Economics is generally regarded as a social science, although some critics of the field argue that economics falls short of the definition of a science for a number of reasons, including a lack of testable hypotheses, lack of consensus, and inherent political overtones. Despite these arguments, economics shares the combination of qualitative and quantitative elements common to all social sciences.

Key Takeaways

  • Economics is generally regarded as a social science, which revolves around the relationships between individuals and societies.
  • Critics argue that economics is not a science due to a lack of testable hypotheses, consensus, and the inherent political overtones.
  • Despite these arguments, economics shares the combination of qualitative and quantitative elements common to all social sciences.

Understanding Economics

Economics is concerned with how an economy and its participants function and behave. Economics studies how goods and services are produced, distributed throughout the economy, and consumed by individuals and businesses. Economics also is concerned with how resources are allocated by governments and businesses to satisfy the wants and needs of consumers. 

One of the key focuses of economics is the study of the efficiency surrounding production and the exchange of goods as a result of incentives and policies that are designed to maximize efficiency.

Economics is typically broken down into two categories; one of which is called macroeconomics, which is concerned with the aggregate economy. The other category is called microeconomics, which focuses on individual consumers and businesses.

Macroeconomics

Macroeconomics focuses on how an overall economy and market system operate. Macroeconomics studies the financial and economic conditions that impact and economy as a whole. Some of the metrics that are studied under my macroeconomics include inflation, which is the measure of rising prices in an economy. 

Macroeconomics also studies a nation's growth rate, called gross domestic product (GDP), and how that growth impacts the economy as a whole as well as the overall market. Macroeconomics also analyzes how a country's growth rate can impact employment or unemployment, as well as the financial viability of businesses or industries.

Macroeconomists develop models to analyze how different sectors of the economy impact one another. Economic models are also used to forecast growth and inflation as well as measure how government policy impacts the economy. Monetary and fiscal policies are studied and modeled to determine how they improve the livelihood of those who live within the economy. 

Microeconomics

Microeconomics studies the impact of human behavior and actions as well as how their decisions affect the distribution of resources throughout an economy. Microeconomics focuses on how individuals make certain choices, particularly when factors change, such as rising prices.

Microeconomic models can include an analysis of supply and demand to determine how many resources are in an economy and how that demand or supply impacts consumer purchase patterns as well as prices for those goods. Microeconomics also focuses on, in part, how consumers can achieve utility, which is the maximum amount of happiness derived from consuming a good or service.

Both macroeconomics and microeconomics are considered social sciences. Social science helps to explain how a society functions and is an umbrella term that incorporates several fields of study, including economics.

Social Sciences

Social sciences include fields, such as law, anthropology, and pedagogy, but differ from natural sciences, such as physics and chemistry. Social sciences revolve around the relationships between individuals and societies, as well as the development and operation of societies. Unlike most natural sciences, social sciences rely heavily on interpretation and qualitative research methodologies.

However, social sciences also use a number of quantitative tools used in the natural sciences to chart and understand trends. For example, economists use statistics and mathematical theories to test hypotheses and forecast trends, a process known as econometrics. In addition, many social sciences use surveys and other rigid research methodologies to determine trends and provide clarity to future practices.

The increased reliance on mathematical models to study the economy began with neoclassical economics in the late 19th century and remained essential to new classical economic theories of the latter 20th century. Both new classical economic theory and new Keynesian economics assume individuals and businesses make rational decisions, which underpin economists' ability to build economic models based on scientific principles.

The Uncertainty of Economics

One of the primary arguments made against classifying economics as a science is a lack of testable hypotheses. Underlying the difficulty in developing and testing an economic hypothesis are the nearly unlimited and often unseen variables that play a role in any economic trend.

One of the challenges with the field of economics is that economists cannot perform controlled experiments in a laboratory. The field of chemistry, on the other hand, offers the ability for chemists to test a hypothesis and evaluate those results. Instead, economists most often analyze historical data either on a nationwide basis or by geographic regions. It's this inability to test hypotheses in a controlled environment and eliminate outside influences that could impact results that some believe economics should not be considered a science. However, even branches of physics have theories that have yet to be proven, but society accepts the branch of physics as a science.

Also, the frequency of immeasurable variables in economics allows for competing, and sometimes contradictory, theories to coexist without one proving the other infeasible. This uncertainty has led some observers to label economics the dismal science.

However, much of the uncertainty of the dismal science applies to the theoretical and overarching questions of macroeconomics. The scientific method, on the other hand, is regularly applied by economists in the field of microeconomics, including conducting quantitative studies in real-world settings that produce verifiable and retested results. Additionally, continued advances in computing power and data processing allow economists to model increasingly complex simulations.

While economics increasingly uses scientific and mathematical methods to track and predict trends, conflicting models, theories and results at the macroeconomic scale prevent economics from providing empirical data as found in many of the natural sciences. However, these discrepancies and conflicts are inherent in any social science–all of which require an element of interpretation rarely found in the natural sciences. The field of economics contains quantitative and qualitative elements common to all social sciences, and as long as social sciences exist as a class of sciences, economics fits within the class.