Define Economics

Reisman suggests: "economics as the science that studies the production of wealth under a system of division of labor."

The New Oxford American Dictionary suggests: economics is the branch of knowledge concerned with the production, consumption, and transfer of wealth.

The former suggests economics studies production, yet the latter suggests it concerns production, consumption, and transfer of wealth.  Granted consumption and transfer of wealth is implied in production.  Which is a better definition?  Other definitions out there?

Economics, it is said, in its rationalistic prepossessions assumes that men aim only or first of all at material well-being. But in reality men prefer irrational objectives to rational ones. They are guided more by the urge to realize myths and ideals than by the urge to enjoy a higher standard of living.

What economics has to answer is this:

1. Economics does not assume or postulate that men aim only or first of all at what is called material well-being. Economics, as a branch of the more general theory of human action, deals with all human action, i.e., with man's purposive aiming at the attainment of ends chosen, whatever these ends may be. To apply the concept rational or irrational to the ultimate ends chosen is nonsensical. We may call irrational the ultimate given, viz., those things that our thinking can neither analyze nor reduce to other ultimately given things. Then every ultimate end chosen by any man is irrational. It is neither more nor less rational to aim at riches like Croesus than to aim at poverty like a Buddhist monk.

2. What these critics have in mind when employing the term rational endsis the desire for material well-being and a higher standard of living. It is a question of fact whether or not their statement is true that men in general and our contemporaries especially are driven more by the wish to realize myths and dreams than by the wish to improve their material well-being. Although no intelligent being could fail to give the correct answer, we may disregard the issue. For economics does not say anything either in favor of or against myths. It is perfectly neutral with regard to the labor-union doctrine, the credit-expansion doctrine and all such doctrines as far as these may present themselves as myths and are supported as myths by their partisans. It deals with these doctrines only as far as they are considered doctrines about the means fit for the attainment of definite ends. Economics does not say labor unionism is a bad myth. It merely says it is an inappropriate means of raising wage rates for all those eager to earn wages. It leaves it to every man to decide whether the realization of the labor-union myth is more important than the avoidance of the inevitable consequences of labor-union policies.

- Mises, Human Action

Hayek:

The confusion which has been created by the ambiguity of the word economy is so serious that for our present purposes it seems necessart to confine its use strictly to the original meaning in which it describes a complex of deliberately co-ordinated actions serving a single scale of ends, and to adopt another term to describe the system of numerous interrelated economies which constitute the market order. Since the name ‘catallactics’ has long ago been suggested for the science which deals with the market order and has more recently been revived, it would seem appropiate adopt a corresponding term for the market order itself.

The term ‘catallactics’ was derived from the Greek verk katallattein (or katallassein) which meant, significantly, not only ‘to exchange’ but also ‘to admit into the community’ and ‘to change from enemy into friend’. From it the adjective ‘catallactic’ has been derived to serve in the place of ‘economic’ to describe the kind of phenomena with which the science of catallactics deal. The ancient Greeks knew neither this term nor had no corresponding noun; if they had formed one it would probably have been katallaxia. From this we can form an English term catallaxy which we shall use to describe the order brought about by the mutual adjustment of many individual economies in a market. A catallaxy is thus the special kind of spontaneous order produced by the market through people acting within the rules of the law of propert, tort and contract.

- Friedrich Hayek: Law, Legislation and Liberty. Vol 2, The Mirage of Social Justice: The Market Order or Catallaxy. Sidan 107ff.

ie. in Austro-speak:

Praxeology is the study of human action.

Praxeology rests on the fundamental axiom that individual human

beings act, that is, on the primordial fact that individuals engage in

conscious actions toward chosen goals. This concept of action contrasts

to purely reflexive, or knee-jerk, behavior, which is not directed toward

goals. The praxeological method spins out by verbal deduction the

logical implications of that primordial fact. In short, praxeological

- Murray Rothbard

Catallactics or economics is the praxeological theory of the way the free market system reaches exchange ratios and prices.