What is ‘the economy’ and what is ‘economics’?

“Fear” “danger” “panic” “double panic”. These are the kinds of words we often hear when we talk to people about the economy. The economy is described as “a giant blob” that is “vast and never ending”, “one big circle”, even “a monster”. So what exactly is the economy? Where is it? And who controls it?

Money is usually comes to mind pretty quickly when we think about the economy. When we buy and sell things, that’s part of the economy. Going to work is definitely economic. And surely, nothing is more economic than a bank.

But what about other things that have less to do with money? Is cleaning house or making dinner economic? What about having kids, or taking care of you parents when they get older? When you give your friend a birthday present, is that an economic transaction? And how about voting; it’s obviously political, but is it also economic?

The economy is nothing but the cumulative result of the way you live your life, and the way everyone around you lives theirs. It’s how we make the things we want and decide who gets what.

Trying to draw hard boundaries around the edges of the economy is a fool's errand. It doesn't take much to link almost everything in our world to the system of making and using things. But claiming that anything and everything has to do with economics is a step too far when there's so many other things that shape our lives.

Economics then, is just how we think about the economy. Many textbooks define economics narrowly as the study of scarcity: how we manage people's unlimited wants with a limited amount of resources. Although that's an important topic, there's much more going on in the world of economics than this definition would suggest. An older definition comes closer: "Economics is the study of mankind in the ordinary business of life."¹

Economics is just seven billion stories, experiences, and choices. This morning, you decided what time to get up, whether or not to go to work, what eat, and whether to go for a jog or laze on the sofa. Each of those decisions affected the economy in some way, and each were economics.

Keeping the definition of the economy broad gives professional economists a lot of leeway when deciding what to actually study. Many economists focus on subjects that sound traditionally 'economic' like markets, unemployment, or finance. But loads of economists study things like the environment or gender that also have to do with production and distribution, but might not typically be associated with the word economics. Seeing as the 'ordinary business of life' varies so much depending on our own stories and circumstances, the conversation around economics needs to be as diverse as the economy itself.