What is Economics?
Before attempting to answer why one must study economics, it is only natural to question what economics actually is. One might find several answers, for each economist has their own view on the topic, but all these definitions can be broadly grouped into two categories:
The Science of 'Wealth'
The Science of 'Choice'
Neither of the two is incoherent, but they must be considered as complementing each other in answering the vital question.
The Science of Wealth
According to this definition, economics studies the production, consumption, distribution, and accumulation of wealth. Wealth comprises those goods and services which command some value when exchanged and also have value in them because of labour expended on their production. Therefore, broadly, economic value is determined by the labour power spent on the production of the good in question and by its exchange. This is an objective way of studying the economy. Notable scholars in this tradition include Kautilya/Chanakya/Vishnugupta, Adam Smith, John-Baptiste Say, John Stuart Mill, and Thomas Malthus.
The Science of Choice
According to this definition, economics studies human behaviour as a relationship between ends and scarce means which have alternative uses. It is assumed that human wants are unlimited while resources are scarce. Thus, one is faced with the problem of choice at every turn - the decisions forced upon us by the relative scarcity of resources compared to our unlimited wants. Here, economic value is determined by the importance an individual places on a good for the achievement of their desired ends. This is a subjective way of studying the economy. Notable scholars in this tradition include Alfred Marshall, Lionel Robbins, William Stanley, Leon Walras, and Carl Menger.
My Definition of Economics
I like to define economics in six simple words: The science and management of resources.
Resources are tangible and intangible assets available to us that can satisfy our needs and/or wants. Tangible resources include things like wood, iron ore, crop, food, and the like, while intangible ones include things such as time, effort, skills, time, etc. The term 'management' in general refers to the pursuit of objectives through organisation, coordination, and decision-making. The term 'science' means building and organising knowledge in the form of testable explanations. I argue that both the approaches to economics, i.e. the science of wealth as well as the science of choice, get subsumed in my humble attempt to encapsulate the meaning of economics. In support of my argument, the etymological meaning of the word 'economics' itself is 'management of the household'.
At the economy-wide (macro) level, my definition points to the science of the production, consumption, distribution, and accumulation of wealth, wherein resources available to the economy are limited and must be utilised in an efficient way for the survival and sustainability of individuals comprising the economy. At the individual (micro) level, it refers to the science of decision-making or that of choice among the limited resources at one's disposal that are required to fulfill their needs and wants. Irrespective of the macro level or the micro level, management of both tangible and intangible resources is required for them to be used efficiently. Based on the study of how these resources have been used historically, how they are being used in the present, and forming predictions for their use into the future, it is the job of the economist to come up with policy prescriptions that can lead to their efficient utilisation.
'Economic value' may termed as the psychological value that individuals or society derive from the production, consumption, holding, and exchange of a product or service. 'Capital' is a broad category within resources which basically represents producible means of production that can directly or indirectly produce economic value. Capital can be developed and enhanced for the use of society. Thus, economics studies it and also provides policy prescriptions based on past experience and experiments. This category of resources may include physical capital (such as computers, data centres, furniture, machinery), human capital (comprising the stock of habits, knowledge, and social and personal attributes), financial capital (e.g. stocks, bonds, and foreign exchange), and social capital (the stock of 'trust' in society).
WHY STUDY ECONOMICS?
Finally, I believe that the following piece by Amit Goyal encapsulates the essence of why one ought to study economics: