Kuta Beach

Kuta Beach

Monday, 22 December 2008

Similarities Between Economics and Medicine

What is economics? Adam Smith defined it as "the science of wealth." Lionel Robbins defines economics as the study of the "allocation and distribution of resources." There are many definitions, but when I think about economics I think about trade. Economics is the study of markets. Markets are places where trade takes place. Markets needn't be actual physical areas, e.g. Ebay is a market that exists on the Internet. Like a human body, markets can be healthy and unhealthy, and an economist's job is to analyze the market, make measurements, make forecasts, treat any sicknesses, and so on.

Economics then is very similar to medicine. The difference is that economists study markets while physicians study the human body. While physicians measure blood pressure, blood glucose, cholesterol levels, etc, economists measure interest rates, inflation, etc. Within medicine there are different schools of thought, e.g. allopathic medicine versus osteopathic medicine. Economics has different schools of thought as well, e.g. monetarism and Keynesianism.

Economics and medicine also share ambiguity. Because the two disciplines study complex systems, there are many unknowns. In medicine, nobody knows how drinking coffee seems to reduce the likelihood of getting Parkinson's disease. In economics, nobody really knows why or how business cycles form and what to do with them.

No comments: