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What is the purpose of economics?

By purpose I mean having a purpose in a similar sense that eating and producing food has a purpose for survival. What does economics produce? How does it help humankind? Is the purpose of economics to help humankind? To what extent?

I assume that there are many views on this, but I'm most concerned about pragmatics. Merely claiming a theoretical viewpoint (e.g. Marxist, Austrian economics, ...) is easy and could be anything, but I'm more concerned about the question: how is economics useful to humans?

Also, if someone thinks this is prone to being opinion-based, then what exactly makes some economic thought non-opinion? I have the view that not all economics is on par with empirical natural science in its verification. For example Ludwig Von Mises has written about economics being "a priori" science, which means "science done without observation". A priori on its own makes me skeptical of economics' usefulness and to perceive it more like armchair philosophy. Still there's more to some economics, some economics is practical.

But I would want to see some more viewpoints on this.

closed as too broad by Joseph Weissman Mar 21 '17 at 0:55

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  • What do you mean with "economics" ? The human activities of exchenge, etc ? or the discipline studying them ? If the frist, the purpose isd the "survival" of society and human being. – Mauro ALLEGRANZA Mar 15 '17 at 6:53
  • @MauroALLEGRANZA The study field. – mavavilj Mar 15 '17 at 7:03
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    Of course, it is part of human sciences: etnology, sociology, etc. We are interested ti study huma behaviour in geenral, and economic activities are part (a fundamental part) of social interactions. – Mauro ALLEGRANZA Mar 15 '17 at 7:11
  • As per the answer below, since the beginning of reflections on human "nature" and societies (see Aristotle) the interest arise regarding the way humans "manage" their social interactions. – Mauro ALLEGRANZA Mar 15 '17 at 7:13
  • The main purpose of economics, is to allow humans to become more efficient users of the Earth's resources. – Guill Mar 22 '17 at 5:13
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Also, if someone thinks this is prone to being opinion-based, then what exactly makes some economic thought non-opinion? I have the view that not all economics is on par with empirical natural science in its verification. For example Ludwig Von Mises has written about economics being "a priori" science, which means "science done without observation".

Mises' position was that we know that people act purposefully in a way that is different from how we know about the motion of electrons. We can only work out the laws governing electrons by observing electrons from the outside. But we can know that human beings act purposefully because we have first hand knowledge that we act purposefully:

http://www.peterleeson.com/Was_Mises_Right.pdf

Economics starts from the fact that human beings act purposefully and explores the consequences of that fact.

A priori on its own makes me skeptical of economics' usefulness and to perceive it more like armchair philosophy. Still there's more to some economics, some economics is practical.

Other economists, especially neoclassical economists, like to act as if there is a quantity called value and people somehow assign this quantity to stuff. And we can draw continuous curves representing the amount of value and do calculus with them. And this allegedly allows us to do all sorts of mathematical tricks to predict and control people.

This is a ludicrous and impractical idea. Any real choice is a choice among alternative courses of action. It consists not of assigning a continuous value but of saying 'I prefer state of affairs X over state of affairs Y and so I will act to bring about X.' There is no continuous quantity, there are no curves. Pretending that such curves exist is 'practical' only as a means of fooling credulous people willing to accept to any old nonsense provided people present it in conjunction with a number that includes a decimal point, e.g. - see the fuss made over values assigned to the Keynesian multiplier. These numbers typically refer to aggregates, like all the socks bought in Washington or whatever. Such aggregates are not particularly useful since there is no particular transaction that is explained in terms of such aggregates. Rather, the price of socks is explained in terms of individual transactions not the other way around. False 'accuracy' and 'precision' is a sign of intellectual and moral bankruptcy, it is not evidence that economics is actually a quantitative science.

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I'm not an economist, but here's how I see it...

Fundamentally, economics arises because of the following:

  1. People want things.
  2. There aren't enough things for everybody to have as much as they want. Therefore:
  3. People have to prioritize their wants.
  4. People have to make decisions in accordance with their priorities.
  5. The decisions of lots of individuals interact with each other in complex ways and create conflicts.
  6. Societies need rules and structures to manage those conflicts.

As to the purpose of studying economics, it can help with 4, by explaining how individuals can make rational decisions.

It can also help with 5, by developing models to explain, for example, how markets work and how prices are affected by supply and demand.

It is also used, more controversially, to try to address point 6. Economists from different schools disagree over what is desirable, what is feasible, what is effective, even over how to define and measure various quantities. But politicians still try to use economic ideas to justify their largely counterproductive meddling in their citizens affairs.

As a subject, I suspect it is overrated, but as you say, it does have some practical value.

  • Do you think economics is necessarily tied to politics? That one cannot consider economics without politics/law. – mavavilj Mar 22 '17 at 5:18
  • I suppose one could study economics independently. But politicians typically campaign on economic issues and make decisions that have a big effect on the economy, so the two are often linked. – Bumble Mar 22 '17 at 16:14
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Putatively attributable to Aristotle (or one of his pupils) the term comes to us from their idea of household management. In this sense, all economics can be said to be home economics (inasmuch as the world is our home.) The purpose of studying the ways and means of managing such a home can be as trivial as studying for the sake of studying. Unstudied, however, it is arguable that the home would not be as hospitable.

In the sense of "wealth and resources of a country" the purpose of economics is in the application of knowledge obtained by studying the production, consumption and distribution of wealth to such concerns of State as policy, taxation, welfare, et cetera. In this sense as well, survival is certainly a purpose economics.

As far as economics seeks to answer questions of how to best manage my home, it can be said to have an ethical purpose.

As far as economics are used as a "science of wealth" it's function can be said to be in service of social engineering.

That said, economics has no purpose - it has no agency. It is simple a field of study.

Per "What is an Institution?" published in the Journal of Institutional Economics:

Economics as a subject matter, unlike physics or chemistry, is largely concerned with institutional facts. Facts about money and interest rates, exchange and employment, corporations and the balance of payments, form the very heart of the subject of economics.

...most of the phenomena we discuss in economics, such as money, financial institutions, corporations, business transactions, and public offerings of stock are all observer relative. One can say that, in general, the natural sciences are concerned with observer independent phenomena and the social sciences with observer relative phenomena. ...

Economists typically believe in models. In my experience in dealing with economists, they often talk about ‘your model’ as if one were not trying to give a factually accurate theory about the real world but to construct a model. And, indeed, of course, in classical economic theory one typically does construct models. One makes a set of assumptions about entrepreneurs trying to maximize profits and consumers trying to maximize utility, for example, and then one deduces certain conclusions. To the extent that the assumptions are true, the conclusions will be substantiated. To the extent that the assumptions are only partly true, or allow for all kinds of exceptions and interferences from outside the assumptions, then the applicability of the model to the real world will be to that extent limited. Economists in general are not worried by these limitations, because they think that as long as the model has important predictive powers, we need not worry about whether or not it is literally true in its details.

This methodological approach can be useful for lots of purposes, but it has impeded understanding of my own views. I am not trying to construct a model; I am trying to advance a theory that states an important set of facts about how society actually works. Just as when I say I have two thumbs, that statement is not a ‘model’ of my anatomy but a literal statement of fact, so when I say institutions generate status functions, that is not a model but, if I am right, it is a true statement of fact. It is not a case of constructing a model that ignores all sorts of complicating details.

Economists, in my experience, typically confuse thought experiments with empirical hypotheses. Here is an example that has come up over and over. I point out that there are desire-independent reasons for action. A classic case of this is promising; when I make a promise to do something, I have a reason for doing it which is independent of my desires. When I point this out, economists often say, ‘Yes, but you have all sorts of prudential reasons why you would keep your promise; if you did not, people would not trust you, etc.’ These are familiar arguments in philosophy, but they miss the point. One way to see that they miss the point is to construct a thought experiment. Subtract the prudential reasons, and ask yourself whether I still have a reason for keeping the promise. The answer is not an empirical hypothesis about how I would behave in a particular situation, rather it is a thought experiment designed to show the conceptual distinction between my prudential reasons for acting and the desire-independent obligation that I recognize when I recognize something as a promise that I have made. The point is that I am not making an empirical prediction about how I would actually behave under certain circumstances, rather I am giving a conceptual analysis where the concept of a prudential reason is a different concept from the concept of a desire-independent reason. The concept of promising, by its very definition, contains the concept of a desire- independent reason. To recognize something as a valid promise is to recognize it as creating an obligation, and such obligations are desire-independent reasons for acting.

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In the beginning of human language, Economics and Ecology were the same thing. A book that will show you this is Hesiod's Works And Days, about 2700 years old. The purpose of this science is to make a living possible for us: we gotta know when to seed and when to sow, hot to combat pests, how to keep the soil fertility, how to fish and hunt, when and how much (if we don't want to destroy the fish and game populations). As anyone can see, the destruction of our environment comes mostly from the separation of Economics from Ecology, as if the former was a structure completely independent from the latter.

One important part of economics is the measure of arable land, the yield of agricultural products and the price of food and drink items. This is of vital importance not only to our life quality, but also to the long-term sustainability of our civilization. Another book that shows how a civilization may destroy itself by ignoring the very basics of Economics/Ecology is Collapse, by Jared Diamond.

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