Ask Dr. Econ

July 2000

Why do we need economists and the study of economics?

A question or a challenge? From a personal perspective, the study of economics has provided me with a systematic framework for analyzing, researching, writing, and teaching about a wide array financial and regional economic issues. Economics has provided me with a methodology for understanding and making sense of our complex environment. As a Federal Reserve economist, one of my responsibilities is to share that knowledge through publications, presentations, and Web-based products, so that it may be beneficial to others.

However, enough from Dr. Econ. Let's defer to Professors Paul A. Samuelson and William D. Nordhaus, who define economics as follows in the 1998 edition of their well-known text, Economics:

Economics is the study of how societies use scarce resources to produce valuable commodities and distribute them among different people.

Behind this definition are two key ideas in economics: that goods are scarce and that society must use its resources efficiently. Indeed, economics is an important subject because of the fact of scarcity and the desire for efficiency.

Samuelson and Nordhaus also provide some insights into the role of economists in Chapter 1 of their book. They declare that, "Throughout the world economists are laboring to collect data and improve our understanding of economic trends." Moreover, as they note, economists are studying and trying to explain a wide and expanding array of activities, ranging from international trade to unemployment and inflation, from investing retirement funds to controlling pollution. Economic analysis, both theoretical and empirical, can generate important insights into individual and aggregate behavior and relationships, and help in society's efforts to use scarce resources in a more efficient manner.

Samuelson and Nordhaus also have an answer to the second part of your question about the need for economists, when they write:

You might well ask, What is the purpose of this army of economists measuring, analyzing, and calculating? The ultimate goal of economic science is to improve the living conditions of people in their everyday lives. Increasing the gross domestic product is not just a numbers game. Higher incomes mean good food, warm houses, and hot water. They mean safe drinking water and inoculations against the perennial plagues of humanity.

Thanks for asking!

References:

Samuelson, Paul A., and William D. Nordhaus. 1998. Economics. Boston, The McGraw-Hill Companies, Inc., Chapter 1, pages 3-7.

Baumol, William J., and Alan S. Blinder. 1988. Economics: Policy and Principle. Harcourt Brace Jovanovich, Inc., Chapter 1.

Personal Financial Education, FederalReserveEducation.org, 2003