What Exactly is the Study of Economics?

Economics—it’s a term we hear all the time. But what does it actually mean?

At its core, economics is a philosophy, a study of human behavior, and a way to understand how we interact with the world around us.

It’s not just about money; it’s about choices, resources, and the systems that govern our lives.

The origins of modern economics trace back to Adam Smith, a philosopher—not a mathematician, not a statistician, but a philosopher—who laid the groundwork in his seminal work The Wealth of Nations in 1776.

Observing the Industrial Revolution, Smith sought to understand human behavior in an economic context. He wasn’t just looking at numbers; he was looking at people—how they consume, produce, and interact.

And from this study of behavior, economics as we know it was born.


Economics: A Study of Behavior and Scarcity

At its heart, economics is a social science, which means it’s about how people interact. While individual behavior might be unpredictable, the behavior of large groups tends to follow patterns. Economists use these patterns to study, predict, and explain economic phenomena.

Here’s the key logic:

  1. The Earth has limited resources.
  2. These resources are used to produce goods and services.
  3. People have infinite wants and needs.


This creates a conflict: finite resources versus infinite desires. And because we can’t have everything we want, resources must be rationed.

That’s where economics steps in—it’s the study of how scarce resources are allocated to meet the boundless wants and needs of people.


The Core Concepts of Economics

To truly grasp economics, you need to know its language. Think of these foundational terms as your entry into a new way of thinking. The five key concepts are:

  1. Goods
    Goods are tangible objects—things you can touch and hold. Think tables, phones, or even a cup of maté (a delicious South American tea). Goods are physical and concrete.
  2. Services
     Unlike goods, services are intangible. They include things like haircuts, motorcycle repairs, or online courses (like this one!). You can’t pick up a service, but it fulfills a need or want just the same.
  3. Wants
     Wants are things we’d like to have but don’t necessarily need for survival. Think televisions, designer clothes, or the latest gadget. Most of what we consume falls into this category.
  4. Needs
     Needs are essential for survival—food, shelter, clothing. These are the basics that every human requires to live.
  5. Resources
    Resources are what we use to produce goods and services. Economists categorize these as the factors of production:
    • Land: Natural resources.
    • Labor: Human effort.
    • Capital: Tools and machinery.
    • Entrepreneurship: The creativity and risk-taking involved in creating something new.


Why it Matters

Economics is about understanding the world—not just the numbers, but the systems and behaviors that drive it.

When you walk into a store and decide what to buy, you’re participating in the economy. When you work, invest, or save, you’re contributing to a larger system.

Economics helps us make sense of these actions, individually and collectively.

And here’s the beauty of it: while economics may seem technical, it’s deeply connected to human behavior and decision-making.

That’s why studying economics is so valuable—it’s not just about understanding money; it’s about understanding life.

So, the next time someone asks, “What is economics?” you’ll know: it’s the study of choices, scarcity, and how we as humans interact with the resources of our planet.

And it all started with a philosopher looking around and asking, “What’s going on here?”

Pretty cool, right?

I think so.