The classical definition of economics is outdated due to the introduction of the economics of abundance. I argue for and present a new definition in this article.
In the current edition of Greg Mankiw’s Principals of Macroeconomics, which is arguably the most widely used textbook on Economics in the United States, Economics is defined as, “the study of how society manages its scarce resources.” This definition is the premier definition of economics, in line with the most famous of definitions given by Lionel Robbins in 1932, “Economics is a science which studies human behaviour as a relationship between ends and scarce means which have alternative uses.”
These classic definitions are not accurate definitions. They do not reflect how economics is done, nor how it should be done, although they do characterize the classical approach very well.
That definition has two components; society and scarcity. This is true to the origin of the study of economics, but not true to modern economics. According to Wikipedia:
The earlier term for ‘economics’ was political economy. It is adapted from the French Mercantilist usage of économie politique, which extended economy from the ancient Greek term for household management to the national realm as public administration of the affairs of state.
Keep in mind that I am not citing Wikipedia as an authoritative source. Rather, this is my view and it was well put by Wikipedia.
In short, the study of economics originated with the Greeks as the study of the management of the household. It became the study of the state under the French. This study was later broken into more specialized political science and modern economics, based on a counter-productive and false dichotomy in my opinion. As early as with the writings of Adam Smith, economists began to focus on the individual. Today, it is entirely mainstream to say that a proper macroeconomics must be built on microfoundations. That is, macroeconomics is the study of the aggregation of microeconomics.
Because macroeconomics and microeconomics collectively encompass all of economics, it is more accurate to say that economics is concerned with the study of the individual than it is to say that economics is the study of society, because if we specify the individual then society is entailed, but if we specify society then the individual is excluded.
Another development in modern economics is the recognition that some things are not scarce. Yet we continue to study them! This is evidence that economics is concerned with the allocation of all resources, finite or otherwise. This field of economics is referred to as the Economics of Abundance, or Post-Scarcity Economics. Here are some articles:
The problem is that post-scarcity economics is absurd by definition if we are using the mainstream definition of economics. It is a contradiction. To reconcile this, we need only to eliminate the concept of scarcity in the definition. Economics today looks at the allocation of all resources, not only scarce resources.
Another complaint is that most economists are not, in fact, concerned with the allocation of resources. This is a Soviet-era mindset, from the time in which economists would plan economies. Economists today generally accept that planned economies don’t work. Economists today are more concerned with understanding why the economy grows My final beef with the mainstream definition of economics is that, after having read the definition, the layperson is left asking, “So what? How is this useful?” I will propose two new definitions. One is a minimal redefinition, and the other is my preferred definition. The preferred redefinition addresses this issue of purpose and mainstream interest.
Definition 1: Economics is the study of the way in which individuals allocate resources.
Definition 2: Economics is a study of the way in which individuals seek to maximize quality of life which emphasizes rational action, efficiency, human nature, and certain assumptions as explanations.