Is Economics a Science or an Art?

What do we mean by Economics as a Science and an Art?

“Is Economics a Science or an Art?” is one of the most debatable questions among economists all around the world. There is one section of economists that assume that economics is a social science. Because the basis of the theories and underlying concept of it is to find out or determine the cause and effect relationship. The theories have taken shape by using numerous scientific methods that look into the behavior of individuals, groups of people, and business organizations. Unlike other fields of science in which individuals perform tests and experiments in laboratories, economists perform these tests and experiments with the help of models. They observe individual and group behavior and then process these observations into deductions. These deductions lead to the building up of theories that we then apply to the real world.

While there is other section of economists who have a different opinion and do not subscribe to the above justifications, according to them, Economics is an art because it is the economy or the market forces that turn the various models and theories into reality. We apply the knowledge that economics gives us to achieve the economic goals of using scarce resources to the best advantage of human beings. Economists propagate that no fool-proof experiments lead to the development of economic models. Economics just acts as a guide and gives direction to individuals and businesses to maximize their economic welfare.  

Why should we treat Economics as a Science?

Systematic Collection, Classification and Analysis

Microeconomics and macroeconomics both rely upon real-world data for the development of models and theories. We collect all the necessary data systematically, classify them into different categories and then analyze them. Thus, we follow a scientific approach with regard to the collection and treatment of data. This suggests that we should treat economics as a science.

Building up a Cause and Effect Relationship

The models and theories in economics closely follow the cause-and-effect relationship. Economics clearly gives us a cause and its effect for every activity or occurrence in the markets. For example, let us take the case of inflation. Economics clearly distinguishes various factors that cause inflation and their individual effect on creating inflationary trends in the market. In fact, they suggest various changes in spending and policies for the desired outcome on the basis of this relationship only.

Origin and Acceptability of Various Theories

The theories and laws of microeconomics and macroeconomics both originate from experiments and are not just random thoughts. They pass through rigorous and continuous tests to check their acceptability and relevance in the fast-changing times. We also use mathematical and statistical tools to arrive at specific solutions and numbers that have universal acceptability, just like any other law of science. Their impact may differ from one country or market to another, but the basic theory remains the same worldwide. The variation in the results could be due to so many factors like geographical, cultural, fiscal, social, and environmental, which may differ from country to country.

A Common Measure

Economists worldwide agree on a common measure of economic value- Money. We study the economic variables in an economy, their interactions with each other, and their impact on the participants of the economy- everything in monetary terms. Therefore, we can assign a specific value to everything in an economy, just like in science.

Why should we treat Economics as an Art?

Limitations to Experiments and Tests

We perform numerous experiments and tests in a laboratory to prove that our theory is right. Then we arrive at a conclusive solution in science. This, unfortunately, is not possible in economics. The theories and laws often rely upon historical data. That may not have a legitimate validity in the present or future. Outside unknown economic elements are continuously changing and evolving in the environment. Also, economics is more people-centric and is very much affected by the qualitative and emotional judgments of its participants. Thus emotions, behavior, and environment is dynamic and varies from person to person or organization, or geography. Hence, the solution may not yield the results exactly on the expected lines, as in the case of science. 

This makes it extremely difficult for us to establish a cause-and-effect relationship in an economy of which we can be totally sure of. This is where the role of economics as art evolves. Economics is an art where participants of the economy use their skills and expertise to make the best possible use of the scarce resources available. And various theories and models are drawn to guide them towards achieving the desired outcome. Moreover, in science, everything has an upper or lower limit. However, since economics is an art, too, there seems to be no limit or boundaries on value creation and growth in an economy. It all depends upon the art of making optimum use of the resources to maximize the creation of wealth in society and generate value. So putting the theories and models to work is art with human touch and involvement.

Is Economics a Science or an Art

Markets are Full of Uncertainty

Science provides us with solutions that give concrete outcomes to any given situation. It is not so in the case of Economics. There are numerous laws and theories, but we are never sure about the outcome or result. There are no mathematical equations to correctly predict the behavior of individuals and businesses in their way of profit maximization. We cannot predict the movement of a stock market even for an hour of a day with certainty. Therefore, Economics is an art of dealing with such uncertainties in the constantly changing economic environment. It also tells us how incentives can change or alter human behavior and how we can use it to the best of our advantage.

Flaws with Assumptions

One of the basic assumptions of economics is the fact that participants in an economy behave rationally. And this assumption often goes wrong in the practical world. Individuals and businesses may often act irrationally, and emotions and judgments may cloud their decisions. A classical example of this is the applicability of the universal law of supply and demand. In contradiction to the standard law, the demand for the product often goes up despite the price moving up. Whereas, as per the law, the demand should fall due to a price hike. Of course, this happens in certain situations and may not always be so. These exceptions and variation (auction, antique items, paintings, etc.) to the standard law proves once again that Economics is an Art. And all the rules are not sacrosanct like in scientific exploration. 

Also, there are many activities that go unaccounted for a while calculating the Gross Domestic Product of a nation. We do not account for activities that we perform in our houses, even though the same activity, when performed outside, will generate revenue and be a part of the GDP.

Therefore, there are many events that occur in an economy on a daily basis but without a scientific rationale behind them. Therefore, economists believe that dealing with such activities is more of an art than science.  

Conclusion: Is economics a Science or an Art?

The proponents of both sides- Economics as a science and Economics as art are correct in their own way. We cannot deny that the basis of Economics is theories, laws, and models. They have been developed over time with the help of intense experiments and tests. Also, it does try to relate every cause with an effect. And these rules, theories, and models have been updated and changed from time to time based on continuous experiments. These factors make Economics look like Science.

But we also cannot ignore that the main constituents of Economics- the people and the businesses made up by those people, are affected by emotions and individual judgments. Due to this reason, the results of numerous experiments that economists conduct cannot be considered fool-proof. They vary from person to person and industry to industry, leading to uncertainty.

Therefore we can comfortably conclude that Economics is a mix of Science as well as Art. Economics as science gives us multiple theories and models that describe and guide the functioning of the economy. Economics as an art teaches us to use our skills to get the best results from those theories and models and maximize the utility from the scarce resources in an economy.    

Frequently Asked Questions (FAQs)

Is economics a science?

Economics as science gives us multiple theories and models that describe and guide the functioning of the economy.

Is economics is an art?

Economics as an art teaches us to use our skills to get the best results from those theories and models and maximize the utility from the scarce resources in an economy.   

Why economics is both art and science?

Economics is a mix of Science as well as Art. As a science, it gives us multiple theories and models that describe and guide the functioning of the economy. And as art, it teaches us to use our skills to get the best results from those theories and models and maximize the utility from the scarce resources in an economy.

Why economics is called science?

Economics is called science because of the following reasons:
1. Systematic collection, classification & analysis
2. Building up a cause & effect relationship
3. Origin & acceptability of various theories
4. A common measure

Why economics is called arts?

Economics is called arts because of the following reasons:
1. Limitation to experiments & tests
2. Markets are full of uncertainty
3. Flaws with assumptions

Sanjay Borad

Sanjay Bulaki Borad

MBA-Finance, CMA, CS, Insolvency Professional, B'Com

Sanjay Borad, Founder of eFinanceManagement, is a Management Consultant with 7 years of MNC experience and 11 years in Consultancy. He caters to clients with turnovers from 200 Million to 12,000 Million, including listed entities, and has vast industry experience in over 20 sectors. Additionally, he serves as a visiting faculty for Finance and Costing in MBA Colleges and CA, CMA Coaching Classes.

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