What is Economics?

1
What is Economics?

• What economists do?

2
Economics as Study of Production Distribution

• Study of particular terrains of human activity
• sphere of production/work
• sphere of distribution
• of consumer goods
• of producer goods
• Classical economics focused on work
• unlike Physiocrats (land) merchantilists
  (money)
• Focus on work result of centrality of work in
  capitalist society

3
Centrality of Work - Historically

• Development of Capitalism has involved ever more
  thorough subordination of life to work
• business tries to put more and more people to
  work
• business has extended itself not only
  geographically but also into every sphere of life
• In 18th - 19th Century, central social conflicts
  were around length of working day
• Business expanded, workers resisted, eventually
  forced down, 15hrs to 12 hrs to 10 hrs to 8hrs
• Business response colonization of free time

4

Human Activity

Work
5
Centrality of Work - Today

8 hours
By Day
5 days
By Week
50 weeks
By Year
7ys-
7yrs-
By Life-Cycle
6
Labor Theory of Value

• Given recognition of centrality of work
• Classical economists had LABOR theory of value
• Economics was "Political Economy"
• study of work
• study of socio-political institutions
• study of conflicts over work, distribution, etc.
• But "labor" theory became a liability
• Used by critics of capitalism, so it was abandoned

7
From Labor to Choice

• Mainstream economics abandoned "labor" theory of
  value and redefined itself in terms of "choice"
• This was "neoclassical" revolution
• Economics as "theory of allocation of scarce
  resources among competing ends"
• Two key concepts choice, scarcity
• choice decision making of individuals, firms,
  govt
• scarcity finite

8
Choice

• Microeconomics choices of individuals firms
• Macroeconomics choices of governments, micro
  choices in background
• Choice Theory theory of preference ranking
• A prefered to B
• B prefered to A
• indifferent between A B
• Opportunity Cost

9
Scarcity Opportunity Cost

• Choosing one thing means giving up something
  else, "cost" of choice what is given up
• Production-possibility frontier

guns
A more guns, less butter
B more butter, fewer guns
butter
10
Is Economics a Science?

• From 'Political Economy' to 'Queen of Social
  Science"
• Economics shares hypothetico-deductive method
  with 'hard' sciences
• But pretense of "positive" science is absurd
• choice of subject methods always involves
  values
• even true in 'hard' sciences
• changes in paradigm over time in all fields

11
Critiques of Two Approaches

• Critique of traditional "political economy"
• largely ignored sphere of consumption which with
  reduction in working day has become critical in
  understanding social development
• Critique of economics as choice theory
• largely ignores centrality of work, relegates its
  study to other social sciences
• largely ignores
• 1. forces that shape constraints on choice
• 2. systematic manipulation of 'scarcity'

12
Sphere of Consumption

• Always existed
• Importance grew historically
• with workers' success in reducing working day,
  gaining higher wages, expanding "demand"
• Business colonization of "consumption"
• Some social theorists have argued sphere of
  consumption has displaced work as central
  organizing institution of society
• But much consumption a function of work

13
Conclusion

• Definition of economics not that important
• In terms of understanding the field look at what
  economists DO, policy oriented - managers of
  capitalism
• What matters for you as an individual is
  identifying what is important
• Disciplinary divisions obstacle to
  understanding
• Study what you need to to understand what you
  think is important

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