Readers Question: What are the importance of economics?
Firstly, here is a rather, frivolous look at 10 reasons to study economics
On a more serious note. The importance of economics includes the following:
- Dealing with a shortage of Raw Materials. Economics provides a mechanism for looking at possible consequences as we run short of raw materials such as gas and oil.
- How to distribute resources in society. To what extent should we redistribute income in society? Is inequality necessary to create economic incentives or does inequality create more economic problems.
- The Principle of Opportunity Cost. Politicians win elections by promising more spending and cutting taxes. This is because lower taxes and more spending is what voters want to hear. However, an economist will be aware that everything has an opportunity cost. Spend more on subsidising free university education, and it means higher taxes and lower spending elsewhere. Giving students £4,000 a year to spend at university may be a noble ideal. But, is it the best use of public money? Are there not better uses of money?
- Social efficiency. The free market leads to countless examples of market failure. I feel one of the best uses of economics is to provide solutions to overcoming market failure. For example, driving into the centre of town creates negative externalities such as pollution and congestion. There is overconsumption. An economist can suggest a tax on driving into towns to internalise the externality. Of course new taxes are not popular, but, it would provide a better solution for society. You may not want to pay £10 a week to drive into a city centre. But, if it saved you 2 hours of sitting in a jam, then maybe you would be quite happy to pay it.
- Knowledge When You are Unemployed and waiting in the queue for unemployment benefits, as an economist you will know WHY you are unemployed, which is of course a great comfort.
More reading on importance of economics
Limitations of Economics