Why is economics important?

Or put another way, what is economics all about, and why should we be studying it?

I’ve been teaching economics for a number of years now, and the stock answer I get when I pose this question is generally a paraphrased version of the definition bequeathed us by Lionel Robbins. And that’s probably because some blessed cog in the Indian education system decided that that was the definition to go with in a textbook.

But no, scarce means and unlimited wants (or whichever remixed version of that song you have listened to) is not  the definition of economics.

Or shouldn’t be, at any rate.

Economics is about getting rich.

Most people recoil instinctively when they hear this, because we have a bit of a cultural stigma associated with getting rich. Rich in India is the big bad industrialist from Bollywood, or the cunning conniving politician, or the sly, evil hoarder.

Not always nowadays, thank god. The word rich also summons up images of start-ups these days, which is wonderful – but still, rich is not necessarily a “good” adjective.

And the reason  it isn’t a “good” adjective is because we view getting rich as a zero sum game. For every big bad industrialist, there is the poor struggling worker. For every cunning, conniving politician, there is the struggling-to-make-ends-meet-common-man. For every hoarder, there is the poor farmer. Which is what the phrase “zero sum game” means: for me to get rich, somebody somewhere must get (and stay) poor.

There existed a long time ago in England a man who would have shaken his head rather vigorously at the last sentence in the paragraph above. Trade, that man would have said, is anything but zero sum. I trade with you because I get rich. The magic is this: you trade with me because you get rich as well. Trade, slightly puzzlingly, leaves both of us better off.

Think about the last time you ordered a meal online. Maybe it was because you were in office and couldn’t cook a meal yourself right then, or maybe it was because you were at home but too tired to cook. In either case, it was too expensive in terms of time and/or money to cook a meal yourself. And so ordering a meal left you better off.

But did the restaurant suffer because you ordered that meal? Nope! It  too was better off because you ordered that meal. As, by the way, was Zomato or Swiggy that arranged for you to get that meal from that restaurant. And the guy from Delhivery who actually delivered the food. Nobody lost out on this trade. And nobody loses out on millions of these kinds of trades that take place every minute on every corner of the globe.

In fact, the more there are of these trades, the richer we are. And since both you and I are getting rich, both of us think its a good thing. And so allow me to amend that definition I put above by adding just one word to it:

Economics is about us getting rich.

And that’s a damn good thing.

 

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