I realised yesterday that I do not have a glossary entry for economics, which seems to be something of an oversight. I offer this for comment. It has now been posted to the glossary, but I am open to updating it based on the comments received.
Economics is the study of how societies organise the creation, distribution, and use of resources so that people can live well together. It is not, as it is so often taught, a science of markets alone, nor a study of scarcity in isolation. It is about choices, power, institutions, and the care of people and planet over time.
First, economics is about provisioning. Every society must decide how food is grown, homes are built, health care is provided, knowledge is shared, and infrastructure is maintained. These are questions about real resources, whether they be labour, land, technology, or ecological limits. Money is a tool used to organise these activities, but not the purpose of them.
Second, economics is about distribution. Who gets what, on what terms, and with what consequences? Wages, profits, rents, taxes, and social security payments all reflect political choices about fairness and power. Most especially, markets do not deliver neutral outcomes; they embed rules about ownership, bargaining strength, and access to opportunity. It is the role of the state to create markets where they are required and to compensate for market failures when they happen.
Third, economics is about institutions. Governments, people, firms, trade unions, banks, regulators, and communities shape economic outcomes. The idea that the economy is a natural system operating independently of the state is a myth. Law creates markets, defines property rights, enforces contracts, and decides what behaviour is acceptable. Economics is therefore inseparable from politics and democracy.
Fourth, economics is about time. Investment decisions today determine living standards tomorrow. If we fail to maintain our five forms of capital (financial, physical, environmental, human, and social), future generations will be poorer. The logic of sustainable cost accounting, which I have argued for on Funding the Future, is therefore essential to good economics.
Fifth, economics is about care. An economy exists to meet human needs with dignity and security. Health care, education, child care, care for the elderly, care for others in need, and environmental stewardship are not peripheral activities; they are the foundation of well-being. When economics ignores care, it becomes an ideology that justifies inequality and ecological damage.
Finally, economics is not value-free. Every model embeds assumptions about what matters. Much mainstream economics assumes rational individuals, efficient markets, and scarcity as the defining conditions of life. These are poor approximations to the reality of economic life and the human condition. Real economies are messy, cooperative, unequal, and shaped by power. That is why they are so interesting.
Economics should, therefore, be reclaimed as the study of how we build a sustainable, fair, and caring society. It is not about maximising growth for its own sake. It is about ensuring that everyone has the resources and security they need to flourish within the limits of our planet.
A variation on this post discusses the term the economy.
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You need to mention money creation and how a government can’t run out it money and the fiction of the household analogy and the difference between micro and macro economics.
Those are all separate entries. I may add links in the gloasary entry, though. So, thank you.
@You need to mention money creation
and fall into the neoliberal trap of making economics about money, all of the above would still apply in principle if money had never been thought of. Money is a technicality, for want of a better expression, a mechanism,
You can remove money from the system and economics remains but money without economics wouldn’t work.
That is one of the messages deliberately included in this version. We agree.
I broadly agree, except to say that I have never ever seen economics as a science such as physics or chemistry.
To me it is a social science, it is the study of human behaviour around man-made economic resources such as money, credit , debt, leverage and also natural resources and their markets/supply chains/competition.
The reason why it is not seen as a social science is because if it were, the very capable power relationship analyses provided by social science would reveal how they really work (always in favour of the rich or better informed), which is why they have to coat them in rather dodgy mathematics to mask what is going on.
Noted, and agreed.
Thank you for a thorough definition of economics. It was needed because most other definitions are either ideological or inadequate – almost an after thought which is odd considering its importance.
The observation that economics and democracy are inseparable is a bit ambiguous, There are other “ideas” than democracy, unfortunately.
really important contribution to your glossary
I will add a definition of democracy, and other systems of government. It’s the sort of day when writing glossaty entries seems a quite attractive idea.
I’d suggest adding that economics is the study of how societies collectively decide how to cover (or not) the needs of their members. This perspective of economics comes from the “school of thought” of Karl Polanyi.
Isn’t that what I say in the first sentence?
I recalled the origin of the word was household or estate management. Looking it up I found this from the American Economic Association.
“It then explores some of the key elements of oikonomia, while offering some comparisons and contrasts with modern economic thought. For example, both Ancient Greek oikonomia and contemporary economics study human behavior as a relationship between ends and means which have alternative uses. However, while both approaches hold that the rationality of any economic action is dependent on the frugal use of means, contemporary economics is largely neutral between ends, while in ancient economic theory, an action is considered economically rational only when taken towards a praiseworthy end. ”
Good to see the Greeks thought the end was the important thing. Something ‘praiseworthy’ suggests things being done for the common good – or politics of care.
I am with the ancient Greeks