scarcity and the tradeoffs that it causes people to make.