Explore the Nature and Scope of Economics

Society is formed by civilised people who indulge in day-to-day transactions. These transactions are based on cultural values, human interactions and economic and financial decisions. Economics is the language and theory of these interactions. It is concerned with the consumption of goods and services that help regular functioning.

Few theorists regard it as a social science. Moreover, it is not merely concerned with the numbers, statistics, and graphs that showcase prudent progress or decline; it covers all the central issues society faces. Hence, it is safe to state that economics is vital for understanding society and the people who constitute it. 

Here we explore and understand the nature and scope of economics.

Several thinkers, theorists, and well-known economists have formulated different theories and applications of economics. These great thinkers are distinguished as classical and neo-classical economists.

Classical Economists

The first economist in this category is Adam Smith, also known as the father of modern economics. The term ‘science of wealth’ was coined by him. He supported the idea that free markets control themselves by means of competition, demand and supply. Moreover, he believed that jobs with higher work hazards or considered dangerous tend to pay a higher wage.

Furthermore, the concept of GDP or Gross Domestic Product was created by him. Hence, to sum it up, classical economists supported economic growth and freedom while ignoring non-material services. Here, the primary importance is given to wealth rather than to human beings.

Neoclassical Economists

Alfred Marshall is the most famous neoclassical economist. He supported the view that economics is a science of ‘material welfare’. Thus, economics is regarded as a social science and has achieved an esteemed position in the world of arts. Here, the focus is on more than the consumption of goods and services. It also covers all the central issues society faces and focuses on its welfare.

Moreover, Alfred Marshall is well known for stating that the scarcity of various resources gives birth to economics and associated concepts. The scarcity of resources leads humans to alternative resources.

Nature and Scope of Economics

While classical theorists offer a relatively narrower scope, neoclassical theorists suggest that economics has broad nature and scope.

Nature of Economics

It is divided into two fields with respect to nature – Science and Arts. Though divided into these two fields, it is considered a part of both.

Economics as an Art

Art is a field that dwells on the means of expression and application of any skills, whether creative, pragmatic, or emotional. Art exists all around us, and it takes a great mind to appreciate art. Like any other art form, economics requires a great deal of imagination; however, the imagination has to be in the context of reality and cannot be a fleeting idea.

Furthermore, economics is goal-oriented. It states the means to achieve an end; similar is the case with arts. For instance, Arts tells us the ‘how to’ part of anything. Economics also states theories that discuss the ‘how to’ part of an end goal. Therefore, arts and economics deal with the practical application of book-based knowledge. Both bring life to the theories.

Economics as a Science

Science determines the cause and effect relationship. It is quantifiable and uses a proven apparatus to predict the desired results. It is based on experimentation. Economics has all these qualities; it establishes a strong cause and effect relationship for the consumption of goods and services between demand and supply.

Moreover, it can be measured or quantified in graphs and charts and, more importantly, money. It uses its own methods to forecast the end result. Hence, economics is a science and can be of two types:

• Positive: It is based on cause and effect relationship between variables and lays down the facts.
• Normative: It is based on value judgements and is to do with ‘how’ things should be.

Hence, economics as a science deals with the theory and the principles; economics as an art deals with the application and execution.

Scope of Economics

Scope refers to the extent to which something deals with or the extent to which something is concerned. Consumption of goods and services is the most basic way to define its scope. However, in reality, the scope of economics is much more than the regular consumption of goods and services. It can be distinguished as follows:

Microeconomics

Micro refers to small; it is the study of individual units of consumption of goods and services as well as that of production and much more. It is concerned with one single household, office, industry or market.

Moreover, concepts such as product pricing and consumer or firm behaviour are a part of it. Various types of markets are also studied under this. Hence, the consumption of goods and services and the behaviour responsible for it is a part of microeconomics.

Macroeconomics

Macro means large; it is the study of the overall production and consumption of goods and services. It is concerned with national income, GDP, GNP or gross national product. Concepts such as macro-level business cycles, national budget, unemployment and money supply are a part of macroeconomics.

Conclusion

The nature and scope of economics are thus much more than the mere consumption of goods and services. Economics covers all the central issues faced by society and is thus regarded as a social science. Hence, economics is a subject that can pave the way for many enlightening thoughts.