What is economics? It’s such a simple yet complicated and multi-faceted question. In order to know what economics is, you must know what an economy is. Thomas Sowell in his book Basic Economics explains, “Perhaps most of us think of an economy as a system for the production and distribution of the goods and services we use in everyday life… [Yet] the Garden of Eden was a system for the production and distribution of goods and services, but it was not an economy, because everything was available in an unlimited abundance. Without scarcity there is no need to economize — and therefore no economics.”
A simple answer to this complex question is to use the classic definition from the British economist Lionel Robbins: “Economics is the study of the use of scarce resources which have alternative uses.”
Then we must ask, what is scarcity? Headlines in recent years discuss the poor “just getting by” (even though American “poor” can be considered “rich” in other countries) with their “budget constraints.” “There has never been enough to satisfy everyone completely,” Sowell says. “That is the real constraint. That is what scarcity means.”
The next key factor in what economics means, is the alternative uses. This concept is fairly simple. Milk can be either used for yogurt or for ice cream or a variety of other things, those are its alternative uses. To which use the resource is needed most is what economics is all about.
Thomas Sowell explains this concept and as many, many other concepts in his book Basic Economics: A Citizen’s Guide to the Economy (revised and expanded edition.) Sowell clearly lays out key issues ranging from inflation, deflation, deficits and anti-trust laws to international trade and the “trickle down” theory. Thomas Sowell leaves no doubt in his belief in the free market and price-coordinated economies.
Rather than a few “knowledgeable” people deciding where resources ought and ought not to be used, allowing the market to be free is “like water reaching its own level.” The USSR put a board of bureaucrats in charge of the economy, resulting in one of the most inefficient and stagnant economies ever to exist. Managed economies have been tried on large scales and small, and they continue to fail. Free markets unleashes the power of every citizen in the nation, who can all manage they’re own area of the economy better than any politician.
If your wanting to cut through the web of words in the search of truth instead of emotional concepts that appear legitimate on the surface, Basic Economics is for you. As Sowell puts it, “While economics offers many insights and makes it easier to see through some popular notions that sound good but will not stand up to scrutiny, economics has also acquired the name ‘the dismal science’ because it pours cold water on many otherwise attractive and exciting — but fallacious — notions about how the world can be arranged.”
I highly recommend this book to anyone who is looking for a clear understanding of how economics and society operates from an objective point of view. Basic Economics ought to be a prerequisite to voting.