Is Economics a Science?

The word â€Å"Economics† is derived from the Greeks word â€Å"Oikonomos† which means to manage the house. So it means the management of a household especially in those matters, which are relating to the income and expenses of the family. After sometime, the term economy was adopted. Economics is regarded as a Social SCIENCE and not a PURE science like Physics or Chemistry because it uses scientific methods to build theories that can help explain the behaviour of individuals, groups and organisations and does not deal directly with experiments with matter. Economics attempts to explain economic behaviour, which arises when scarce resources are used to fulfil unlimited human needs. 1. It is a science because economists can experiment:- In terms of methodology, economists, employ different methods, based primarily on observation and deduction and the construction of abstract models to make experiments with numbers and data. As the social sciences have evolved there are now many different strands of investigation including micro and macro economics, pure and applied economics, and industrial ,social ,environmental and financial economics. . Economics is a science because it can make predictions Economists use scientific observation and deduction in their investigations using index numbers, base year and current year figures and past data. Economists frequently use versions of the demand and supply model to help explain events such as realty prices trends and movements. Economic models usually employ graphical and mathematical analysis to help explain and illustrate such economic processes. 3. It is both a Positive and normative science. As a social science, economics attempts to use the principles and methods of science to explain economic behaviour. This involves making positive statements about the economic world. Positive statements are those that can be verified, and are factual, such as: ‘.. House prices have fallen by 15% over the last year†¦ ’ In contrast, normative statements are based on opinion and value judgement. Statements suggesting that something ‘ought to’ happen, or that something is ‘unfair’, are normative because they are matters of opinion. For example, ‘.. the recent fall in house prices is unfair to the rich.. ’. This statement cannot be tested because it not based on anything testable. If there is an agreed definition of fairness, and it can be measured, then it might be possible to test the effect of the change in house prices on the degree of fairness experienced by a certain identifiable group of people defined as rich. Therefore, this statement is normative, impossible to verify, and based on opinion rather than fact. 4. Economics is a social science because it follows the â€Å" ceteris paribus† rule( all other things remaining the same) just like in an experiment In the real world, economic variables such as price and income, are constantly changing, and this creates a problem in demonstrating the relationship between variables. For example, a fall in price is likely to lead to a rise in consumer demand if we assume nothing else changes. Of course, for independent reasons, income could also fall and demand does not rise. The fall in price could have been counteracted by a fall in income. The ceteris paribus rule, that all other things remain the same, is used whenever attempting to demonstrate the link between economic variables. 5. Economic theories are based on facts and can be proven by deductions and mathematical precision. 6. Economics is a systematic and standardised process of studying human behaviour in the context of the unlimited need, limited resources and their allocation and hence it is a science. Conclusion- Just like all other sciences economics too is logical, rational and provable through experiments and factual data and hence we conclude that economics is a science. b) ECONOMICS AND RELEVANCE TO LAW- 5 points Economics is the branch of knowledge concerned with the production, consumption, and transfer of wealth. It is the social science that analyzes the production, distribution, and consumption of goods and services. Now the Question is whether Economics is a science or not? Law, as a social science, is closely related to many cognate disciplines in the social and natural sciences. And law does not operate in a vacuum, law works in the society and economics is an important part of the society. Its relevance must relate to the overall values of society. Economics, it is said, is the science of rational choices in a world of limited resources. And the term ‘resources’ here does not relate only to money but can be of any type. Both are related to each other such that: 1. Law and economics is the application of economic methods for the analysis of law. Economic concepts are used to explain the effects of laws, to assess which legal rules are economically efficient, and to predict which legal rules will be promulgated. For eg- Law about taxation , laws on custom duties etc,. In other words â€Å"Law and economics,† also known as the economic analysis of law, differs from other forms of legal analysis in two main ways. 1. First, the theoretical economic analysis focuses on Efficiency or economic benefit. 2. The second characteristic of law and economics is its emphasis on incentives and people’s responses to these laws/incentives. 2. As used by lawyers and legal scholars, the phrase â€Å"law and economics† refers to the application of the methods of economics to legal problems. Using the best resource available, prioritizing etc 3. Both Law and economics stresses that markets are more efficient than courts. When possible, the legal system, according to the positive theory, will force a transaction into the market. When this is impossible, the legal system attempts to â€Å"mimic a market† and guess at what the parties would have desired if markets had been feasible. 4. Law and economics are related because they both share the same assumption with other branches of economics that individuals are rational and logical in decision making and respond to incentives and punishments. When penalties for an action increase, people will undertake less of that action. For eg- Huge penalties for economic offences deters the future offenders. 5. Law and economics is more likely than other branches of legal analysis to use empirical or statistical methods to measure these responses to incentives. Lawyers have to quote figures and data and statistics to argue their cases. Hence both economics and law rely on empirical data. In the United States, economic analysis of law has been extremely influential. Judicial opinions utilize economic analysis and the theories of law and economics with regularity. The influence of law and economics has also been felt in legal education. Many law schools in North America, Europe, and Asia have faculty members with a degree in economics. Conclusion : Law and economics scholars also apply the tools of economics, such as game theory, to purely legal questions, such as various parties’ litigation strategies. These aspects of law and economics, are of more interest to legal scholars than to students of the economy.