William J. Polley

I think Adam Smith and Friedrich Hayek got it right. Economics should be understood first in terms of the empirical explanatory problems it has developed over time -- overall undesigned order in the economy and poorly understood disruptions of economic order with otherwise mysterious causes. The logic of marginal valuation and the empirical force of entrepreneurial learning help us to perceive and explain these patterns. The important point here is that the logic of marginal valuation and the study of choice behavior only have significance as "economics" (rather than pure logic or psychology) within the context of real empirical problems -- and these are inadequate to fully explain economic order without the additional causal factor of entrepreneurial learning in the context of changing prices and local knowledge.

The idea that economics is simply the "science" or "theory" of choice with "unintended consequences" tacked on is a fallacy.

L. Robbins all the way:

"Economics is the science which studies human behavior as a relationship between given ends and scarce means which have alternative uses."

The issue with scarcity goes away if we have a clear definition for it but if someone insists, he can safely take it out from that definition... he'll use it anyway implicitly or explicitly when dealing with most topics.

I dislike the attempt of some people to push "activist" definitions, where economics is about "doing good". Is it a science or not? If so, it's not morality. In any case, it's not "doing good" more than physics and you don't see physicists adding "doing good" in their definition, do you?

Let me suggest again that Robbins misled everybody with his famous definition -- as Hayek and Smith make clear, economics studies unexplained patterns of social order in our experience, it doesn't simply study the logic of valuation, nor does it give us a psychology of human behavior. I.e. economics is NOT a "science" of human behavior or choice, it's an explanatory project -- an explanatory project which requires patterns of empirical order (and disorder!) to get off the ground. There have been different explanatory strategies to address these empirical patterns -- the most powerful of these have made use of the logic of marginal valuation. But there are other strategies within "economics" which use other techniques -- and most economists are not very talented when it comes to making clear what strategies they are using, or at providing reasons for believing that they have provided us with genuine causal knowledge.

In their defense, I would say that the definition of Heyne, et al. is truer to Hayek's principles than most other textbooks out there. One thing does seem clear. It is difficult to reduce economics to a one sentence definition.

Still, in an introductory course it is necessary to do so. (Some people might even think that my definition is too long.) But even though you try to reduce it to a sentence, you can still provide the necessary context in a lecture (or in the textbook, if you are the author). As a trivial example, I often use the example of gasoline prices after a hurricane as a case where search costs and information matter at least as much as the logic of marginal analysis. In my definition, the emphasis on markets and government allows me to talk about the use of the law to limit market transactions that people would otherwise voluntarily make. I think I'm closer to your kind of definition than I am to a lot of textbooks out there.

PrestoPundit,

You will notice that my definition says "study of" rather than "science of". That was deliberate.

Gabriel,

I think it is a fallacy to argue that ethics can be totally separated from economics (cf. Frank Knight--quite the contrary of what Robbins argued). See this paper, for example: http://www.mises.org/reasonpapers/pdf/10/rp_10_1.pdf

Can you talk about property rights or liberty in an ethics-free environment? I don't think so. Economics was born out of a tradition of moral philosophy. Unfortunately most students don't ever read the literature of that tradition--what with all the epsilons and deltas.

Don't misunderstand. I certainly do not oppose mathematical formalism in economics. I practice it. But I would certainly not argue that economics should focus entirely on mathematical formalism to the exclusion of everything else. Even Robert Lucas once wrote concerning economic growth, "The consequences for human welfare involved in questions like these are simply staggering: Once one starts to think about them, it is hard to think of anything else."

Now, does that mean that you have to advocate every government intervention that comes down the pike claiming to improve standards of living? Of course not. In fact, it would be perfectly reasonable in this framework to claim that many ill-conceived interventions will make things worse from both a positive and normative point of view. But tell me why you would study growth if you didn't have some kind of normative concept in mind.

The fact that I believe that the world would be a better place if poverty was reduced is what drives me to understand (through models with epsilons and deltas) why things are as they are, and how they might be made better.

That is a good discussion to have, but requires a lot of context before you can turn it into a definition of economics.

I think I can talk of property rights and liberty in a positive manner. Of course, it's not easy. I certainly wouldn't claim that.

Economics does share, with (some) moral philosophy, a common ancestor in British utilitarianism (and empiricism?). But this is a hard legacy I'd rather work hard to exorcise, rather than embrace.

You shouldn't misunderstand me either. I never said anything about formalism. My point was that the focus should be on parsimonious theory and competing hypotheses testing. -- Let's build an array of empirical regularities for which we have good theoretical explanations! This is our job. That moral philosophers, politicians and common men may benefit from this knowledge, or misuse it, that's a separate issue.

R. Lucas said much "heavier" things than that, including very positive remarks about the welfare state. That's why he's my favorite economist but hardly my favorite political thinker.

Of course, people are motivated to do Economics because of different reasons: many, like you or me, because of a desire to improve society, others see it as an outlet for their mathematical virtuosity, others for other reasons. That being said, this is not a proof that value-free economic theory is impossible.

A strict separation of positive and normative concerns is important from the point of view of intellectual honesty, first and foremost, and secondly, it stops the profession from imploding into moralistic accusations, a politicizing free-for-all.

Bill, I would agree that you have a good working definition of economics from the point of view of teaching. You're trying to point students toward good explanatory practices and get them engaged in a grand tradition of those "best practices" in the discipline. Sometimes it's easy to forget what the point of providing a definition might be, esp. when one comes out of the Platonic tradition (i.e. philosophy).

Gabriel,

I am certainly not opposed to distinguishing between positive and normative as it is a very pragmatic approach to the practice of economics. However, I do not wish to banish the normative, ignore ethics, or remove the long heritage of moral philosophy from the discourse.

Acknowledging normative issues need not lead us into a political free-for-all. Being careful about the differences can inform both positive and normative inquiry.

Without endorsing all of Frank Knight's views on these subjects, I do find myself in sympathy with a number of his opinions on methodology, the importance of ethics, and so on. The paper I cited in a previous comment summarizes it quite well.

I keep saying that the foundation of economics is the Law of Scarcity and now Mandel says forgot all of that. Therein lies my problem with most of his writing. But OK, we talk about people's choices. But why do I have to choice. Ah, scarcity. It's called Constrained Optimization. Of course, some free lunch types (Lawrence Kudlow, Thomas Sowell when he discusses macroeconomics, and yes - Michael Mandel) want us to ignore the constrained. Fine - I choose to consume more of everything. I guess now George W. Bush can hire me as his next head of the CEA!

Allocating scarce resources requires choices is exactly right. And if there were no scarcity (aka no constraint to utility optimization) then the term choice loses its meaning. The reason I went off as to Mandel's post is that many of his posts on fiscal policy assumes there is indeed a free lunch.

Bill, I like your definition. Prestopundit's arguments also resonate for me. I'm still thinking about whether having the normative imperative in the definition is useful.

I think that that standard of living has gone way up since 1990. With technology improves greatly and quicker every day, it is no surprise. Since 1990, there are now thousands of businesses in which run soley on the internet. With technology also comes much better medicine practices. Lastly, with the minimum wage going up, I think that shows are standard of living has gone up.

I wound up on this site after searching for an answer to the same question. I am a philosophy professor, and weekend economics warrior. I came across a textbook that is being used by a colleague in the economics department that claimed, as many here are, that economics is a “science” that deals with allocating scarce resources in the face of the unlimited desires of individuals.

That definition seems to me to be both limiting and implicitly value-laden; or, as one respondent would say, “normative.” At any rate, a definition like that would end any argument over the question concerning whether economics is or is not a “science.”

First, if you are limiting economics to only situations of scarcity then economists would have nothing to say about overproduction, including oversaturated markets, and that seems intuitively ridiculous. It is simply not the case that in the face of overproduction we would find other things than what is intended with that commodity; rather, in a capitalist economy that becomes one of many potential factors in an economic downturn. In the past when this occurs politics has entered into the picture, and often times some way of eliminating, or destroying, the excess is carried out to re(in)force scarcity. The reason is to prop up profit making. It seems to me that economists should have something to say about this phenomenon, no?

It seems to me that the definition in question is confusing economics in general with one possible form of economics: market capitalism. In a market capitalist economy profit making occurs relative to demand, which is another word for scarcity.

Second, the assumption that all economies are predicated on "individual choice" among human beings who have unlimited desires seems to me to be projecting a Western ethic and the symptoms of an obsessive-compulsive neurosis onto our entire race. If such a being exists at all it would have to be someone who is being targeted by Western advertising and then interpolating the desires of the ideal consumer from that particular medium. 1. Some econonomies are still predicated primarily, and all to some degree, on communal decisions. 2. Am I the only human being on the face of the earth who feels pretty satisfied with what I have?

Thanks for your patience folks.

KL

Keith,

Sorry about the delay. Comments on very old entries are moderated. This might be worth revisiting in a new post.

Bill