Discovery, Innovation and Invention in Economics
Economics is one of the fantastic areas of learning. Some people says that, economics is an art and some others says that economics is a science. Another group of people says that, economics is both science and art. What is actually the categorization of economics? It is not easy to define and grasp the spirit of economics. But it is adjacent to all the individuals.
The nature of economics is very different from any other disciplines. Today the scope of economics has become enlarged. Now, it deals with many matters of human life such as economical, social, political, psychological, behavioral and even spiritual. In fact, economics and economists have to play an important role in the world to create a better living condition irrespective of any labels or nature of countries.
Here, this hub is about some of the discoveries, innovation in economics. Further it also highlighted the role of innovation in economics to bring wide social and economical changes.
Discoveries in Economics
Similar to material disciplines like chemistry or physics, there are discoveries in economics. Science related theories can be proved, without any bias. But economics is dealing with human beings. They are not unique but different from each other. Therefore, to prove a theory in economics, economists put certain assumptions. Then only economic theories are workable under particular conditions. Here the complexity of a problem is the real challenge to any economists.
Derivation of demand theory is one of the best examples of discovery. Here the economists derived a function of demand which having a negative correlation between price and quantity demanded. Generally, we know that, for any commodity there will be many factors which determines the quantity demanded such as price, taste of consumer, income, weather etc. For the purpose of simplicity, economists take ‘price’ as a single variable of determining the quantity demanded keeping all other factors as constant (ceteris paribus). Based on this condition, economists established that, for any general commodities the quantity demanded is indirectly related with price. That means, consumers may tend to buy more at lower prices and vice verse. The price demand function can be represented as in the following form.
Q= f (p)
Here, ‘q’ is the quantity demanded and ‘p’ is the price. And there exists an opposite relationship. This is one of the best examples of discoveries in economics.
Inventions and Innovations in Economics
There are many examples for inventions in economics. For instance, taxation is the subject matter of public finance. The authority or government uses taxes to control many economic changes such as inflation, consumption level, saving etc. Normally when the government impose taxes at a higher rate, the disposable income of the people will decline. That means higher tax imposition will reduce the consumption. But the same tax method can be use as a tool for bringing many social and economic changes. Then only the innovation and inventions are possible in economics.
Suppose an economy wanted to reduce the income inequality among its citizens. Then the government must follow progressive taxation policy. That is, the richer class must pay higher and the low income earning people must pay low taxes. In this way the income inequality can be reduced. Further the government must ensure that, the public expenditure is also in progressive method. That is more benefits of public spending should reach to the poor class.
The Real Challenge of Economists
Now, what are the major challenges of a student of economics is facing when he/she is passionate to learn economics and learn about the society? To understand the real challenges for the lovers of economics, it is better to know the scope and nature of economics first. This 21st century will be the century of humanity. Modern welfare economists are not giving emphasis on quantity or gigantic figures of national income, per capita income, output, growth etc. Instance, they used to highlight developmental indicators of human quality such as Human Development Index, World Happiness Index, Green Index, Human Progress Index etc.
In fact, the real challenge of any economist is to make not just discoveries but that must be capable of bringing social and economical changes. Here the student of economics must know various other disciplines too such as Philosophy, Psychology, Anthropology, and Sociology, Polity etc. So to create a revolutionary change in the world and human life, the economists must follow interdisciplinary approach. Then only it can create a positive impact in the society.
Why economists were failed to predict the 2008financial crisis. It is a vivid proof for the scope in economics to develop more in the future. Nowadays we have world class economists, but we lack a sense of analyzing things which happening around us. So, Economics has to improve more and innovation in economic thought is essential.