Why study economics?

by Tanusree Charkravarty Mukherjee

Very often, business students first entering university would ponder whether it is worthwhile taking economics as a subject.

My answer to that is a definite “Yes”.  Not only is studying economics rejuvenating and enchanting, it confronts students’ preconceptions and provide them a potential and articulate framework for analysing the world around them. We need to learn economics to know our daily lives better and make our future more prosperous.

Alfred Marshall’s Principles of Economics: An Introductory Volume (London: Macmillan, 1890) defines economics as ‘the study of people in the ordinary business of life.’
Robbins in his An Essay on the Nature and Significance of Economic Science (London: MacMillan, 1932) defined economics as ‘the science which studies human behaviour as a relationship between given ends and scarce means which have alternative uses.’

On the otherhand, Samuelson (Economics; New York: McGraw-Hill, 1948), stated that economics is ‘the study of how societies use scarce resources to produce valuable commodities and distribute them among different people.’

However, the motive of learning economics is still not very clear to many students.  Therefore, before starting, one should comprehend the scope of economics in the real world scenario.

Among the current phenomena that influence social life, those related to the economy attract the most attention, and terms such as unemployment, inflation, interest rates, exchange rates, productivity, investment and savings as conveyed regularly by the news media are not always simple to understand.

Economics is the discipline that enables people to comprehend such matters and analyse the relationships between them precisely. Put broadly, it is alienated into two interrelated branches – microeconomics and macroeconomics. Microeconomics focuses on the behaviour of individual economic agents while macroeconomics looks the larger picture and examines the factors that determine production, employment and price levels in the global market.

Economists also explore areas of social sciences relating to sociology and political science. Given the complexity of the world in which we live, it is often useful to consider problems from different points of view. However, the basic difference between economics and other social sciences is its emphasis on the quantifiable characteristics of the behavioural aspects. Phenomena such as unemployment and inflation can be quantified. For that reason, mathematical formulisation and statistical analysis are widely used in economics compared to other social sciences.

It should also be noted that while business administrators and economists are both concerned with markets, they adopt different points of view. The former study market situations as administrators of businesses whilst the latter study market situations from the perspective of society. Hence, economists play a functional role in advising and guiding public policy makers.

However, at the end of the day, what students are most concerned about are the avenues available to them after graduation. The study of economics is becoming increasingly important as grounding for both a diversified career and progression to more sophisticated programmes of study.

Graduates in economics can also look forward to career opportunities in both the public and private sectors. Investment banking or other financial sectors are good places for starting careers and, besides being economists, they can choose careers as chartered accountants, cost accountants, tax consultants, bank managers, management consultants, financial analysts, investment bankers and advisors and merchant bankers.

In 2008, the US Bureau of Labor Statistics (BLS) revealed that 14,600 economists were employed in the United States alone. Furthermore, the industry is expected to see an estimated job growth of 6% over the next 10 years. The rate of job growth for financial managers is also anticipated to experience an 8% growth over the same time period, and 20% or more for financial analysts.

The Occupational Information Network (a project of the US Department of Labor’s Employment and Training Administration) predicts that actual job growth will outrun the BLS statistics. It uses a formula that considers market growth along with the number of existing positions that will be vacated by retirement, career change and early termination.

The most significant growth in the job market will be experienced in the area of personal financial advising, which is expected to add 30% more positions over the next 10 years, according to the BLS. Given the 30% increase to the reported 208,400 personal financial advising positions existing in 2008, the industry will add 62,800 new jobs.

Source: US Bureau of Labor Statistics

Source: US Bureau of Labor Statistics

Source: US Bureau of Labor Statistics

Source: US Bureau of Labor Statistics

In Malaysia, there has been vigorous growth across all sectors and sub-sectors. Of note was the service sector which contributed a higher growth of 6.8% in 2010 (source: Department of Statistics, Malaysia). Furthermore, the service sector registered 3.9% points to overall GDP growth. Surprisingly, this robust growth was mostly driven by the emancipated growth of the finance and insurance subsectors with a 11.7% share of GDP (source: Department of Statistics, Malaysia).

With the continuous rapid growth of Malaysia’s economy, it is obvious that there will be increased employment opportunities in all economic sectors. In the first semester of 2010, job vacancies registered through jobsmalaysia increased by 83.75% with the service sector constituting 30.4% (source: Economic Planning Unit, Malaysia). Vacancies for graduates numbered 73,183 out of which 84.5% were for the service sector, particularly in the finance, real estate, business and education services (source: Economic Planning Unit, Malaysia).

In a nutshell, economics encompasses learning generic skills such as more precise thinking and problem-solving as well as exploring our dynamic world better. It is well worth studying and students should seriously consider it.

Tanusree Charkravarty Mukherjee is a lecturer of economics in the Department of Economics and Finance at Curtin Sarawak’s School of Business. Her research interests are mainly in Development Economics. Tanusree can be contacted by e-mail to tansuree@curtin.edu.my.

 

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