What Is Economics About?


World map showing countries by nominal GDP per...

Countries by nominal GDP per head in 2008. (Photo credit: Wikipedia)

Economics is the study of the efficient allocation of limited and scarce resources among a society. If all resources were always available in unlimited quantities, much of modern economics would be an unnecessary field of study. However in modern society, all goods, services, technology, production, capital, labor, and natural resources do exist only in finite amounts.

Some natural resources, such as gold to a certain extent, or platinum or diamonds to an even greater extent, are so rare that it would be impossible for everyone to posses their desired amount of them. Other less tangible resources such as food, water, clean air, fire, and sunlight aren’t always available in limitless quantities.

The study of economics attempts to find how to allocate natural and man-made resources in such a way that the most efficient possible use is received from all of them. The most common way to allocate resources in the modern era is through monetary compensation for services rendered and a perfectly competitive market based economic system that regulates wages and sales prices according to the market supply and demand trends.

Although we most often associate economics with our current monetary and financial systems, any open exchange of goods or services falls under the umbrella group of economic theory. A popular recent book, Freakonomics, delves deeply into the economics of non-monetary markets and scenarios, and explores other types of efficient resource allocation and trends that manage to work without the traditional form of exchanging currency.

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