This interesting little article appeared recently in the JEP. What, exactly, do we mean when we say “economics”? Most economists know that in Adam Smith’s day, there was no such thing as economics: Smith held chairs in Logic and Moral Philosophy. Malthus famously held the first chair in Political Economy in Britain, but as far as I can tell, it was an obscure French Revolutionary named Vandermonde, and not Jean-Baptiste Say, who was the first to hold such a position in any country. Economics splintered from the other social sciences around the turn of the 20th century, and by Marshall’s time, we taught in departments called by their modern name. But did Marshall and Say and Malthus and the rest mean what we mean when we say “economics”? Do we even know what we mean today, or is economics, as the great Jacob Viner put it, simply the study of what economists do?
Backhouse and Medema began with Smith, and Smith certainly didn’t use the modern definition. In The Wealth of Nations, unsurprisingly, political economy is the art of enriching the nation and sovereign. In the early 19th century, ethical considerations were generally removed from the definition, and political economy was rather seen as dealing with the distribution and sum of wealth, full stop. Mill was closer to the modern definition: he allowed for tracing “the laws [that] arise from the combined operation of mankind for the production of wealth…,” implying a deduction of behavior from general tendencies that looks a lot like the modern economic method. The Austrians sought to focus on exchange, rather than on wealth alone. All of these definitions look fairly macro-focused, however.
Unsurprisingly, the marginalists focused more on the individual. Jevons recounts, in a great turn of phrase, that economics is “the calculus of pleasure and pain,” essentially making economics a branch of psychology. Marshall, no lover of Jevons by any means, nonetheless kept the focus on psychology; his legendary textbook begins by saying that “economics is the study of the ordinary business of life…that part of individual and social action which is most closely connected with the attainment and with the use of the material requisites of wellbeing…on the one side, a study of wealth; and on the other, and more important side, a part of the study of man.”
The real modern definition, though, comes from Lionel Robbins, a professor at that Fabian upstart LSE, adversary of Marshall’s Cambridge. In his Essay on the Nature and Significance of Economic Science (1932), Robbins defines economics as the “the science which studies human behavior as a relationship between ends and scarce means which have alternative uses”; that is, economics studies production and allocation under scarcity. Note that this definition, for example, leaves out any role for ethics and focuses heavily on individual action; the broad social forces of the German Historical School and the sociologists are not included. Robbins’ definition was not immediately accepted: American Institutionalist textbooks kept definitions like “the subject matter of economics is industry, the process by which men get a living.” A group emerging in the 20s and 30s, under Frank Knight, uses much more restrictive definitions than Robbins: they wanted economics to focus and markets and the price system, not human behavior and rationality more generally.
Backhouse and Medema credit the acceptance of Robbins’ definition as a product of the technocratic involvement of economists in World War II. Samuelson’s 1948 1st edition of his textbook just says that economists study What, How and For Whom, but that by the 1970s, even Samuelson was focused more on how individual actions in a market facing scarcity lead to certain results, rather than wartime planning of such results. A number of economists in the 1960s and 1970s, such as Becker, began to define economics in terms of its methodology – individuals maximizing under constraints – rather than in terms of subject matter. Such focus on rational choice theory as the defining characteristic of economics seems necessary to explain so-called academic imperialism, whereby economists have gone on to study politics, games, mechanisms, social forces, etc.
So where does that leave us? Clearly neither of the three modern-looking definitions – allocation under scarcity, rational choice theory, or the study of markets and prices – is altogether accurate. Flip open an AER or Econometrica and you will see very few markets, basically no prices or money, many articles with non-maximizing behavior, and a lot of philosophizing that can’t be called allocation under scarcity except in the most broadly meaningless senses of those words. For example, allocation under scarcity puts far too much emphasis on static allocation and far too little on growth. Perhaps, “Economics is the study of the actions of agents in the social world, and the outcomes of those interactions”? Too broad? Suggestions are gladly taken in the comments for a better definition!
http://www.rau.ro/intranet/JEP/2009/2301/23010221.pdf (Final JEP version. Another great history of economics terms article is David Card’s article on the modern definition on unemployment which appeared in the May P&P issue of the AER: http://emlab.berkeley.edu/~card/papers/origins-of-unemployment.pdf)
I guess the definition must include some reference to incentives. Economics is all about studying incentives and reactions of agents to incentives.
I like using a definition similar to yours: ‘economics is the study of social interaction’ but tbh I think it’s to difficult to define economics in one (or a couple of sentences).
I remember reading somewhere trying to define economics is analogous to trying to define french cuisine, that is, it’s best done through experience (the analogy went something along those lines).
I teach my undergraduates that “economics is the science of choice.”
Any one sentence definition of economics is going to have to be explained further, so the goal should be to find something clear and simple that provides a good framework for further explanation.
I’ve always thought attempts to squeeze fancy terminology like scarce resources, alternative uses, or even opportunity cost into the definition was more obscuring than enlightening. All of those concepts are captured by the fact that what we are interested in is choice (including the incentives influencing those choices and the extended, often unintended consequences of those choices).
I like using the term science because it implies a level of intellectual (and particularly mathematical) rigor that, while it may not be the best description of what Malthus did, is certainly what modern economists aspire to. It encapsulates the mathematical analysis of maximization under constraints, game theoretic analysis, and emphasizes that we should judge theory by the data whenever possible.
“Economics is the study of the actions of agents in the social world, and the outcomes of those interactions”
So economics is sociology now?
There are subject matters that overlap both fields as is the case with other subject matters with psychology, poltical science etc. Generally speaking economists are studying the choices people (indiviually or in aggregate as part of a larger unit) make and the outcomes associated with those choices ie social interaction. Of course socioogy and economics differ considerably methology wise but that’s the trouble with trying to define economics in one sentence.
I’ve always felt that the broad fields of study which the subject of economics covers makes it difficult to define. I came to realise its not about the problem you are studying but the way in which you are thinking about it which differentiates an economist.
I like your article for the brief historical walkthrough. Thank you for that.
in my opinion economics is any way a study of wealth but human should also be very important in it………….