Besanko and Brauetigan’s popular “Microeconomics” textbook begins with this paragraph:

“Economics is the science that deals with the allocation of limited resources to satisfy unlimited human wants. Think of human wants as being all the goods and services that individuals desire, including food, clothing, shelter, and anything else that enhances the quality of life. Since we can always think of ways to improve our well-being with more or better goods and services, our wants are unlimited. However, to produce goods and services, we need resources, including labor, managerial talent, capital, and raw materials. Resources are said to be scarce because their supply is limited. The scarcity of resources means that we are constrained in the choices we can make about the goods and services we produce, and thus also about which human wants we will ultimately satisfy. That is why economics is often described as the science of constrained choice.” [1]

Therefore, economics is a study of individual preferences and decision making, which are revealed in the actions of individuals. These actions are attempts to improve well-being, attempts to satisfy our wants. Interestingly, the authors do not, in this case, build economics from the point of view of the individual. Instead, they in the very next page, discuss abstract actions of “society”. However, how can “society”, which is a group of people, undertake actions to “satisfy unlimited human wants” if human wants can only be observed through a study of an individual?

Only individuals can act, after all. Even when an army is rushing to attack another army in an open battlefield, it is still individuals who are the ones doing the running! This is important because a student must have a clear view of what exactly it is that he or she is studying. If economics is the study of how societies allocate limited resources, then it should be a study of how societies allocate limited resources to fulfill unlimited societal needs. This, however, would be a study of sociology – the study of society – rather than economics. In addition, how would one define “societal needs” without grounding those needs in individual human needs? Indeed, it often seems that many economists are really just sociologists. This, of course, should not be taken as a slight; sociology is a fascinating science in its own right. However, again, economics only makes sense when its analysis begins with individual human action.

Therefore, I will begin my study of economics with different theories of value.


[1] “Microeconomics”, 3rd edition. Besanko and Brauetigam. Page 3.