Economics

What is economics and
why should I care?

Today you got dressed, had breakfast, brushed your teeth, maybe took the bus or drove to school or work, studied or worked, met a friend, ate a snack, and ended the day sleeping in a bed with sheets and pillows. Just like you, billions of people go through their days trying to meet their needs and wants.

But how these needs are met has changed over time. Long ago, people relied on hunting and gathering. Today, we rely mostly on markets. Not every society organizes itself the same way. That’s where economics comes in.

So, what is economics?
Some definitions from important economists:

You might feel like you already know, but there isn’t one single answer. Let’s build a clearer idea using some well-known definitions:

P. Samuelson: “The study of the way in which societies use scarce resources to produce valuable goods and distribute them among different individuals.”
F. Mochón: “The study of how societies manage their scarce resources to produce goods and services, and distribute them among different individuals.”
K. Marx: “Scientific discipline that analyzes the relations of production that occur within society.”
N. Mankiw: “Economics is the study of how society manages its scarce resources.”
Cambridge Dictionary: “The system of trade and industry by which the wealth of a country is made and used.”

Our definition:

Economics is the study of how people and societies choose to use limited resources to produce and share goods and services.It helps us make sense of decisions about work, spending, saving, and trade. Like other social sciences, economics is shaped by history, culture, and context. While it doesn’t always offer exact answers, it gives us a useful lens to understand how the world works.

Why is it important?

One word: scarcity.
If we had everything in unlimited supply (like air to breathe), we wouldn’t need to think too much about how it’s shared. But since most resources - like money, time, oil, and food - are limited, we need to make choices. Economics helps us understand how those choices are made and who benefits.

Two big lenses: micro and macro

Microeconomics looks at individuals, households, and businesses. Think: the price of tomatoes or how two brands compete.
Macroeconomics zooms out to look at the big picture: things like inflation, unemployment, or how an entire country’s economy is doing.

What pALLicies is all about

Here, we’ll explore economic policy - how governments make decisions that affect jobs, prices, trade, and more. We’ll break down those policies and help you understand how they affect your life, wallet, and future.

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Who Runs the Economy? Understanding Economic Systems

What Are Economic Systems?

An economic system is how a society organizes the production, distribution, and use of goods and services. In simple terms, it answers three big questions:

What do we produce?
How do we produce it?
Who gets what?

These decisions shape the economy and people’s daily lives, opportunities, and public policies.

Capitalism: The Market in Charge

In capitalism, most decisions are made through markets. People and companies own land, factories, and businesses and decide what to produce based on profit. Prices are set by supply and demand. The role of the government is usually limited, mainly focused on protecting property and enforcing contracts.

Supporters say capitalism promotes efficiency, freedom, and innovation. Critics point to inequality and argue that markets don’t always provide basic services fairly.

Example: In the United States, the market plays a central role. Most services—like housing, higher education, and healthcare—are private, though public programs support certain groups (like Medicare or food stamps).

Communism: The State Coordinates Everything

Communism aims to replace private ownership with shared or state ownership of the economy. In theory, everyone works according to their ability and receives according to their needs. Decisions about production and distribution are made centrally, often by the government.

Supporters believe it ensures equality and meets everyone’s basic needs. Critics argue it can reduce motivation, restrict freedom, and lead to inefficient or overly centralized planning.

Example: In China, the government owns key sectors like banking and energy, which significantly guides investment. However, China also allows private businesses and has embraced many market-style reforms, creating a hybrid model.

Mixed Economies: A Bit of Both

As you have seen in the examples, most countries follow a mixed model today. The market decides many things, but the government also plays a key role—regulating prices, providing education or healthcare, or supporting struggling groups.

In these systems, the balance between state and market varies, and the distribution in which goods and services are provided by the free market or by the government depends on the country's politics, culture, history, and more.

Why It Matters for Policy
The type of economic system influences how governments decide taxes, welfare, education, and public services. No model is perfect, and each country adapts its system over time based on values, history, and challenges. Understanding the mix helps us ask better questions about what kind of society we want to build.