We have all heard people saying stuff about what economists do and these are just some of the anodyne myths about the field. To begin with, most people think economics is just about money and the subject is often confused with business studies. The first questions economists face is usually, ‘Hey, how’s the stock market doing?’ Yes, economics does involve topics like wealth and finance, but it’s not all about money.
In layman terms, economists explain their field as studying people making decisions under scarce resources such as time and money. It is the study of people making choices, and it uses mathematical models and statistical analysis to model this decision-making and how incentive structures change this decision-making. So it's like they are studying millions and billions of people making decisions on the basis on their own values and what happens when these people
rub elbows.
Morality, it could be argued, represents the way people would like the world to work, whereas economics represents how the it actually does work. Economics is above all a science of measurement. It comprises an extraordinarily powerful and flexible set of tools that can reliably assess a thicket of information to determine the effect of any factor, or even the whole effect. That’s what ‘the economy’ is, after all : a thicket of information about jobs and real estate and banking and investment. But the tools of economics can be just as easily applied to subjects that are more—well, more interesting.
Economics is, at root, the study of incentives: how people get what they want, or need, especially when other people want or need the same thing. Economists love incentives. They live to dream them up and enact them, study them and tinker with them. The typical economist believes the world has not yet invented a problem that he can not fix if given a free hand to design the proper incentive scheme. His solution may not always be pretty—it may involve coercion or exorbitant penalties or the violation of civil liberties- but the original problem, rest assured, will be fixed. An incentive is a bullet, a lever, a key: an often tiny object with astonishing power to change a situation.
As cliché as it may sound, economics is everywhere. But the fact is, it really is everywhere. It’s ubiquitous.
~Shagun Khetan
Operations Head, Ecofinlysis
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