Economics as a social science

Economics studies how individuals, groups and organisations endeavour to solve the economic problem, and is generally defined as the scientific study of the ownership, use, and exchange of scarce resources. Scarce resources are those which are limited in availability and have alternative uses.

Limited resources, specialisation and the need to choose.

The economic problem - that all resources are limited - requires individuals to make choices about how best to use their talents, assets and resources. Resources are put to their best use when they are given a specific role, or put to a specific use - in other words, they benefit from specialisation.

Exchange
In order to produce and consume goods and services, scarce resources must be exchanged, or traded. The expectation of ever-more sophisticated goods and services has led to a greater level of complexity in production as well as increase the need for more specialisation and trade. The production and distribution of even the simplest of supermarket goods, such as coffee or soap, today involve a complex network of transactions which span the globe. It is the role of the economist to understand and explain how specialisation, trade and exchange can solve the economic problem.

Methodology - model building
As a social science, economics uses scientific methods to build theories which can explain the economic behaviour of people and organisations. Economic behaviour is human behaviour in economic situations, which are those involving the exchange of one scarce resource for another. In terms of methodology, while economists cannot experiment in the way that pure scientists can, increasingly they use scientific methods when attempting to understand the behaviour of consumers. Economists employ a wide range of methods,
including observation, experimentation, deduction, and building abstract models.

As the social sciences have evolved over the last 100 years, they have become increasingly specialised. This is true for economics, as witnessed by the development of many different strands of investigation including micro and macro economics, pure and applied economics, and industrial, financial, and behavioural economics.

What links them all is the attempt to understand how and why exchange takes place, and how exchange creates benefits and costs for the participants.