Economics: The Dismal Science?

Abstract

What is economics?1 A mainstream economist would say that economics is the study of the allocation of scarce means to unlimited ends, the standard definition of economics since Lionel Robbins’s Essay on the Nature and Significance of Economic Science, first published in 1932. This definition leads to an economics which emphasizes opportunity costs, trade-offs, the idea that there is no gain without pain, that something must be given up to get something else. In short, an economics geared to efficiency, to identifying and eliminating waste. All good and useful things to know — within limits. My purpose here, as in The Dismal Science (2008), from which much of the argument is taken, is to explore some of those limits, now with the benefit of two years of economic crisis to provide additional illustrations.KeywordsCash FlowMarket FailureDefault RiskMarket SystemMortgage LendingThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.