Economics studies how people, businesses, and governments choose when faced with limited resources. It's about more than money and markets, exploring how we produce goods and services, set prices, and manage trade, labour, and wealth. Let's find out more about what exactly economics is.
Why Study Economics?
Economics is an essential part of everyday life. Whether thinking about how to spend your income, why prices are rising, or how government policies affect things, studying economics, even basic economics, can help.
Here's why learning economics will help:
- Make better personal decisions — like managing money, saving, and investing.
- Understand markets and prices — know why goods become expensive or why shortages happen.
- Analyse business and work trends — from wages and employment to trade and industry shifts.
- Understand public policy — how governments use taxes, spending, and interest rates to influence the economy.
- Explore global issues — trade, inflation, unemployment, and economic growth.
What is Economics?
Economics can have many definitions. Often, the meaning of economics depends on which economist you ask. Although in the strictest sense, economics is defined in the dictionary as:
- “The branch of knowledge concerned with the production, consumption, and transfer of wealth”; or
- “The condition of a region or group as regards material prosperity.”
However, economics as a social science can have more meanings and does not necessarily have to focus on wealth or prosperity. This is because economics seeps into our daily lives, not only through our banking and monetary systems, but also when it comes to our fundamental understanding of human behaviour and society as a whole. This is also reflected in the wide variety of economic specialisms that exist, including:
So when it comes to understanding what economics means and how you can benefit from studying it, there is much to know and learn. That’s why it can help to have an economics tutor by your side, to help guide you through the maze that an economics curriculum can sometimes feel like.
An economics teacher can be very beneficial, as he or she can provide you with a different perspective on economics, and introduce you to economic systems or concepts you may not have previously seen in your studies. However, nothing can stop you from learning more about economics, its broader meaning, and current economic issues on your own.
Below, we outline the variety of meanings that economics as a term can have, and what that means for your economics studies, you should learn the basics of economics.
Branches of Economics: Micro and Macro
Economics can be broken down into two overarching fields:
- Macroeconomics
- Microeconomics
These two fields are entirely separate, and what you learn or examine within economics will depend on what field you’re looking at. What's more, your definition of economics may change depending on whether you are a specialist in microeconomics or macroeconomics.
Macroeconomics
Macroeconomics looks at how the economy behaves in aggregate and what influences it. In practice, this means that macroeconomics can comprise the study of items such as:
Essentially, any item that can influence how the economy behaves as a whole should fall within the scope of macroeconomic analysis. The benefits of macroeconomics are numerous.
For example, governments can use macroeconomic analysis to understand how best to develop their economic policies, improve the economy's growth, or boost factors such as unemployment.
Modern macroeconomics is often associated with John Maynard Keynes. Keynes is one of the most influential economists ever, whose ideas went against previous beliefs in laissez-faire economic policies.
Microeconomics
As the name of the term suggests, microeconomics is the polar opposite of macroeconomics. It studies individual items within an economy, from people to households or companies, and their decisions and actions. In particular, specialists in microeconomics are interested in how resources are managed and distributed at the individual level. Examples of economic items falling within the microeconomics sphere are:
In addition, relatively newer fields such as behavioural economics, which looks at how human psychology impacts our decision-making and its impact on our economic reality, fall within the realm of microeconomics.
by 2030.
That's $100 trillion, by the way!
Here are the two main branches compared.
| Microeconomics | Macroeconomics |
|---|---|
| Individual choices (people, businesses) | National/global economy |
| Supply, demand, price | GDP, unemployment, inflation |
| Labour, capital, production | Economic growth, fiscal/monetary policy |
| Example: price of coffee | Example: national unemployment rate |
What Economists Say: Famous Definitions
Many economists, from Enlightenment thinkers to Nobel Prize winners for economic discoveries, have developed their own definitions of economics, and their assumptions about its meaning often differ from those of another economist. The original meaning of economics derives from the Greek word oikonomia, which translates to “household management.”
Economics has many definitions, and famous economists often see it differently.
Adam Smith
However, economics has come a long way from this somewhat restrictive meaning. For example, Adam Smith in his seminal work The Wealth of Nations argued that economics and wealth are derived from an individual’s self-interest: "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their interest."
Other economists shared Smith’s definition of economics as primarily related to wealth.
John Stuart Mill
John Stuart Mill also believed, for example, that economics involved the study of the production and distribution of wealth. However, since classical economics, plenty of definitions of economics have sought to expand on this definition.
Thomas Carlyle
In 1849, Thomas Carlyle called economics the “dismal science” in a more light-hearted, if somewhat derogatory, tone. Although not everyone agrees with Carlyle's definition, other economists have tried to broaden it.
Lionel Robbins
For example, moving away from the notion that economics should only be associated with money or resource management, Lionel Robbins defined economics as: “the science which studies human behaviour as a relationship between given ends and scarce means which have alternative uses.”
Alfred Marshall
In the same vein as Robbins, Alfred Marshall provided another influential definition of economics: “a study of mankind in the ordinary business of life.”
This definition, along with Robbins' view of economics' meaning, highlights a more commonly held view today that economics can, and does, extend to everyday life, with its influence extending far beyond wealth. This is primarily because later definitions of economics focus on the human condition, precisely human behaviour, and how our decision-making and behaviour can have a broader impact on economic systems.
However, despite the shift in the meaning of economics towards a consideration of human behaviour and action, the fact remains that the definition of economics can have a fundamentally personal meaning to each economist, as each researcher has their view of how economics can impact wealth, prosperity, and society at large.
For example, if you asked Keynes to agree with Hayek’s or Friedman’s definition of economics, he would likely be at odds with some of their interpretations. This is because Keynes, shaped by the belief that government intervention in the economy is sometimes necessary, would not be able to come to terms with Hayek’s or Friedman’s belief in laissez-faire policies as the best route forward for an economy.
Economics is not just about money — it's about people, choices, and how society uses its resources.
Finding Out For Yourself
As we’ve seen, the true definition of economics is often elusive. While this can be frustrating for learners of this subject, both at school and university, it can also be a liberating realisation. This is because, in essence, you can make economics mean whatever you want. Fundamentally, economics is so present in almost every aspect of our lives, from:
- The news that we read
- The state of our local and global economy
- How we behave with one another during financial or social interactions.
As a result, you can draw inspiration and meaning from economics in the way that most appeals to you and your learning preferences. For example, you may prefer a definition of economics that focuses solely on wealth creation or distribution.
Alternatively, you may like an expanded definition of economics, and prefer to see economics as a study in the human condition and rational decision-making. You may also find that the economic areas that interest you may be influenced by how you perceive economics. For example, suppose you prefer to see economics in a more traditional light.
In that case, you may enjoy learning more about financial or even international economics, and perhaps a field such as macroeconomics would appeal more. However, if you’re more interested in the psychology behind why we behave the way we do or why stock market decisions can sometimes be irrational, then perhaps behavioural economics is where you can derive the most meaning in your economics studies.
You can tailor economics to your interests and goals. Whether you care about wealth, human behavior, policy, or trade, economics has something for you.
Of course, suppose you’re struggling to navigate your way around economics, or need some assistance learning more about what the key economists of the modern era believe economics represents as a field. In that case, you can always find some help through a tutor.
An economics tutor can help you focus your studies in economics and pinpoint what interests you about economists. Moreover, once you’ve found the niche you’re most interested in, your tutor can point you to economists who have pioneered that field and help you study more about their theories and ideas.
Websites such as Superprof offer a range of economics tutors, whether you’re looking for online tuition or prefer to work with a tutor in person. Enter your postcode and the subject you’d like a tutor for, and Superprof will match you with the best tutors in your area.
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