What is Economics?

Summary

This script introduces economics as the study of scarce resources and the choices people make to fulfill their desires. It clarifies misconceptions, distinguishing economics from accounting and emphasizing its complexity. The video explains the difference between positive and normative economics, highlighting the importance of making value-free judgments in the former. It also covers microeconomics and macroeconomics, and introduces econometrics, the statistical branch specific to economics. The script concludes by noting the broad application of economics across various fields, including psychology, sociology, and more, showcasing its interdisciplinary relevance.

Takeaways

• 📚 Economics is often misunderstood, with misconceptions like it's just about money or accounting.
• 🔍 Economics is defined as the study of the use of scarce resources that have alternative uses.
• 💡 People have unlimited desires but limited resources, leading to the need for choices.
• 🤔 Economists study these choices to understand human behavior and resource allocation.
• 🧩 Economic questions fall into two categories: positive (describing what is) and normative (arguing what ought to be).
• 📊 Positive economics involves models without value judgments, while normative economics involves value judgments.
• 🔬 Economics is divided into microeconomics (individual agents and markets) and macroeconomics (entire economy).
• 📈 Econometrics is a branch of statistics focused on analyzing real-world economic data.
• 🌍 Economists study a wide range of topics, including crime, war, family, religion, culture, politics, law, and genetics.
• 🔗 Economists often collaborate with experts from other fields, such as psychology, sociology, criminology, political science, anthropology, biology, neuroscience, and law.

Q & A

What is the typical misconception that first-year economics students have about economics?

First-year economics students often have misconceptions such as thinking economics is the study of money, another word for accounting, or that it is a difficult subject to avoid.

What is the classic definition of economics provided in the script?

The classic definition of economics is the study of the use of scarce resources that have alternative uses.

Why are resources considered scarce in economics?

Resources are considered scarce because they are limited in supply, whereas human desires for these resources are infinite.

What are the two main categories of economic questions?

The two main categories of economic questions are positive economics and normative economics.

What distinguishes positive economics from normative economics?

Positive economics describes what is, focusing on objective analysis without value judgments. Normative economics argues for what ought to be, involving value judgments about what is best.

Can you provide an example of a positive economic question?

An example of a positive economic question is: 'Why do people use money?'

Can you provide an example of a normative economic question?

An example of a normative economic question is: 'Should people use money?'

How is economics divided in terms of scope?

Economics is divided into microeconomics, which studies the behavior of individual agents and markets, and macroeconomics, which studies the behavior of the entire economy.

What is econometrics, and why is it unique in economics?

Econometrics is a branch of statistics specialized in analyzing economic data. It faces unique mathematical challenges because economic data often comes from the real world rather than controlled experiments.

What are some of the diverse fields that economists might study beyond traditional markets?

Economists might study fields such as crime, war, family, religion, culture, politics, law, and genetics.

Why is it not unusual to see interdisciplinary research involving economists?

It is not unusual to see interdisciplinary research involving economists because the tools developed in economics to study human behavior have broad applications across various fields like psychology, sociology, criminology, political science, anthropology, biology, neuroscience, and law.

Outlines

00:00

📚 Introduction to Economics

The first paragraph introduces the fundamental concept of economics to a novice student. It clarifies common misconceptions and presents the classic definition of economics as the study of the allocation of scarce resources which have alternative uses. The paragraph explains the distinction between positive and normative economics, with positive describing 'what is' and normative arguing 'what ought to be'. It also introduces microeconomics and macroeconomics, the former focusing on individual agents and markets, and the latter on the economy as a whole. The paragraph concludes by mentioning econometrics, the statistical branch specific to economics, which faces unique challenges due to the nature of economic data.

Keywords

💡Economics

Economics is the social science that studies the production, distribution, and consumption of goods and services. In the script, it is defined as the study of the use of scarce resources that have alternative uses. This is the central theme of the video, emphasizing that economics is about making choices due to the scarcity of resources in relation to unlimited human desires.

💡Scarce Resources

Scarce resources refer to limited goods and services that are not sufficient to fulfill all human needs and wants. The script mentions that economics is about how people need to make choices because resources are scarce, but desires are not, highlighting the fundamental problem of scarcity in economic decision-making.

💡Positive Economics

Positive economics is concerned with describing and analyzing economic phenomena as they are, without making value judgments. The script explains that positive economics describes 'what is,' such as why people use money, providing an objective analysis of economic behavior.

💡Normative Economics

Normative economics involves making value judgments and prescribing what ought to be. The script contrasts this with positive economics by stating that normative questions, like whether people should use money, involve value judgments and recommendations.

💡Microeconomics

Microeconomics is the branch of economics that studies the behavior of individual agents and markets. The script mentions that microeconomics focuses on how individual consumers and firms make decisions in the face of scarcity, which is a key aspect of understanding economic choices at a smaller scale.

💡Macroeconomics

Macroeconomics is the branch of economics that examines the economy as a whole, including aggregate measures like GDP and unemployment. The script states that macroeconomics studies the behavior of the entire economy, which is crucial for understanding broader economic trends and policies.

💡Econometrics

Econometrics is the branch of economics that applies statistical methods to economic data. The script notes that econometrics specializes in analyzing economic data, which often comes from real-world observations rather than controlled experiments, making it a unique and essential tool in economics.

💡Value Judgments

Value judgments are subjective assessments of what is good or desirable. The script explains that if an economic model includes value judgments, it falls under normative economics, emphasizing the distinction between objective analysis and subjective recommendations.

💡Behavioral Economics

Behavioral economics is a field that combines insights from psychology and other social sciences with economics to understand human behavior better. The script implies this by mentioning that economists study not only markets but also areas like crime, war, and culture, showing the interdisciplinary nature of economics.

💡Interdisciplinary

Interdisciplinary refers to the approach that integrates insights from multiple fields of study. The script highlights this by noting that economists often collaborate with psychologists, sociologists, and other scholars, indicating that economics is not limited to traditional economic topics but extends into various aspects of human behavior.

💡Real World Data

Real world data refers to information collected from actual economic activities and transactions, as opposed to controlled experiments. The script mentions that econometrics faces mathematical challenges because economic data usually comes from the real world, which can be more complex and less predictable than experimental data.

Highlights

Economics is not just about money or accounting; it's the study of the use of scarce resources that have alternative uses.

People have infinite desires, but resources are scarce, requiring choices to be made.

Economics involves studying these choices to understand how people allocate their scarce resources.

All economic questions fall into two categories: positive and normative.

Positive economics describes 'what is,' while normative economics argues for 'what ought to be.'

A question like 'Why do people use money?' is an example of a positive question.

'Should people use money?' is an example of a normative question.

If an economic model has no value judgments, it's considered positive economics.

Normative economics involves value judgments to determine what is best.

Economics is divided into microeconomics and macroeconomics.

Microeconomics studies the behavior of individual agents and markets.

Macroeconomics studies the behavior of the entire economy.

Econometrics is a branch of statistics specialized in analyzing economic data.

Economic data often comes from real-world observations, not controlled experiments, presenting unique challenges.

Economists study a wide range of topics, including crime, war, family, religion, culture, politics, law, and even genetics.

Transcripts

what is

economics the typical firste student

walks into his first economics class

with very little idea of what economics

is he might have heard something like

economics is the study of money or

economics is another word for accounting

or economics is hard don't take that

class but none of those are

true economics is the study of the use

of scarce resources that have

alternative uses that's the class

classic definition of

economics basically there are people and

people need resources to fulfill their

desires these resources cannot be

infinite but the desires can be so

people need to make choices about how to

use their scarce resources economists

study these

choices all economic questions fall into

one of two categories positive and

normative positive economics describes

what is and normative economics argues

for what ought to

be so a question like why do people use

money is a positive question and should

people use money is a normative question

a general rule of thumb is that if your

economic model has no value judgments

it's positive economics whereas if it

does have value judgments it's normative

economics since to tell someone what he

ought to do you first have to judge what

is best for him

economics is also divided into

microeconomics and

macroeconomics microeconomics studies

the behavior of individual agents and

markets while macroeconomics studies the

behavior of the entire

economy economists also have their own

branch of Statistics called

econometrics that specialize to

analyzing economic data since economic

data usually comes from The Real World

and not from controlled experim erment

econometrics faces mathematical

challenges that other fields might

not the tools economists have developed

to study human behavior of broad uses

outside of what we would traditionally

consider economics economists study not

only markets but things like crime War

the family religion culture politics law

and even

genetics that's why it's not unusual to

see papers by psychologists sociologist

ologists criminologists political

scientists anthropologists biologists

neuroscientists or legal Scholars being

co-authored by

economists