Why do we need Economics?

Economics has had a hard time recently, especially the macro part, which focuses on the big picture - growth, inflation, employment, as well as fiscal and monetary policy. Too much reliance on mathematical modelling, a failure to identify real-world problems and then to agree on the appropriate solutions, have all contributed to a sceptical public attitude towards Economics.

These concerns in fact relate more to the practice, rather than the concepts, of Economics; more specifically, we can do better in the collecting and handling of information. However, the ideas to which this information is applied remain fundamental to everything we do, both in business and in life generally.

In essence, the need for Economics, and the thinking frameworks it offers, arises because the supply of almost all the things we consume is limited and so they have to be allocated somehow. An obvious exception is the air we breathe which, unless we want to bottle and use it, is not yet in short supply and has no price. Based on this simple fact, the words "economic", as in related to Economics, and "economical", as in being careful with resources, are actually very close in meaning.


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