1. Define Applied Economics.

· Applied Economics is the study of economics in relation with real life, real world situations in
conjunction with theoretical ideas. It is used to understand and solve problems in business and
government, rather than just plain-speak ideas. Applied economics is a broader subset of the
overarching social science that is economics – the study of the production and consumption of
goods/services, and analysis of commercial activities and decision making.

· As with all other applied disciplines, Applied Economics is the study of economics in relation
with real life, real world situations in conjunction with theoretical ideas. It is used to understand
and solve problems in business and government, rather than just plain-speak ideas. Applied
economics is a broader subset of the overarching social science that is economics – the study of
the production and consumption of goods/services, and analysis of commercial activities and
decision making. Alternatively, in simple words, it is economic theory that is put into practice, in
a specific setting. It can be at a macroeconomic (aggregate economy) or microeconomic
(individual consumer/firm) level. In a sense, applied economics provide a true and clearer
picture of a business/economic situations so that policy makers and decision makers make the
right choices. Given the nature of the complexity of macroeconomies, applied research is
especially useful in dealing with problems in macroeconomics. With the objective of achieving
potential desired outcomes, economic theories and principles are applied to the situation at
hand. At times, advanced research would involve inter-disciplinary study such as econometrics
as well. In spite of its extensive use of economic principles and theories, Applied Economics by
itself is not a field of economics. Applied economics provides the insights to ensure real world
economic stability. In short an intersection of economic theory, econometrics and real world
business problems gives us applied economics. For example, instead of creating an economic
model to examine performance of government regulation in markets, a researcher can conduct
an actual study to examine the government regulatory performance via data collection and
inferences from key stakeholders.

· The study of observing how economic theory works in practice. Applied economics may be
practiced at the macroeconomic or microeconomic levels. For example, one may conduct a study
examining the performance of a government regulation in a national economy. This would
involve gathering data from real businesses and/or individuals, as opposed to constructing a
model on how such regulation should work. The term originated in the early 20th century.

· Applied economics is a field that applies of economic theories and principles to real-world
situations with the desired aim of predicting potential outcomes. The use of applied economics
is designed to analytically review potential outcomes without the "noise" associated with
explanations that are not backed by numbers. Applied economics can involve the use of
econometrics and case studies.

· Applied economics is the application of economic theory and econometrics in specific settings.
As one of the two sets of fields of economics (the other set being the core),[1] it is typically
 characterized by the application of the core, i.e. economic theory and econometrics, to address
practical issues in a range of fields including demographic economics, labour economics,
business economics, industrial organization, agricultural economics, development economics,
education economics, engineering economics, health economics, monetary economics, public
economics, and economic history. The process often involves a reduction in the level of
abstraction of this core theory. There are a variety of approaches including not only empirical
estimation using econometrics, input-output analysis or simulations but also case studies,
historical analogy and so-called common sense or the "vernacular".[2] This range of approaches
is indicative of what Roger Backhouse and Jeff Biddle argue is the ambiguous nature of the
concept of applied economics. It is a concept with multiple meanings.[3] Among broad
methodological distinctions, one source places it in neither positive nor normative economics
but the art of economics, glossed as "what most economists do".[4]

· Iain Begg and Brian Henry say: “Applied economics is a dark art. A skilled applied economist has
to use the tools of economic theory to articulate question, and to identify and analyse the data
needed to generate convincing answers.”

· Department of Applied Economics Cambridge follows this definition: “Applied economics is

bringing together of economic theory, measurement and methods of statistical and econometric
analysis, and interpretation of such analytical work to elucidate economic phenomena and to
inform economic policy” (Iain Begg, S. G. B. Henry, University of Cambridge)

· N. B. Ghodke says: “Applied economics is concerned with the application of economic principles
in real life in a given set of conditions. It refers to the use of economic theory to examine
practical economic problems or policies and reach conclusions”.

· Michael Eugene Wetzstein says: “Although applied economics is closely related to normative and
positive economics, it belongs to neither category but instead to a third category called the art
of economics.”

· Robert Scott Gassler says: “ It is the mixture of science, experience, ethics and judgment that is
seen necessary in dealing with matters of practical policy. Whereas the best scientists are the
ones who act skeptical even when they are absolutely sure they know the answer, the best
decision-makers are those who act sure of themselves even when they are not sure they have
the faintest idea what is going on.”

· Lars Udehn “Pure economics is the theory of prices and of the allocation of scarce resources, or
social wealth. Applied economics is a theory of industry and the production of wealth.”

· Gary Richard Hawke says: “Applied economics is characterized by the intelligent deployment of
some simple concepts, the understanding of which is not beyond anybody who has mastered
techniques regarded as commonplace by historians”

· Taylor & Francis say: “The primary purpose of Applied Economics is to encourage the application
 of economics analysis to specific problems in both the private and the public sector. It
particularly hopes to foster quantitative studies the results of which promise to be of use in the
practical field and help to bring economic theory nearer the realities of life.”

· Applied economics is the application of economic theory and econometrics in specific settings.
As one of the two sets of fields of economics (the other set being the core), it is typically
characterized by the application of the core, i.e. economic theory and econometrics, to address
practical issues in a range of fields including demographic economics, labour economics,
business economics, industrial organization, agricultural economics, development economics,
education economics, health economics, monetary economics, public economics, and economic
history. The process often involves a reduction in the level of abstraction of this core theory.
There are a variety of approaches including not only empirical estimation using econometrics,
input-output analysis or simulations but also case studies, historical analogy and so-called
common sense or the "vernacular". This range of approaches is indicative of what Roger
Backhouse and Jeff Biddle argue is the ambiguous nature of the concept of applied economics. It
is a concept with multiple meanings. Among broad methodological distinctions, one source
places it in neither positive nor normative economics but the art of economics, glossed as "what
most economists do".

· the study of economics in relation to real situations, rather than the theory of economics

· Employing economic theories in real-world business.

· The application of economic theory and econometrics in specific settings.

· Applied Economics is the study of the applications in economic theory.

· In Applied Economics, most of the work is going to involve directly looking at specific problems
and applying economic theory to solving them. This is evident in things like the economics of
education, resource economics, etc.

· Applied economics is the study of economics in relation to real world situations, as opposed to
the theory of economics. It is the application of economic principles and theories to real
situations, and trying to predict what the outcomes might be.

· applied economics is the study of observing how theories work in practice. Applied economics
may be practiced at macroeconomic (the whole, aggregate economy) or microeconomic
(analyzing individual consumers and companies) levels.

· According to the University of St. Andrews in Scotland: “This (Applied Economics degree)
provides the student with a broader perspective on the application of economic theory to real
world issues but less knowledge of core economic theory.”

· Duke University says Applied Economics is for people seeking a broad understanding of
economics.
 · Applied economics involves utilizing theories from the economics field of study to various
industries, such as business or finance.

· Applied economics is the use of economic theories in areas of business, finance, consulting and
government, among others. Students can find bachelor's and graduate-level degree programs in
applied economics. Graduates of an applied economics program are often prepared for careers
in areas of strategic planning, economic development, financial services and research.

Significance of Applied Economics:

• Forecasting of future events and estimations can be done.

• Applied Economics is a powerful tool to uncover the true perspective of events, irrespective of what
they have been shown out to be.

• It can address practical real life issues in a range of fields as diverse as demographic economics, labour
economics, development economics, health economics, etc.

Economics is a social science seeking to analyze and describe the production, distribution, and
consumption of goods and services.[1] That is, economics studies how individuals and societies seek to
satisfy needs and wants. Alfred Marshall informally described economics as "the study of man in the
ordinary business of life" in the late 19th century; the vast number of topics to which the methods of
economic theory have been applied suggests to some that economics is simply "that which economists
do."

The word "economics" is from the Greek words οἶκος [oikos], meaning "family, household, estate," and
νόμος [nomos], or "custom, law," and hence means "household management" or "management of the
state." An economist is a person using economic concepts and data in the course of employment, or
someone who has earned a university degree in the subject.

Economics has two broad branches: microeconomics, where the unit of analysis is the individual agent,
such as a household or firm, and macroeconomics, where the unit of analysis is an economy as a whole.
Another division of the subject distinguishes positive economics, which seeks to predict and explain
economic phenomena, from normative economics, which orders choices and actions by some criterion;
such orderings necessarily involve subjective value judgments.

Economic reasoning has in recent decades been increasingly applied to social situations where there is
no monetary consideration, such as politics, law, psychology, history, religion, marriage and family life,
and other social interactions.

The approach to economics that is dominant today is usually referred to as mainstream economics. The
more specific definition this approach implies was accurately captured by Lionel Robbins in 1932: "the
science which studies human behaviour as a relation between scarce means having alternative uses."
Scarcity means that available resources are insufficient to satisfy all wants and needs; absent scarcity and
alternative uses of available resources, there is no economic problem. Heterodox economics, including
institutional economics, Marxist economics, socialism, and green economics, sometimes make other
grounding assumptions, such as that economics primarily deals with the exchange of value, and that
labour (human effort) is the source of all value.

Economics is a social science seeking to analyze and describe the production, distribution, and
consumption of goods and services.[1] That is, economics studies how individuals and societies seek to
satisfy needs and wants. Alfred Marshall informally described economics as "the study of man in the
ordinary business of life" in the late 19th century; the vast number of topics to which the methods of
economic theory have been applied suggests to some that economics is simply "that which economists
do."

The word "economics" is from the Greek words οἶκος [oikos], meaning "family, household, estate," and
νόμος [nomos], or "custom, law," and hence means "household management" or "management of the
state." An economist is a person using economic concepts and data in the course of employment, or
someone who has earned a university degree in the subject.

Economics has two broad branches: microeconomics, where the unit of analysis is the individual agent,
such as a household or firm, and macroeconomics, where the unit of analysis is an economy as a whole.
Another division of the subject distinguishes positive economics, which seeks to predict and explain
economic phenomena, from normative economics, which orders choices and actions by some criterion;
such orderings necessarily involve subjective value judgments.

Economic reasoning has in recent decades been increasingly applied to social situations where there is
no monetary consideration, such as politics, law, psychology, history, religion, marriage and family life,
and other social interactions.

The approach to economics that is dominant today is usually referred to as mainstream economics. The
more specific definition this approach implies was accurately captured by Lionel Robbins in 1932: "the
science which studies human behaviour as a relation between scarce means having alternative uses."
Scarcity means that available resources are insufficient to satisfy all wants and needs; absent scarcity and
alternative uses of available resources, there is no economic problem. Heterodox economics, including
institutional economics, Marxist economics, socialism, and green economics, sometimes make other
grounding assumptions, such as that economics primarily deals with the exchange of value, and that
labour (human effort) is the source of all value.

2. Make an essay about, "Economics as a Social Science".

· Everyone recognizes that physics is a science. Everyone also recognizes economics–a “social
science”– is somehow not quite the same as physics in its ability to be science-like. But what is a
science and how is economics different? At first glance, a science is a way of thinking that
emphasizes putting forward basic hypotheses and then doing controlled experiments that are
set up to distinguish in stark relief whether each hypothesis is right or wrong. Clearly economists
cannot usually do controlled experiments in a laboratory. Economists often are stuck with using
historical or cross-country evidence to tease out what might merely suggest a result. Political
 viewpoints and the everyday language used in economics make unbiased statements or
interpretations of results, or the understanding of ideas, imprecise and easily misinterpreted.
Economics is a science in some ways but not others.

At second glance, though, even the most fundamental scientific aspects of physics are more complicated
than the ideal. Real life physics experiments can’t always be set up to test the key hypotheses.
Experimental results in physics are never 100% conclusive and are subject to dispute even centuries after
the fact. The ideal of creating a physics hypothesis before looking at the evidence is often more of an art
than depicted in physics textbooks.

Economics is the study of social behavior guiding in the allocation of scarce resources to meet the
unlimited needs and desires of the individual members of a given society. Economics seeks to
understand how those individuals interact within the social structure to address key questions about the
production and exchange of goods and services.

Economics (/ɛkəˈnɒmɪks, iːkə-/)[1][2][3] is the social science that studies the production, distribution,
and consumption of goods and services.[4] Economics focuses on the behaviour and interactions of
economic agents and how economies work. Microeconomics analyzes basic elements in the economy,
including individual agents and markets, their interactions, and the outcomes of interactions. Individual
agents may include, for example, households, firms, buyers, and sellers. Macroeconomics analyzes the
entire economy (meaning aggregated production, consumption, savings, and investment) and issues
affecting it, including unemployment of resources (labour, capital, and land), inflation, economic growth,
and the public policies that address these issues (monetary, fiscal, and other policies).

Political Economy or Economics is a study of mankind in the ordinary business of life; it examines 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.

Thus it is on the one side a study of wealth; and on the other, and more important side, a part of the
study of man. For man’s character has been moulded by his every-day work, and the material resources
which he thereby procures, more than by any other influence unless it be that of his religious ideals; and
the two great forming agencies of the world’s history have been the religious and the economic. Here
and there the ardour of the military or the artistic spirit has been for a while predominant: but religious
and economic influences have nowhere been displaced from the front rank even for a time; and they
have nearly always been more important than all others put together. Religious motives are more
intense than economic, but their direct action seldom extends over so large a part of life. For the
business by which a person earns his livelihood generally fills his thoughts during by far the greater part
of those hours in which his mind is at its best; during them his character is being formed by the way in
which he uses his faculties in his work, by the thoughts and the feelings which it suggests, and by his
relations to his associates in work, his employers or his employees.

Robbins’ most famous book was An Essay on the Nature and Significance of Economic Science, one of
the best-written prose pieces in economics. That book contains three main thoughts. First is Robbins’
famous all-encompassing definition of economics that is still used to define the subject today:
“Economics is the science which studies human behavior as a relationship between given ends and
scarce means which have alternative uses.”

Alex Rosenberg of Duke University talks with EconTalk host Russ Roberts about the scientific nature of
economics. Rosenberg, a philosopher of science talks about whether economics is a science. He surveys
the changes in economics over the last 25 years–the rise of experimental economics and behavioral
economics–and argues that economics has become more scientific and that economists have become
more aware of flaws in economic theory. But he also argues that economics is unable to make precise
predictions about the effects of various changes in policy and behavior. The conversation closes with a
discussion of the role the philosophy of science can play in the evolution of economics….

Diane Coyle talks with host Russ Roberts about the ideas in her new book, The Soulful Science: What
Economists Really Do and Why it Matters. The discussions starts with the issue of growth–measurement
issues and what economists have learned and have yet to learn about why some nations grow faster
than others and some don’t grow at all. Subsequent topics include happiness research, the politics and
economics of inequality, the role of math in economics, and policy areas where economics has made the
greatest contribution….

David Henderson, editor of the Concise Encyclopedia of Economics and a research fellow at Stanford’s
Hoover Institution, talks with EconTalk host Russ Roberts about when and why economists disagree.
Harry Truman longed for a one-armed economist, one willing to go out on a limb and take an
unequivocal position without adding “on the other hand…”. Truman’s view is often reflected in the
public’s view that economic knowledge is inherently ambiguous and that economists never agree on
anything. Henderson claims that this view is wrong–that there is substantial agreement among
economists on many scientific questions–while Roberts wonders whether this consensus is getting a bit
frayed around the edges. The conversation highlights the challenges the everyday person faces in trying
to know when and what to believe when economists take policy positions based on research. Is it biased
or science?

Chris Freiman, a philosophy professor at the College of William and Mary, describes the phenomenon of
“confirmation bias”: how people look for evidence to confirm their existing beliefs. He shows how
confirmation bias plays an important role in citizens’ voting decisions.

Vernon Smith, Professor of Economics at George Mason University and the 2002 Nobel Laureate in
Economics, talks about experimental economics, markets, risk, behavioral economics and the evolution
of his career….

Emanuel Derman of Columbia University and author of Models. Behaving. Badly talks with EconTalk host
Russ Roberts about theories and models, and the elusive nature of truth in the sciences and social
sciences. Derman, a former physicist and Goldman Sachs quant [quantitative analyst], contrasts the
search for truth in the sciences with the search for truth in finance and economics. He critiques attempts
to make finance more scientific and applies those insights to the financial crisis. The conversation closes
with a discussion of career advice for those aspiring to work in quantitative finance….
David Weinberger of Harvard University’s Berkman Center for Internet & Society and author of Too Big to
Know, talks with EconTalk host Russ Roberts about the ideas in the book–how knowledge and data and
our understanding of the world around us are being changed by the internet. Weinberger discusses
knowledge and how it is attained have changed over time, particularly with the advent of the internet.
He argues the internet has dispersed the power of authority and expertise. And he discusses whether
the internet is making us smarter or stupider, and the costs and benefits of being able to tailor
information to one’s own interests and biases.

Ed Yong, science writer and blogger at “Not Exactly Rocket Science” at Discover Magazine, talks with
EconTalk host Russ Roberts about the challenges of science and science journalism. Yong was recently
entangled in a controversy over the failure of researchers to replicate a highly-cited and influential
psychology study. He discusses the issues behind the failed replication and the problem of replication in
general in other fields, arguing that replication is under-appreciated and little rewarded. After a
discussion of the incentives facing scientists, the conversation turns to the challenges facing science
journalists when work that is peer-reviewed may still not be reliable.

Ed Leamer, of UCLA and author of Macroeconomic Patterns and Stories, talks with EconTalk host Russ
Roberts about how we should use patterns in macroeconomic data and stories about those patterns to
improve our understanding of the economy. Leamer argues that economics is not a science, but rather a
way of thinking, and that economic models are neither true nor false, but either useful or not useful. He
discusses various patterns in the recessions and recoveries in the United States since 1950. The
conversation closes with a discussion of the reliability of econometric analysis….

It is with a view to put you on your guard against prejudices thus created, (and you will meet probably
with many instances of persons influenced by them,) that I have stated my objections to the name of
Political-Economy. It is now, I conceive, too late to think of changing it. A. Smith, indeed, has designated
his work a treatise on the “Wealth of Nations;” but this supplies a name only for the subject-matter, not
for the science itself. The name I should have preferred as the most descriptive, and on the whole least
objectionable, is that of CATALLACTICS, or the “Science of Exchanges.”…

Everyone knows that economics is the dismal science. And almost everyone knows that it was given this
description by Thomas Carlyle, who was inspired to coin the phrase by T. R. Malthus’s gloomy prediction
that population would always grow faster than food, dooming mankind to unending poverty and
hardship.

While this story is well-known, it is also wrong, so wrong that it is hard to imagine a story that is farther
from the truth. At the most trivial level, Carlyle’s target was not Malthus, but economists such as John
Stuart Mill, who argued that it was institutions, not race, that explained why some nations were rich and
others poor….

Nobel Laureate Vernon Smith of Chapman University and George Mason University talks with EconTalk
host Russ Roberts about the ideas in his new book, Rationality in Economics: Constructivist and
Ecological Forms. They discuss the social and human sides of exchange, the robust nature of equilibrium
in experiments and the real world, the seeming contradiction between Adam Smith’s two great works,
the unpredictability of how innovation emerges and its rationality, what neuroscience might tell us about
economic decision-making, and the challenges of small-group intimate exchange and our interactions
with strangers in the extended order of the marketplace….

Jim Manzi, author of Uncontrolled, talks with EconTalk host Russ Roberts about the reliability of science
and the ideas in his book. Manzi argues that unlike science, which can produce useful results using
controlled experiments, social science typically involves complex systems where system-wide
experiments are rare and statistical tools are limited in their ability to isolate causal relations. Because of
the complexity of social environments, even narrow experiments are unlikely to have the wide
application that can be found in the laws uncovered by experiments in the physical sciences. Manzi
advocates a trial-and-error approach using randomized field trials to verify the usefulness of many policy
proposals. And he argues for humility and lowered expectations when it comes to understanding causal
effects in social settings related to public policy.

Brian Nosek of the University of Virginia talks with EconTalk host Russ Roberts about how incentives in
academic life create a tension between truth-seeking and professional advancement. Nosek argues that
these incentives create a subconscious bias toward making research decisions in favor of novel results
that may not be true, particularly in empirical and experimental work in the social sciences. In the
second half of the conversation, Nosek details some practical innovations occurring in the field of
psychology, to replicate established results and to publicize unpublished results that are not sufficiently
exciting to merit publication but that nevertheless advance understanding and knowledge. These include
the Open Science Framework and PsychFileDrawer.

he term economics is derived from economic science, and the word economic is perhaps shortened from
economical or derived from the French word économique or directly from the Latin word oeconomicus
"of domestic economy". This in turn comes from the Ancient Greek οἰκονομικός (oikonomikos),
"practiced in the management of a household or family" and therefore "frugal, thrifty", which in turn
comes from οἰκονομία (oikonomia) "household management" which in turn comes from οἶκος (oikos
"house") and νόμος (nomos, "custom" or "law").

^ Compare with Nicholas Barr (2004), whose list of market failures is melded with failures of economic
assumptions, which are (1) producers as price takers (i.e. presence of oligopoly or monopoly; but why is
this not a product of the following?) (2) equal power of consumers (what labour lawyers call an
imbalance of bargaining power) (3) complete markets (4) public goods (5) external effects (i.e.
externalities?) (6) increasing returns to scale (i.e. practical monopoly) (7) perfect information (in The
Economics of the Welfare State.

This science indicates the cases in which commerce is truly productive, where whatever is gained by one
is lost by another, and where it is profitable to all; it also teaches us to appreciate its several processes,
but simply in their results, at which it stops. Besides this knowledge, the merchant must also understand
the processes of his art. He must be acquainted with the commodities in which he deals, their qualities
and defects, the countries from which they are derived, their markets, the means of their transportation,
the values to be given for them in exchange, and the method of keeping accounts. The same remark is
applicable to the agriculturist, to the manufacturer, and to the practical man of business; to acquire a
thorough knowledge of the causes and consequences of each phenomenon, the study of political
economy is essentially necessary to them all; and to become expert in his particular pursuit, each one
must add thereto a knowledge of its processes."

· If we look around, we see the farmer tilling his field, the workman working in the factory, the
clerk at his desk, the doctor attending to his pleats, the teacher teaching his students, and so on.
They are all engaged in what is called economic activity. They earn money to satisfy their wants.
It is with this part of man’s life that Economics deals.We may say that when a man is engaged in
an economic activity he is busy earning money. But he does not want money for its own sake. He
needs it to buy things which satisfy his wants. The purpose of all economic activity is the desire
to purchase goods to satisfy human wants. Neither good nor money is an end in itself. They are
needed for the satisfaction of human wants and to promote human welfare.A man wants food,
clothes and shelter. To get these things he must have money. For getting money, lie must work or
make an effort. Effort leads to satisfaction.

We have seen that Economics studies human beings. But it does not study them as isolated individuals
living aloof in jungles or in mountain caves. Rather, it studies man living in organized society, exchanging
his goods for those of others, influencing them by his actions and being influenced by them in turn. He
depends on them, and they on him. Economics is thus a social science and not one dealing with
individual isolated human beings. Interest has now almost completely shifted to the economy as a
whole, how it grows and develops, the factors that hinder its growth and the measures that would help
or accelerate it.

A positive science explains the ‘why’ and ‘wherefore’ of things, i.e., their causes and effects. A normative
science, on the other hand, discusses the Tightness or wrongness of things. Economists hold different
views on this point. Some economists think that Economics is only a positive science and as such explains
why things are as they are. It is neutral as regards ends. Others think that it is a normative science and
tells us as the things ought to be.

Our view is that Economics is both a positive and a normative science. It not only tells us why certain
things happen, it also says whether it is the right thing to happen. For example, we know that a few
people in the world are very rich while the masses are very poor.. Economics should explain not only the
causes of this unequal distribution of wealth, but it should also say whether this is good or bad. It might
well say that wealth ought to be fairly distributed. Further, it should suggest the methods of doing it.

A Science or an Art?

When a student joins a college, he has to choose between two groups of subjects—Science subjects and
Arts subjects. In the former group are included Physics, Chemistry, and Biology, and in the latter History,
Civics, Economics, Philosophy, Sanskrit, etc. According to this classification, Economics falls in the Arts
group. But this is not a sound classification, and does not help us in deciding whether Economics is a
science or an art.
Let us first understand what the terms “science” and “art” really mean. A science is a systematized body
of knowledge. A branch of knowledge becomes systematized when relevant facts have been collected
and analyzed in a manner that we can “trace the effects back to their causes and project causes forward
to their effects.” Then it is called a science.

In other words, when laws have been discovered explaining facts, it becomes a science. Facts are like
beads. But mere beads do not make a necklace. When a thread runs through the beads, it becomes a
necklace. The laws or general principles are like this thread and govern the facts of that science. A
science lays down general principles which help to explain things and guide us.

The knowledge of Economics has advanced a great deal. It has reached a stage when its facts have been
collected and carefully analysed, and ‘laws’ or general principles explaining facts have been laid down.
Thus, the study of Economics has become so thoroughly systematized that it is entitled to be called a
science. But Economics is also an art. An ‘art’ lays down precepts or formulae to guide people who want
to achieve a certain aim. The aim might be the removal of poverty from a country, or the production of
more wheat from an acre of land.

Many English economists consider that Economics is a pure science and not an art. They claim that its
function is merely to explore and explain and not to help in the solution of practical problems. Yet many
others are of the opinion that Economics is also an art. Economics does undoubtedly help us in solving
many practical problems of the day. It is not a mere theory; it has great practical use. It is both light-
giving and fruit-bearing. Hence, Economics is both a science and an art.

thics is a science of what ought to be. It tells us whether a thing is right or wrong. Now ethical or moral
considerations govern all economic activity. The economist cannot justify immoral activities. Some
modern, economists (e.g., Robbins), however, think that Economics is a pure science arid as such it is not
concerned with right or wrong. It is said to concern itself merely with means, and ends lie outside its
scope. It is regarded as neutral as regards ends. The ends may be good or the ends may be bad,
Economics is not concerned.

But our view is that Economics cannot be dissociated from Ethics. Ethics is indeed a handmaid of
Economics. The economists are being called upon more and more to give their advice in economic
affairs, and they should not shirk this task. That is why it is said that Economics is both a positive science
and a normative science.

We may, then, sum up the scope of Economics by saying that it studies ran’s actions in relation to wealth
from the social point of view. It does not merely explore and explain but it also advocates and condemns.
It not only investigates facts and discovers truths, but it also prescribes rules of life and passes judgment
as to what is right and what is wrong. It is also both an art and a science. The scope of Economics is very
wide indeed.

Economics has relation with almost all other sciences. All sciences have been developed by man for the
benefit of mankind. As a science, which is primarily concerned with man’s welfare, Economics freely
makes use of the other sciences in its study. It uses, in its own reasoning, the conclusions at which the
other sciences may have reached. But its relation with social sciences like Politics, History and Ethics is
the closest. Let us consider this relationship.

· Is economics a science?Edit

One of the marks of a science is the use of the scientific method and the ability to establish hypothesis
and make predictions which can then be tested with data. Unlike natural scientists and in a way similar
to what happens in other social sciences, economists are generally unable to test their theories due to
its impracticality. Unlike the natural sciences, economics yields no natural laws or universal constants, so
this has led some critics to argue that economics is not a science, or at best, is just a soft science. [8]
Economists in general reply that while this aspect presents serious difficulties, they in fact do test their
hypothesis using statistical methods such as econometrics, using the data generated in the real world.
[9] The field of experimental economics has also seen efforts to test at least some predictions of
economic theories in a simulated laboratory setting – an endeavour which earned Vernon Smith the
Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel in 2002.

Economics is a social science, and, unlike the physical sciences, cannot engage in controlled
experimentation to demonstrate how variables are connected.

In the real world, economic variables such as price and income, are constantly changing, and this
creates a problem in demonstrating the relationship between variables. For example, a fall in price is
likely to lead to a rise in consumer demand if we assume nothing else changes.

Of course, for independent reasons, income could also fall while demand does not rise. The fall in price
could have been counteracted by a fall in income. The ceteris paribus rule, that all other things remain
the same, is used whenever attempting to demonstrate the link between economic variables.

Economics is the scientific study of the ownership, use, and exchange of scarce resources - often
shortened to the science of scarcity. Economics is regarded as a social science because it uses scientific
methods to build theories that can help explain the behaviour of individuals, groups and organisations.
Economics attempts to explain economic behaviour, which arises when scarce resources are exchanged.

As the social sciences have evolved over the last 100 years, they have become increasingly specialised.
This is true for economics, as witnessed by the development of many different strands of investigation
including micro and macro economics, pure and applied economics, and industrial and financial
economics.

· Economics is the study of the production, distribution, and consumption of wealth in human
society, but this perspective is only one among many different definitions. Economics is also the
study of people (as consumers) making choices about which products and goods to buy.

Indiana University says that economics is a social science that studies human behavior. It has a unique
method for analyzing and predicting individual behavior as well as the effects of institutions such as firms
and governments, clubs, and even religions.
Economics is the study of choices. Though some believe that economics is driven purely by money or
capital, the choice is much more expansive. If the study of economics is the study of how people choose
to use their resources, analysts must also consider all of their possible resources, of which money is but
one.

In practice, resources can encompass everything from time to knowledge and property to tools. As such,
economics helps illustrate how people interact within the market to realize their diverse goals.

Beyond defining what these resources are, the concept of scarcity is also an important consideration.
These resources—no matter how broad the category—are limited, which is the source of tension in the
choices people and society make: Their decisions are a result of the constant tug of war between
unlimited wants and desires and limited resources.

Economists often perform experiments and use scientific tools for crafting analyses. However, much of
the attention paid to economics focuses on its non-scientific aspects.

At its core, the field of economics tries to uncover basic universal facts. Like many sciences, economics
has a strong foundation in mathematics, and it is developed by testing hypotheses. In many ways,
economics can be viewed as a field of applied psychology. Understanding how humans behave in certain
situations and respond to changes is essential for the field's development.

Unlike the so-called "hard sciences," however, many economic hypotheses are difficult to test. Economic
systems are run by governments, and it is immoral to cause economic harm to individuals and
populations. With its strong mathematical foundation and its reliance on human behavior, economics
straddles the gap between more basic types of science and so-called "soft sciences" such as
anthropology and sociology.

· In the media and in politics, however, the scientific aspects of the field are often ignored.
Politicians might discuss the morality of different economic policies, and they might make
promises based on faulty economic premises. Because economic policies have such a dramatic
effect on the lives of voters, politicians spend a considerable amount of time developing a
message that influences voters.

In general terms, economics is a social science that studies the behaviour patterns of human beings. The
basic function of economics is to study how individuals, households, organizations, and nations utilize
their limited resources to achieve maximum profit. The study of economics is divided into two parts,
namely microeconomics and macroeconomics. Microeconomics is a branch of economics that examines
the market behavior of individual consumers and organizations.

It focuses on the demand and supply, pricing, and output of individual organizations. On the other hand,
macroeconomics analyzes the economy as a whole. It deals with issues related to national income,
employment pattern, inflation, recession, and economic growth. With the advent of globalization there
is a rapid increase in complexities in business decision making. Therefore, it is important for
organizations to have a clear understanding of different economic concepts, theories, and tools.
i. Economics as a Science:

Refers to the scientific nature of economics. Some economists believed that in economics, a problem is
solved by adopting a scientific approach, which involves collecting and analyzing data and making related
laws and theories For example, various economists examined the concept of employment and framed
relevant theories, such as Say’s law, Pigou’s modifications, and Keynes theory of employment.

Economics is considered as a science because there are similarities between the problem solving process
of economics and science. Apart from this, there is another controversial issue related to whether
economics is a positive or normative science.

Positive science refers to the science that deals with the question of what is, while the normative science
deals with the question of what it should be. Positive science is the description of a concept whether it is
right or wrong. On the other hand, normative science is the evaluation of a concept. After a very detailed
analysis, it is decided that economics is a positive as well as normative science.

ii. Economics as a Social Science:

Implies that economics is a study of behavior patterns of human beings. The basic function of economics
is to study how individuals, households, organizations, and nations utilize their limited resources to
achieve maximum profit. This function of economics is termed as maximizing behavior or optimizing
behavior. In economics, optimizing behavior refers to selecting the most profitable alternative from the
available alternatives.

Therefore, it can be said that economics is a social science that aims at studying human behavior with
respect to optimal allocation of available resources to achieve maximum profit. For example, economics
covers how individuals allocate their resources (income) to purchase different goods and services, so
that they can achieve maximum satisfaction.

In addition, economics also studies how organizations make their decisions regarding selection of a
product to be produced, production technique, plant location, and price of the product. Apart from this,
economics also covers how nations utilize their resources to fulfill the needs of the society so that
economic welfare can be maximized.

3. How can you address the basic economic problems in our country?
Economics teaches us many interesting and instructive facts about man’s behaviour when he is engaged
in economic activity. The inner working of his mind in economic matters is revealed to us. We come to
understand the various motives which guide men in economic affairs. It is both a fascinating and a
fruitful study.

Mental Training:

Economic reasoning trains our mind as reasoning does in other sciences: It enables us to think clearly
and judge correctly and thus affords useful mental exercise. A careful student of Economics can easily
see through the game of politicians who want to deceive the general public. He will not be misled by
cheap newspaper propaganda. No doubt, “Economics is no philosopher’s stone to turn everything it
touches into gold, but it will help at least to distinguish gold from baser metals.”

Understanding Functioning of the Economic System:

The study of Economics helps us to understand how the complicated economic system of today
functions almost automatically without any central control. Every economic disturbance somehow tends
to smoothen itself out. For example, if there is a shortage of a commodity, its price will rise. This will cut
down unnecessary demand so that the demand will be brought down to the level of supply. This is how
economic system adjusts itself in all spheres.

Teaches Mutual Dependence:

Economics teaches us the important lesson of the mutual dependence of man on man. We come to
realize how we depend on others for the satisfaction of our wants, and how others depend on us. It
clearly brings home to us the bond that binds worker to worker, industry to industry and country to
country. This knowledge adds to our sense of responsibility and understanding, and thus leads to better
work and a happier society.

Useful Citizenship:

The study of Economics makes us useful and intelligent citizens. Most of the problems today are
fundamentally economic in character. It is only Economics that can give us a correct understanding of the
problems of agriculture, industry, trade, transport, etc.

Economics enables us to shape and mould the State policies for solving these problems. A student of
Economics can easily understand questions relating to taxation, currency, exchange, etc. Thus, it is clear
that the study of Economics goes to build up a body of keen, intelligent and useful citizens. The
knowledge of Economics enables everyone to perform one’s duties more intelligently and, therefore,
more efficiently.

Practical Importance:

Besides the knowledge that Economics gives us, it has a great practical value in life. Economics is a
science which is closely related to life. In most government departments, knowledge of Economics is
found useful and is sometimes considered indispensable.

Professional Value:

The study of Economics is very useful in several professions. It is useful to the banker, to the
businessman, to the agriculturist, and to the industrialist. As a matter of fact, it is useful to all.

Useful for Householders:

A householder will arrange his expenditure much better if he has studied Economics. He can prepare a
family budget and put his household expenditure on a rational basis.

Useful for Labour Leaders:

A labour leader who knows Economics is able to fight for the rights of labour more effectively. He can
understand clearly the conditions of industry. He will, thus, know when to yield a point gracefully and
when to stand firm in the matter of workers’ demands.

Solving Problem of Poverty:

Finally, it is Economics that we look up to for solving the problem of poverty. ‘Economics alone will not
build a millennium; but in that building—(and in whatever preliminary pulling down may be necessary),
it is an essential tool.’ In view of what has been said above, it is clear that the study of Economics is not
only useful in ordinary life, but also serves as an excellent mental discipline.

Importance of Economics for Under-developed Economies:

The study of Economics has a special significance for an under-developed economy. In the backward and
under-developed countries, the major problem is how to remove poverty and unemployment and to
raise living standards. These problems can be solved by accelerating economic development.

The economists have evolved a theory of economic development. From the study of this theory, we can
know the causes which have retarded economic growth and how the process of development can be
initiated and growth accelerated. The theory of economic growth and planning, which is now an
important branch of Economics, furnishes an invaluable guide to the economically backward countries.

Economists all the world over are now taking keen interest in the problems facing the poverty-stricken
and under-developed countries. The result is that the literature on economic growth has enormously
increased. This literature is of immense benefit for the people and the governments of the backward
countries.

Most of them have adopted planning techniques to bring about rapid economic development and raise
living standards of their people so as to catch up with the advanced and affluent nations of the world. A
great deal has already been achieved in this direction.

The ultimate goal of the economist is to predict future behaviour. For example, by using a demand and
supply model and by inputting real data about the housing market, economists can show that even a
small fall in bank lending can trigger behaviour that leads to a significant fall in house prices in the short
run. The ultimate value of an economic model is that it can accurately predict the onset and the effect of
an economic event. The better the model is, the more useful it is in helping economists make
predictions.

Economists assume that economic events and phenomena do not occur at random, but are determined
by underlying and understandable causes. Unlike the pure scientist, economists cannot undertake
controlled experiments, so they must test their models in different ways. Statistical analysis of actual
economic data can provide a flow of information from which to build models and test hypotheses. For
example, by gathering data about changes in house prices it is possible to deduce factors that cause
house prices to go up or down, and by how much. Economists use index numbers to help make
comparisons between countries and over time.

Professional economists apply their skills of description, analysis, model building, and prediction to
generate knowledge and, from this, provide advice to private firms, to governments and other
organisations.

The first function of the economist is to provide information, called economic intelligence, from which
decisions can be made. For firms to survive and succeed, they need to take many decisions, but each
decision carries with it a risk. The professional economist can help reduce such risks by gathering and
analysing economic intelligence. This economic intelligence is only useful when it can be put into an
economic model, and then applied to the decisions that need to be taken.

The second function of the professional economist is to interpret the data that has been gathered and
provide informed advice to firms, organisations, and governments about the likely costs and benefits of
the decisions they make.

In providing advice, the economist will always make an assessment of the other options that could have
been chosen. For example, a large petrol refiner and retailer may be faced with a significant rise in the
costs of crude oil – should it now raise price? After having made an assessment of all the pricing options,
and having taken account of the likely response of rivals, the firm’s chief economist may advise it to hold
price constant – perhaps the least ‘common sense’ answer.

Economists do many things, such as:

· Conduct research

· Monitor economic trends

· Collect and analyze data

· Study, develop, or apply economic theory

Economists hold positions in business, government, and academia. An economist's focus may be on a
particular topic, like inflation or interest rates, or her approach might be broader. Using their
understanding of economic relationships, economists might be employed to advise businesses,
nonprofits, labor unions, or government agencies. Many economists are involved in the practical
application of economic policy, which could include a focus on several areas from finance to labor or
energy to health care.

Some economists are primarily theoreticians and may spend a majority of their days deep in
mathematical models to develop new economic theories and discover new economic relationships.
Others may devote their time equally to research and teaching, holding a position as a professor to
mentor the next generation of economists and economic thinkers.

Economics is concerned with helping individuals and society decide on the optimal allocation of our
limited resources.

Individual Economics

Economics is also important for an individual. For example, every decision we take involves an
opportunity cost - which is more valuable working overtime or having more leisure time?

In recent years, behavioural economics has looked at the diverse range of factors that influence people's
decisions. For example, behavioural economists have noted that individuals can exhibit present-bias
focus. This means placing excess importance on the current time period and making decisions our future
self may regret. This includes over-consumption of demerit goods like alcohol and tobacco and failure to
save for a pension.

In classical economics, we often focus on maximising income and profit. However, this is a limited use of
economics. Economics is also concerned with maximising overall economic welfare (how happy are
people). Therefore economics will help offer choices between increasing output and reducing inequality.

Economics is important for many areas of society. It can help improve living standards and make society
a better place. Economics is like science in that it can be used to improve living standards and also to
make things worse. It partly depends on the priorities of society and what we consider most important.