An Introduction to Economic Reasoning

For many economic schools of thought, economic reason begins with how humans act.

Economics as a social science makes assumptions about human nature and decision making. These assumptions are tested by social science research and philosophical logic. Although economic reasoning may be thought of as a purely academic enterprise, business schools and entrepreneurs have used economic reasoning to influence government, trade policy and the market.

Broadness

Economics is a broad discipline. This fact makes it difficult to ascertain a complete definition of economic reasoning.

Approach

One approach argued by the Mises Institute, an educational organization that follows the Austrian economic school of thought, sees the foundation of economics as actions taken by human beings. In general, most economists see economic reasoning as a function of people's wants and demands.

Considerations

Using economic reasoning helps researchers understand how people and businesses make decisions. The idea is called marginal analysis. A marginal analysis compares the costs and benefits of any transaction or action. If the benefit outweighs the cost in a person's mind, then that person performs the action. This is the foundation of economics.

Benefits

The insights of economic reasoning are taught across the social sciences and at business schools. Political and business leaders have utilized the basic foundations of economic thought for policy goals and international relations, as well as how to view the nature of a business and the market.

References

• Mises Institute: An Introduction to Economic Reasoning
• Rio Hondo Community College: Economics and Economic Reasoning