Economic as a Social Science and Applied Science (1)

Economics

Definition and Origin

The word "economics" originated from the Greek work Oikonomikos (Xenophon), meaning "The Estate Manager" or "Household Management."

Oikonomikos is a treatise on managing agricultural estates efficiently for productivity, reflecting the roots of economics as the study of how individuals and societies use scarce resources to produce and distribute goods and services.

Comparison to Household Management

Households and economics share similarities: decision-making, resource allocation, and meeting needs based on abilities, efforts, and desires. Societies face similar questions: What jobs to assign? Who performs them? How to divide resources to satisfy collective needs?

Definitions of Economics

1. Mankiw: Economics is the study of how society manages its resources.
2. Hall and Leiberman: Economics is the study of choice under the conditions of scarcity.
3. Castillo: Economics is the study of how man allocates scarce resources to satisfy unlimited wants.
4. Webster: Economics is the branch of knowledge that deals with the production, distribution, and consumption of goods and services.
5. Sicat: Economics is a scientific study of how individuals and society make choices.

Core Focus

Economics seeks to understand how society allocates resources under scarcity, defined as the limited nature of society's resources. Key considerations include how goods are produced, priced, and consumed in light of unlimited human wants and limited resources.

Scarcity

Relative Scarcity

A good is scarce compared to its demand. Example: Coconuts in the Philippines may become scarce if supply is insufficient despite their natural abundance.

Absolute Scarcity

Supply is inherently limited. Example: Oil is absolutely scarce in the Philippines due to the lack of domestic oil wells, necessitating reliance on imports.

Economics as a Social Science

• Economics is classified as a social science because it studies:
  • Human behavior and societal organization.
  • The allocation of scarce resources to satisfy unlimited wants.
  • How societies meet individual and communal needs using scientific methods (observation, hypothesis, testing, and experimentation).
• Economics explains:
  • How goods and services satisfy human desires.
  • How society balances unlimited demands with limited resources.

Economics as an Applied Science

Applied science involves using scientific knowledge to solve practical problems.

Economics applies theories and principles to real-life situations to analyze and predict outcomes.

Applied Economics

The application of economic principles and theories to real-world scenarios, such as:

• Observing how economic theories work in practice.
• Predicting outcomes to address societal, national, or corporate challenges.

Econometrics

Econometrics applies statistical and mathematical theories to economics to:

• Test hypotheses.
• Forecast future trends.

Common econometric models include:

• Linear Regression
• Generalized Linear Models
• Probit, Logit, and Tobit Models
• Hazard Models
• ARIMA
• Vector Autoregression
• Cointegration

Branches of Economics

1. Microeconomics

Focus: Economic behavior of individual units like consumers, firms, or specific resources. Examples: Price of rice, a firm's workforce, an individual's income. Also known as Price Theory.

2. Macroeconomics

Focus: Economic behavior of aggregates (e.g., government, households, businesses). Examples: Gross National Product, employment levels, national income. Also known as Employment and Income Analysis.