Paul Samuelson, an economist, said, “economics is the queen of the social sciences.” It reveals various aspects of human behavior and interaction, whether as individuals or groups when faced with scarcity.
Before discussing how economics is considered a social science, I will review what economics is and what social science is. I also present some branches of both sciences.
What is economics?
Economics studies how we deal with scarcity. Our resources are limited to meet our unlimited needs. It raises scarcity.
We make decisions in allocating resources to their best use. And, for every decision we make, there is an opportunity cost, which is the next best alternative we sacrifice when we decide something. For example, when you decide to use your money to buy a house, you sacrifice the next best alternative, say buying a car. Your money is limited, and you can’t buy both at the same time.
In a simple model, economists discuss three main sectors: households, business, and government. They are all made up of individuals. That means, every decision in those sectors, we will determine.
Economics has various branches or subdisciplines. The most popular are microeconomics and macroeconomics. Other economic subdisciplines are:
- Agricultural economics
- Behavioral economics
- Development economics
- Ecological economics
- Environmental economics
- Financial economics
- International economics
- Managerial economics
- Monetary economics
- Regional economics
What is social science?
Social sciences study humans and the way they behave, interact and relate socially. Economics is one example.
Social studies contrast with the natural sciences. The latter explores nature and has many fields such as physics, biology, and chemistry. Natural sciences are more predictable than social sciences because social sciences are constantly evolving, along with the development of human activities.
Apart from economics, here aresome other social science disciplines:
- Demographics – about the population and its changes, including births, deaths, and the population composition by age, occupation, or sex.
- Business and management – dealing with managing a business, including operations, marketing, finance, human resources, labor relations, and strategic management.
- Social anthropology – about how society, social structures, and culture are organized and understood.
- Politics – about government, power, and democracy.
- International relations – about how countries relate to each other, including the multinational organizations’ role.
- Psychology – studying the human mind, which influences our behavior in certain contexts.
- Sociology – about how people relate to one another and function as a social group.
Why is economics a social science?
Economics is a social science because it explores society and human behavior. In particular, it discusses how economic actors allocate limited economic resources to meet their needs and wants.
Economic actors comprise three groups:
Every decision in the three sectors is a decision by the individual. Individuals play different roles. It affects how they make decisions, what decisions are made, and how they behave.
As households, individuals act as consumers. Therefore, they seek to maximize satisfaction (utility) in consuming goods and services.
- For example, changes in the price of goods by businesses affect their behavior and how they respond. When prices are raised, they reduce demand. Conversely, if prices are lowered, they increase demand.
In business, individuals make decisions about how to produce goods and services. They seek to maximize profits.
- For example, management will change its strategy when consumer tastes change. They develop research to explore what products are currently popular. Then, they allocate resources to develop appropriate products.
In the government sector, individuals act as regulators and public policymakers. They make not only decisions about individuals (society) but also businesses.
- For example, business regulations such as the environment, product health, and employment affect business, prompting management to adapt business policies and strategies to comply with these regulations.
- Another example is taxes. The increase in income tax has an impact on household decisions in allocating the budget. Say, they are more selective in shopping because they have less money available – they have to pay higher taxes.
Economists discuss these decisions at three different levels. It forms a subdiscipline of economics.
- Microeconomics deals with decisions and behavior at the individual and market (household and business) levels. It includes how consumers and producers make choices in trying to meet their economic goals.
- Macroeconomics deals with decisions at the level of the economy as a whole. For example, economists explain why economic activity varies over time and its impact on the economy and society.
- International economics examines the relationship between countries and explains to you why decisions in one country affect other countries. For example, you will study how capital flows and international trade affect economic growth and exchange rates in a country.
The scientific method in economics
In studying human activities and their decisions, economists construct theories. Economists use curves or mathematical functions to explain their theories.
- For example, in microeconomics, motivations and human-formed systems form the assumptions and foundations for consumer and firm theory. Economists then introduce various models such as utility functions and curves, supply-demand functions and curves, indifference curves, budget lines, and short-run and long-run cost curves.
Economists also rely on social scientific methods to explain economic phenomena and human behavior. Thus, they need tools, techniques, and empirical evidence to build a knowledge base – applied economics and econometrics are two examples.