We spoke to The American Economic Association to find out what economics is, how it affects society and what skills students need to develop to successfully complete an undergraduate economics degree.
What is Economics?
Economics is the study of how people choose to use resources. Resources include
- The time and talent people have available
- The land, buildings, equipment and other tools on hand
- And the knowledge of how to combine them to create useful products and services.
Important choices that people must make involve how
- Much time to devote to work, to school and to leisure
- Many dollars to spend and how many to save
- To combine resources to produce goods and services
- To vote and shape the level of taxes and the role of government.
How does Economics affect society?
Often, people appear to use their resources to improve their well-being. Well-being includes the satisfaction people gain from
- The products and services they choose to consume
- Their time spent in leisure, with family and community and in jobs
- The security and services provided by effective governments.
In summary, economics includes the study of
- Labour, land and investments of money
- Income and production,
- Taxes and government expenditures.
Economists seek to measure well-being, to learn how well-being may increase over time, and to evaluate the well-being of the rich and the poor. The most famous book in economics is the Inquiry into the Nature and Causes of The Wealth of Nations written by Adam Smith and published in 1776 in Scotland.
Although the behaviour of individuals is important, economics also addresses the collective behaviour of businesses and industries, governments and countries, and the globe as a whole. Microeconomics starts by thinking about how individuals make decisions. Macroeconomics considers aggregate outcomes. The two points of view are essential in understanding most economic phenomena.
Which skills are developed, and needed for success, in an undergraduate programme?
The undergraduate major in economics develops three skills: logical thought used in solving problems, observation and inference from data and presenting ideas in compelling writing and speech. Logical analysis underlies an economist’s ability to understand economic phenomena.
The ability to translate between mathematical models and observed economic phenomena
Many programmes use algebra and some use calculus as tools for understanding economic events. Some courses in economics ask students to complete a series of problem sets that consist of elaborate algebra word problems.
The ability to create and interpret a chart
Logical analysis and use of mathematics often involve radical simplification to allow focus on a logical cause-and-effect relationship, much as physics often imagines a world without friction to describe basic relationships.
In economics, mathematics provides models that reveal significant connections while ignoring other features of the phenomenon. Those models are often applied in many settings rather than having to be reinvented for each new situation.
The ability to write clearly
Being able to write thoughtfully and clearly is the best way to show an understanding of economic theory and concepts. The ability to build an argument in the form of an essay is a valuable skill developed in many economics programmes. In some programmes, oral presentations also play an important role.
The American Economic Association has about 18,000 members from all over the world, most of whom are working economists in academia, business, government and international and not-for-profit agencies. It was founded in 1885 to promote the study of economics from all points of view.