Definition
Economics is a domain dedicated to how humans intentionally act and the consequences of those actions.
Discussion
Overview
It is common for economics to be thought of as:
- how people use money
- the flow of goods and services within and across countries
- the supply and demand of goods and services in a particular geographical area or market segment.
However, none of these three concepts can be usefully interpreted without a clear understanding of why an individual has, or group of individuals have, chosen to act in a certain way and what the outcomes of that action are.
When we speak of “economics” we are not necessarily focused on money, assets or productivity. We are, rather, referring to the mechanisms and results of people choosing one action over alternatives. It just so happens that the use of money, the provision of services and the production of goods are among the most helpful indicators to make sense of people’s choices and actions.
Economics in law, freedom and peace
Why is economics relevant to Live and Let Live? It all has to do with the Legal Principle and, in particular, the motivations for law and the impacts the law has on people’s freedom.
Legal rules require human action for their production and for their enforcement. Moreover, legal frameworks influence how humans act. This applies to private law, regulation and criminal law. As such, we can better understand the intentions behind the development of legal rules and the results of enforcing legal rules by applying economic principles.
Human-made law is subject to the same rules of economics as any other human activity.
By looking at the choices humans have, and the consequences of acting on those choices, the principles of economics are a vital for understanding how laws impact people’s opportunities to live in any peaceful way they choose.
Economics and intentional actions
Other disciplines also consider human action. While some branches of psychology, for instnace, are also concerned with human decision-making and human behavior, they are distinct from economics becuase they consider more than just intentional action.
Many branches of psychology are concerned with all types of action, including reflexive or subconscious. By contrast, economics focuses on the purposeful choices humans make. Economics concerns the actions people make upon making intentional decisions.
Human action and scarcity
The study of economics becomes particularly relevant when humans make decisions, and act on those decisions, in environments of scarce resources.
A scarce resource is anything of which there is not enough to satisfy all people in any one environment.
This does not mean there is “not very much” of a particular resource. Rather, “scarce” in this context means anything which is less than fully abundant. In other words, even if only one person misses out on the resource, then the resource is scarce.
Scarce resources mean we must choose to give something up in order to obtain them. On earth (in most places) air is not scarce. It is abundant. We do not need to give something up in order to acquire air. Shoes, phones, ice cream, houses, medicine and roads, however, are scarce. While we need only breathe to acquire air, for scarce resources we must do more than make an instinctual action.
Acquiring scarce resources requires us to choose to acquire them.
As such, any law which affects people’s access to or use of scarce resources is directly relevant to economics.
The first lesson of economics is scarcity. There is never enough of anything to satisfy all those who want it. The first lesson in politics is to disregard the first lesson in economics.
— Thomas Sowell, social scientist
Further Resources
- Misesmedia, What is Economics
- Saifedean Ammous, Principles of Economics (The Saif House, 2023)
- Frederic Bastiat, The Law (1850)
- Henry Hazlitt, Economics in One Lesson (1946)
- Thomas J. DiLorenzo, The Politically Incorrect Guide to Economics (Regnery, 2022).