I am an engineer from Nepal. I am working in USA comfortably. Should I know about economics ? Why ?
I wish to give the answer in the following steps.
Dictionary Meaning of Economics : Branch of Science that deals with the Production, Distribution, Consumption and Services and their Management.
Science innovates new ideas. But it does not provide any idea about the end-use of the innovation. Engineering makes a design to convert the ideas into useful products. But it cannot foresee the methodology to manufacture these products. Technology prepares a process to manufacture these designs into products of utility, and sets the supply quantum. But the products becomes useful only if it is within the means of the people to buy, utilise and get some expected advantages. This decides the demand quantum. The Science to relate the Demand with the Supply is Economics.
The foundation for modern Economics was initiated in 1776 by Adam Smith (1723 - 1790, Edinburgh, UK) through his paper "An Enquiry into the Nature and Causes of the Wealth of the Nation". He postulated the theory that Labour is the only source of national wealth, and investment in productive powers of labour is essential. He emphasized the need to have the division of labour, importance of individual enterprises, and the benefits of free trade . From then, the dimensions of Economics expanded towards a methodology to direct and decide the formation of wealth, their distribution and their impact on social welfare.
Also, after the 2nd World War (1939 to 1945) many war strategies became beneficially usable for peace-time production and distribution management in the form of Operations Research. This technique converts any requirement into a mathematical model with an objective or target function. Then sets the equalities and inequalities for the constraints and limitations within which the objective or targets are to be reached. The problem is solved algebraically, with Optimisation of favourable aspects, and Minimisation of unfavourable elements.
The final result is then interpreted into implementable decisions. Economic Science has adopted this mathematical modeling into the application concepts as Econometrics.
In 1969, Quantitative synthesis of the national economy to isolate the important factors and their effects by means of a set of definitions and equations was introduced by the (First) Nobel Laureates in Economic Science, Jan Tinbergen (1903 – 1994) Netherlands School of Economics, Rotterdam, and Ragnar Frisch (1895 to 1973), Oslo University, Oslo, Norway. They developed and applied a dynamic model for the analysis of the economic processes, through the dimension of Econometrics.
The 1970 Nobel prize award winner in the area of Economic Science, Paul. A. Samuelson (1915 to 2009, MIT, Cambridge, Massachusetts, USA) was known as the father of economics for "the scientific work through which he developed for static and dynamic economic theory and actively contributed towards raising the level of analysis in economic science".
In 1972, John.R.Hicks (1904 to1989, All Souls College, Oxford, UK) and Kenneth.J.Arrow (1921, Harvard University, USA), were the Nobel prize Winners for Pioneering Contributions to the General Economic Equilibrium Theory and Welfare Theory.
In 1977, the Nobel Prize was awarded to Bertil Ohlin (1899-1979, Stockholm School of Economics, Sweden) and James.E.Meade (1907 to 1995, Cambridge University, UK). They provided a Path Breaking contribution to the Theory of International Trade and International Capital Movements.
In 1979, W.Arthur.Lewis (UK/USA) of St.Lucia (1915-1991), Emeritus Professor, Woodrow Wilson School of Public and International Affairs, Princeton University, New Jersey, USA, and former President of the Caribbean Development Bank (A World Bank and UNDP set up for Regional Development), Barbados, West Indies, along with T.W.Schultz of USA (1902 - 1998) was awarded the Nobel Prize in Economic Science.
They pioneered the research into Economic Development with particular consideration to the problems of the Developing Countries.
Contributions in the Current Millennium
In 2000, the Nobel Laureate James.J.Heckman (1944. University of Chicago, USA) developed a theory and model for analysing selective samples. Also the joint Nobel Laureate Daniel.L.McFadden (1937. University of California, Berkeley, USA) developed a theory and a method for analysing discrete choices.
A well functioning economy is utmost importance for the welfare of any society. The effective base for such a functioning is the market information. In 2001, the methodology to analyse the market with asymmetric (one-sided) information was established by the Nobel Laureates in Economic Science, George.A.Ackerlof (1940. University of California, Berkley, USA), A.Michael Spence (1943. Stanford University, USA) and Joseph.E.Stiglitz (1943. Columbia University, USA). The basis of this analysis bridged the gap between some of the factual information exclusively known to the buyers (or customers), and other factual information exclusively known to the sellers (or the product and service providers).
The Nobel concepts of 2002 in the area of Economic science are the "Integrated insights from Psychological research to Economic science, especially concerning human judgment and decision making under uncertainty" by Daniel Kahneman (1934, Israel, Princeton University, NJ, USA) and "Establishment of laboratory experiments as a tool in empirical economic analysis, especially the study of alternative market mechanisms" by Vernon.L.Smith (1927, George Madison University, Fairfax, VA, USA).
As a result, now the Economic Science engulfs all the area of Commerce, Management and all the area in End-user relations. The attached schematic shows the intrinsic relationship between the Science, Engineering, Technology, Economics, Psychology and Sociology. Also it establishes the central role of economics in binding all these faculties to function in a continuous cycle, through a simple consumer product - Match Box. (Refer to Attached diagram).
The initial raw match boxes made with White Phosphorous. It starts and functions in the cycle route "A" from the (1. Science) and ends in
(6. Sociology). The Sociological feed-back "A" from user groups, initiates the necessary action from Science to develop "Safety Match Boxes" using Red Phosphorous, and functions in the cycle route "B" from the (1. Science) and ends in (6. Sociology). This cyclical process is continued (C, D, E etc..) and resulted in today's wax coated long burning matches, electronic lighters etc...
In this cycle 1 to 3 are the Supply functions and 5, 6 are the Demand functions. These two are linked, moderated and cyclically activated by 4, the Economics, performing the critical, crucial and central function.
The answer to your question is : Economics plays a vital role for the Socio-Economic Development of the world, linking the various needed faculty. Even though you are an engineer, you should know the concepts and uses of economics, to function better in the current millennium. Economics provides the link and guideline for cost control and productivity optimization for continued survival in your profession and your future leadership growth.
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