Economics 101
Economics 101
Economics 101
What is economics?
The word economics is common to everyone.
Ask anyone you meet
around, be it here inside the WMSU campus or there at the market, and you will
be surprised to know that people really have perceptions about economics or
something about the economy. Let them talk freely as to how they "see the
economy" today, and no doubt you will hear them saying: so hard to find money,
income is not enough, no chance of getting a job here, endless sky-rocketting of
prices, no investments coming in, and good for the chinese - they virtually have
the entire city's commercial district! And if you further get harsh comments
"bullshitting" tricycle drivers "extortionary fares," the stinking market at
downtown area, the undisciplined Baliwasan PUJ drivers picking up passengers in
the middle of the street, then, you have simply found out that the person has
plainly expressed his or her disgust over something away from the borders of
economics yet statements which have been originally precipitated by some
economic reasons.
But what is really economics? To begin with, it is best to discuss the origin
of the term and give its most common definition. From various sources, the
origin of the term is attributed as far as to the time of ancient Greece when the
word oikonomia was coined, the meaning of which was simply limited to the idea
of management of the household. The original meaning of the term was limited
within the household set-up and not as a "policy prescriptions for the workings of
society or state in general. From the time of ancient Greece, the term may have
evolved in its meaning during the medieval period until, during the 18th century,
the field of study was formally "turned into a science" by a Scottish Philosopher
Adam Smith, now regarded as the "father of modern economics" when he
published his famous work the Wealth of Nations in 1776.
Today, and as it is commonly defined by most authorities in the field,
economics is defined as a social science which deals with how man could best
allocate the scarce resources in order to bring about the fullest satisfaction of
human wants. This is what I call as the classical definition of economics. The
classical definition poses some questions which ultimately would lead to
generate more and more questions. It is for this reason that, without changing
the substance of the definition, I "redefine" economics by simply "rephrasing the
classical definition" with the use of terms that would give plain and simple
meaning to the discipline and getting rid of more potential controversial
questions.
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The first point of controversy in the classical definition is the term scarce
resources. The question that should be asked is: are resources really scarce?
Are resources, say those that are given by nature, really scarce? Take the case of
petroleum. Is it scarce? May be in our country but abundant in the Middle East
as they are the main source of world oil supply. But oil-rich countries have
scarcity in water! The question therefore is, from whose point of view do we say
something is scarce? Are diamonds really scarce? Well, now technology could
produce diamonds in the laboratory! Is gold scarce?
There's plenty of gold
deposits on the earth's surface!
There's a lot more in other planets! What
about rice? Bread? Uranium? Levi's Jeans or cellphones and electronic loads?
And of course, what about money? For those who could hardly afford to eat even
once a day, money may be extremely scarce! But perhaps, it may be the exact
opposite for the President of the Microsoft Corporation.
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Division of Economics
The study of economics may be divided into two areas: microeconomics
and macroeconomics. What is microeconomics? From the word micro (meaning
small, as in the word microscope or microscopic referring to the tiny particles),
microeconomics refers to that branch of study that focuses merely on any of
those specific components as illustrated above. For example, if one studies the
firm, how and how much a firm produces, the inputs it buys, the profit it
generates, then that area of study is a microeconomic study. Same for a study
that focuses solely on studying, say, household income, how a household earns
and spends income, its consumption pattern and the like, such is also a
microeconomic study. Also, the study of the market, how buyers and sellers
interact creating price fluctuations in the market prices, is also a microeconomic
study. But when a study is made in such a way that you see the interplay of all
these components, that is, a study that involves all the three components, then
the study becomes a macroeconomic study. Say, for example, the study about
national income, how government raises revenues that come from various
sources. Such is a macroeconomic study. The study about growth in the
economy or development programs, such is a macroeconomic study. To simplify,
any study that is concerned with any one of the components, such is a
microeconomic study. When it is the study of the economy as a whole, then it is
macroeconomics.
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has totally shaped capitalistic culture of people. When I say capitalistic culture
or capitalist culture, I mean that the way of life today is very much centered on
money! It's as if everything is measured and judged in terms of money. How do
you regard the wealthy? You look them high. How do you regard the poor? You
look them down. That's the usual attitude. But why? Possibly because we look
at things in terms of money value. Why do so many students these days flock in
the College of Nursing? What motivates them to go into such study knowing
very well that the market of nursing graduates, as recent surveys reveal, has
already been much saturated? Surely no doubt, everyone desires to work abroad
hoping to earn dollars! Why do people, almost all people now if only they have
the chance, desire to go abroad? Again, in search for the "almighty dollar". And
so, thousands if not millions are flooding out of the country. And the results?
Tremendous social cost - families disrupted, children suffering phycho-emotional
crisis, worse, and some migrants lost sanity in the midst of waging battle against
loneliness in foreign lands. All caused by that desire for money and for more and
more money without even realizing that that craving simply would never come to
an end! That is in the minds of most people today. In fact, that's the prevailing
consciousness of most people today. The capitalist consciousness that has
conditioned minds of people to look at things in terms of money value. And so
we live life as if we live for money!
Let's try to look at some very real issues today. Take for instance
the issue of population and economic growth. An economic growth model has
recently been developed and so popularized as a model for those Third World
economies aspiring to rise above their present status. This is the popular Solow
Growth Model developed during the 50s and 60s by Robert Solow who finally got
the Nobel Prize in Economics in 1987 for his unparalleled contribution in the
subject of economic growth theory. The theory really sounds "quantitatively
scientific" with its sophisticated analysis on capital, labor, population and
depreciation factors in a given economy. The theory, in a way, is largely rooted
from the Malthusian theory of Robert Thomas Malthus who popularized that
famous postulate that population increases faster than food supply" and that
"its increase is geometrical in ratio compared to production which is arithmetical
in ratio". The Solow Growth model is similarly constructed along that premise
but somehow substantiated with mathematical sophistication where finally
"critical points and gaps" are inferred from the analysis of the model. And the
seeming conclusion is: curb or control population growth in order to attain
economic growth! It is from this theoretical model that many developing
countries have launched population control programs in the hope of having an
increase in growth rate!
But what happens to the moral issues surrounding the population control
program? Are they serious issues that should be considered or better discarded
or set aside because they would simply tend to be nuances of the "most
desirable and scientifically-valid economic decision" in the light of the
"scientifically-proven economic growth model" of Solow? But what is really the
truth of the matter? Is it correct or right to curb population growth? Is it really
morally right to subject millions of people to all these "sterility stuff? Because if
we dont do it now, it would be a complete tragedy in the future? And who are
the brains behind this economic prophesy? That if we dont limit or control our
numbers, then there will be not enough space (also shortage of resources) for
everyone?
seriously regard the realm of ethics and morality. And that is why economic
decisions should be made with utmost regard to value judgment.
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