What is economics? Why should you study it? Will it help you get rich? If it won’t make you rich, why study it? These are just some of the questions that beginning students might wonder.
So what is economics and why is it important? Some think of economics as a study of how our economy works; to some extent, that’s true. Others think of economics as how to make money, and it is possible to use economic knowledge to improve your own financial outcome. Perhaps the most common definition of economics was applied by the great economist, Lionel Robbins, who said “Economics is the science which studies human behavior as a relationship between given ends and scarce means which have alternative uses.” But that’s a mouthful. While all of these offer useful ways to think about economics, we want you to take a step back. Economics is essentially the study of how people make choices in a market economy. (While economic behavior and actions exist in non-market economies, we will generally restrict our discussion to market economies, where the freedom to choose is most foundational.) Should you become a banker, or a baseball player? Should you drive a Toyota, or a Ford? If the price of oil rises dramatically, what will you do? With college tuition rapidly rising, what steps can you take to minimize your cost? Economic analysis can provide insight into all these questions…and more.
You may agree that economic analysis can help answer these questions, but you may wonder how God fits into this analysis. Why would we need to have a Christian worldview to better understand economic analysis? Most economic textbooks make a distinction between positive and normative economics. Positive economics focuses simply on “what is” (e.g., if we raise the minimum wage, what will the result be?) Normative economics asks “what should be” (e.g., should we have a higher minimum wage?) Secular economic analysis can offer effective tools to provide positive analysis, but has no firm ethical foundation to answer normative questions. It is obvious that secular economic writers do have an ethical basis for their arguments, but it’s usually not stated and in some cases not even recognized by the author. It may be secular ethical principles such as utilitarianism, the principle of non-aggression, or Pareto efficiency—but it’s not necessarily a Christian worldview. The Christian can arrive at a more complete understanding—able to analyze both what is and what should be. A Christian worldview is also essential to comparing different economic systems. The Communist believes that if we get rid of private property and institute a communist utopia, there will be a new economic man, who will work for the good of the commune (the overall societal group). The Christian, however, understands that man’s failings are not due to the economic system he is under, or the historical era he lives in, but rather he is still a fallen creature that is inherently sinful outside of Christ’s redeeming grace and His payment for our sins. The Christian is therefore skeptical of any system that does not begin with an understanding of man’s fallen condition, and does not design institutions accordingly. Because of man’s fallen nature, we will come to see that in almost all of our economic choices, there are no solutions; only tradeoffs!
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