Few of us truly understand how the economy works. We often rely on widely accepted sayings such as, “The rich get richer, and the poor get poorer,” “Money makes more money,” and “The best things in life are free.”
There is some truth to these sayings when we examine income patterns, investment returns, and aspects of living standards. However, despite their validity, these proverbs do not offer sufficient information, insight, or inspiration to guide us in our economic lives. They serve as substitutes for understanding economics—a subject many find obscure.
Economics, however, touches every aspect of our lives. Our jobs, livelihoods, purchasing and investment decisions, as well as our choices about where and how we live, all depend to some extent on economics. As a system that societies use to determine what to produce and distribute, and who gets what, economics is a driving force in our lives.
Still, several reasons make economics a complex subject. The primary reason, in my view, is that most people find the topic overly complicated, partly because of its language. Like healthcare, auto repair, and other fields, economics has its own terminology, which, while unfamiliar, remains abstract and meaningful.
Many people also assume economics is full of mathematics. While it does involve numbers, most significant economic concepts can be explained in simple terms. Aside from specialized fields like economic forecasting, the math in economics is often quite basic.
Economics is a social science, akin to psychology, as it explains human behavior—particularly why people make certain choices in markets. Questions like why people buy specific items, how retailers set prices, why not everyone gets what they want, and how businesses decide what to produce and pay their employees are central to economics. Additionally, it addresses what governments can (or should) do to alleviate poverty, often without relying heavily on mathematics.
The importance of understanding economics lies in the following aspects:
1. Helping Manage Family Budgets:
Economics affects the way a family budget is organized and guides its members toward certain choices to adopt or modify, such as the type of work and the income it generates, the amount of money allowed for entertainment, and the amount that should be saved.
Moreover, everything purchased, from a bottle of milk to a new car, is related to economics, as all these purchases are added to the budget list that determines the total spending that can be allocated for buying goods, services, and more. The higher the income, the greater the amount of money that can be spent, referred to as "purchasing power."
2. Teaching Optimal Use of Limited Resources:
Economics helps in adopting a rational approach to utilizing and managing resources by teaching each individual how to optimize the use of limited resources. For example, when spending a sum of money to purchase a particular product, the individual analyzes the product and assesses its exact value to determine whether it is worth spending that amount of money or not. This means that economics guides individuals in making the right decisions regarding resource purchases, their scarcity, and the use of alternatives if the original option is unsuitable or if a better alternative exists.
3. Guiding Investment Decisions:
Therefore, every individual seeks to invest in what they own to achieve the best returns in the future. Some investments may be profitable, while others may result in losses. What helps in evaluation and reducing the likelihood of significant losses is studying economics.
According to economics, an individual can assess the available investment options, whether through purchasing gold, land, or other assets, and identify the risks associated with each option. This enables them to choose the most suitable option among them.
4. Enabling Financial Forecasting and Planning:
Certainly, no one can predict the future with absolute accuracy, but anticipating what might happen through the study of probabilities helps prepare individuals for crises in the best way possible. Future predictions, if Allah wills, can be made through the study of economics. Economists, with Allah's help, can forecast future crises such as inflation, and they provide advice based on these predictions. For example, they advise whether it is suitable to participate in stock markets and investments now or to wait for a better opportunity.
5. Educating on Daily Social and Economic Issues:
Economics helps individuals understand the social and economic issues happening around them, enabling them to make informed economic decisions. For example, not understanding concepts like inflation can lead to incorrect decisions, such as spending or investing solely in one direction, which is problematic.
On the other hand, a correct understanding of inflation encourages individuals to take necessary precautions and precise measures to safeguard their wealth from loss.
Unfortunately, sometimes economists are the ones who make economics seem complicated. Economists are highly educated experts who study economics in-depth, conduct research, formulate theories, and teach economics at colleges and universities. Additionally, they provide advice to business leaders and political leaders on economic matters, playing a crucial role in society. However, like all experts, they can contribute to the complexity of their field because they are the ones who create it.
Let’s face this truth: if there is a fundamental principle guiding life on earth, it is the principle of relative scarcity, not absolute scarcity as they claim. There is simply not enough of everything for everyone, whether it’s homes overlooking the sea, luxury cars, food, clothing, or healthcare for all who need it, for reasons everyone understands.
Therefore, the entire field of economics—and all economic activity—emerged from the scarcity of goods and services relative to human needs and desires. If there isn’t enough of something for everyone who wants or needs it, society faces a serious problem: how do we decide who gets what and who does without?
Economics also deals with critical issues that are often matters of life and death, which is why it is so important. The difficulty of this science lies in its obscurity; we don’t know when the next economic growth or recession will occur, which technologies should be encouraged or which won’t succeed. Sadly, we don’t yet know how to overcome issues like poverty, hunger, crime, and other inherent challenges in the economic reality. However, economics is the social science specifically concerned with these matters, and it has the tools to help us navigate them.
As Alfred Marshall said, economics is a profession that should combine sound science with a commitment to humanity. While people in the Middle Ages viewed noble professions such as medicine, aimed at physical health, and law, aimed at political health, as important, Marshall aspired to economics becoming the third noble profession—aimed at achieving better financial health, not just for the wealthy but for everyone. Marshall courageously sought to mediate between two opposing influences: one towards a purely mathematical, theoretical approach to economics, and the other towards complete emotional extremism without careful theoretical consideration. The approach he fought to establish at Cambridge combined the most scientific minds with the most empathetic ones.
Economics is one of the most avoided fields, often seen as too complex for the average person to understand without specialized knowledge. This perception is somewhat justified, as many economic books are intricate and intended for specialists, without taking into account the average individual seeking to build their economic literacy. Even works aiming to be accessible often end up theoretical and tedious, leaving readers uninterested. Fortunately, not all is bleak; many economic books succeed in making the subject accessible, engaging, and captivating.
Unfortunately, one of the primary reasons for the aversion to economics and the erosion of trust in economists and their methods is:
1. Economics’ abstract and complex nature.
2. Its foundation on limited resources versus infinite human needs.
3. Reliance on abstract, logical assumptions.
4. Use of observation and theoretical analysis, given the difficulty of practical experiments.
5. Economists’ reliance on technical terms, equations, and graphs.
6. Failure to align predictions with outcomes, weakening public trust.
Therefore, economists are often unfairly attacked, even though they are usually not the cause of bad news, but rather they simply convey it. The message is straightforward: humans must make difficult choices. Humanity does not live in a paradise, and the world is not filled with rivers of milk and honey. We must choose between cleaner air or faster cars, larger homes or bigger gardens, more work or more leisure.
Several satirical writers have dedicated their time to attacking economists, such as George Bernard Shaw, Thomas Carlyle. In fact, the season of attacking economists began when Carlyle referred to economics as "the dismal science."
Economists do not tell us that any of these options are inherently bad; instead, they only emphasize that we cannot have everything at the same time. Economics is about studying choices; it does not dictate what we should choose but helps us understand the consequences of our choices.
Interestingly, early economists did not merely play the role of messengers. Despite receiving sarcastic and impolite labels—like "Smith the fool," "Mill the sophist," "Keynes the sensualist," and so on—they should not be dismissed simply because of their motives.
Ironically, modern economists also face harsh criticism because—as Keynes observed—they began as well-intentioned individuals seeking to make the world a better place.
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