Economics as a science

ECONOMICS AS A SCIENCE  

Definition of economics

Economics- a social science examining human behavior and practices to efficiently use scarce resources to supply the unlimited needs of man and achieve man’s satisfaction. 

Two kinds of goods:

Economic goods- things that have a value or price. We need money to have these because of our unlimited needs. Ex: Food, clothing, shelter, etc.

&

Free goods- things that have no price. Man gets it free in natural form Ex: Air, water, sunlight.

Microeconomics- studies the small unit of the economy. Tackles individual behavior of consumers, producers, and the market such as products and services.

Macroeconomics- studies the behavior of the entire economy. Focuses on aggregate activities of the government, industry, and households.

The whole operations of the economy are the center of discussion in macroeconomics

ECONOMISTS AND THEIR PRINCIPLES

• Adam Smith

➢Adam Smith- Father of modern economics

Laws /policies 

➢Adam smith made- Laissez Faire also known as the Let Alone Policy- government should not interfere with the activities of man towards the free market but instead concentrate of maintaining peace and order in the country.

➢Wrote “An Inquiry into the Nature and Causes of the Wealth of Nations”

➢ Pointed out the importance of specialization in achieving the industrialization of the economy.

Specialization- concentrating on one particular work according to one’s skill and ability. 

• David Ricardo

➢David Ricardo- Known for his brilliant ideas about the effects of natural resources, like land, in the development of the economy.

Laws /policies 

➢David ricardo made- Law of Diminishing Marginal Returns-  the increasing number of people will drive a man to cultivate even idle lands to support his necessities in life. This will happen due to the depletion of fertile lands.

➢David ricardo also made- Law of Comparative Advantage- a country benefits more in producing the products with less production cost than any country. 

• Thomas Robert Malthus

➢discussed the effects of a rapid increase in population. 

➢ Malthusian theory- if the population increases more rapidly than the supply of food, it can cause famine and will affect the economic activities of man.

Written in his book “An Essay on the Principle of Population”.

• John Maynard Keynes

➢John Maynard Keynes- Father of macroeconomics 

➢Father of Modern Theory of Employment

 Laws /policies 

➢Law of supply and demand- the underlying principle of the neoclassicists, a group where he belonged.

The government plays a significant role in maintaining equilibrium in the economy through public spending and keeping the balance among demand, supply, and market prices.

➢Wrote “General Theory of Employment, Interest, and Money”

• Karl Marx

➢Karl Marx- Father of communism

➢Advocate of communism 

➢shared his principles regarding the cause of poverty in society.

➢believed that poverty of the proletariat/working class is caused by abuse practices of the rich capitalists (bourgeoisie).

➢all industries and other sources of wealth should be nationalized to achieve equality. 

➢wrote “Das Kapital” which contained the teachings of communism

Relationship of Economics and Other Sciences 

Economics deals with people and society which perform a variety of activities to survive. 

1. Sociology- is the science that studies the composition of society, social relationships, and social institutions. The collective actions of people, because of their culture, beliefs, and the implementation of laws, affect the economic activities in the society. Economic conditions affect the actions, relationships, living conditions, and foresight of people in a society. Ex: in the past, the father is expected to provide everything. Time changes culture, and providing for the needs of the family is now a responsibility for both parents. Gender equality helps families and the economy attain progress

The role of the family is vital in economic development.

2. Political science- the study of government structure, functions, responsibilities, and laws is vital because all of these affect and influence our lives and the economy as a whole. Laws on environmental protection, investment, incentives, wages, and implementation of various government projects and social programs are some of the factors that affect the quality of life and the living conditions in of the people. Political issues and debates require an understanding of economics.

3. History- the recorded struggle of and progress made by man from the past to the present. History has brought us important lessons in both local and world economies, and how economic events form our world today. Whatever achievements that the early Filipinos achieved, influenced the modern way of life and economic activities in the economy.

4. Ethics- is about the morals of an individual and doing what is right in life. The morality of man is one of the most important elements in the progress of a country. The knowledge of what is right or wrong in any activity will guide citizens who are the partners of the government in the development of the economy. Individuals become good citizens of the country which is necessary in achieving economic progress of the country.

5. Psychology- the scientific study of the mind and how it influences human behavior.

It is related to economics in such a way that a person should have a positive outlook in life and an open mind when he/she decides to engage in a business venture. They should learn to accept failures when the business climate is not doing well. Therefore, human behavior affects the economic activities of man.

6. Geography- is about the study of the physical features of a country as well as its products and population which affects the economic activities of man. Geography affects the distribution of goods and services when a certain province is located in a far-flung area. In other words, economic activities vary with geography.

7. Chemistry- is focused on the study of the composition of chemicals for the creation of a variety of goods. The creation of and production using new technology including the production of new chemical compounds is essential to be competitive in a global market and economy.

8. Physics- is the study of matter and energy. Technology, invention, and innovation are the outcomes of scientific studies. Through the use of modern technology, the economy is able to sustain and provide for the needs of the people.

9. Biology- is the study of living things like humans, animals, and plants. It is also the study of processes and characteristics of plants and animals. Mention that, agriculture, fisheries, and livestock are themselves significant contributors to economic activities and whose development and existence are founded on the understanding of biology. The development of agriculture is the main source of livelihood for many Filipinos. 

10. Mathematics- is the science of numbers and their operations. Economics is facilitated by the use of numbers, statistics, mathematical equations, formulas, and graphs which are mathematical in nature. You will understand the effects of price increases, wage increases, budgeting, and oil price increases, which are directly related to our daily activities, by the use of concepts and principles in mathematics.

Statistics- is the science of learning from data. It is concerned with the collection, classification, analysis, and interpretation of numerical facts and data to draw inferences. 

• Many economic decisions cannot be made without statistical techniques. 

• Statistics give an idea to producers on the status of their business.

• Economists used statistical data to explain the present condition of the economy.

Economics is always part of the daily activities of people.