11 July 2012

Day 40: What is Economics?

Economics is about how a society decides to answer particular questions in relation to resource distribution – which can be brought down to the follow three:

1)    What should be produced by a society?
2)    How should it be produced?
3)    Who gets to consume what is produced?

Many hold the believe that economics is a ‘one way street’, where for instance ‘Capitalism’ is treated synonymous to ‘economics’, as the ‘only way’ that economics can ever be – while this is only one way of answering the above basic economic questions, and where the Equal Money System is another way of answering these three questions.

The above three questions are the basis of economics, and any form of economic system has to answer to these three questions. So whether you have an economic system based on complete government control or an economic system based on total individual control – the same questions are being dealt with, but in different ways.

Currently within the world there are several different types of economic systems, which economists like to present within a spectrum which runs from the one polarity of absolute government control to total individual control – where most of the economic systems currently lay in-between these two polarities.

Total Individual Control
What is produced, How and Who gets it is decided by individuals
Stage 2
Government deals with basics only such as police protection, enforcement of contracts, protecting property rights, national defense
Stage 3
Includes Stage 2 + additional services such as education, science, roads, fire protection
Stage 4
Stage 3 + additional programs such as health care and retirement
Stage 5
Stage 4 + state industries (steel, cars, agriculture), distribution of basic consumer goods (food, housing)
Stage 6
Stage 5 + government in charge of employment, housing, food, production, prices
Total Government Control
What is produces, How and Who gets decided by Government

However, as capitalism is the main overall system implemented within the world – students are mostly taught within the context of capitalism only – and since this is the system we are currently living in and as – this will be the system that we’ll walk through within these blogs.

So keep in mind that all the vocabulary points, concepts, views etc. which will be explained in this blog are specific to the current system in play, and may not necessarily be relevant to an Equal Money System. Yet we will still discuss these points as they form part of the current system, and the thought pattern of economists -- and thus form part in completing your understanding of how economics currently works and what requires to be corrected – both in how things are viewed and how things are structurally manifested according to these views.

Let’s have a look at some definitions which have been given to the term ‘Economics’, so we can establish the starting point of our current economic system.
“Economics is the study of how our scarce productive resources are used to satisfy human wants.” – George Leland Bach

“Economics is the study of how people allocate their limited resources to provide for their wants.” – Jack Harvey

“Economics is the study of the use of scarce resources to study unlimited human wants.” – Richard Lipsey

Within each one of these quotes we can derive the following components:

•    Scarcity of Resources
•    Human Wants
•    Choices

The current Economic Paradigm assumes an inherent conflict between “Scarcity of Resources” and “Human Wants” – which are often referred to as ‘unlimited’. Since we have only so many resources available – but unlimited wants to satisfy: we have to make certain choices – and something or someone will always have to be sacrificed (this is another re-occurring trend found within ‘trade-offs’ and ‘opportunity cost’).

So what’s fascinating to be observed from the statements of various people about “what is economics” – is that various value judgments* are implied, but which are never questioned or explained.

The component of ‘Human Wants’
This trend returns over and over again throughout current economic theory where precedence is being given to ‘human wants’ over ‘needs’.

The Anthropocentric View**
Another value judgment is implied, since the definitions of economics as the framework which encompasses the distribution of resources, only takes into consideration humans: what about the animals? plants? Earth itself?

Sacrifices Have to be Made
Since the definition of economics was agreed to be ‘unlimited wants vs limited resources’ – there is a value judgment implied, which we pointed out earlier as ‘wants over needs’ – and where this choice/preference inevitably leads to having to sacrifice since the definition as a mathematical equation is not balanced – which in itself reveals another value judgment, which is that sacrifices are acceptable – within the decision/agreement that wants ought to be placed over needs. Because if you have look at it, if the definition of economics had been around the lines of ‘the management of limited resources towards limited needs’ – then the point of conflict with which we are currently faced with as ‘unlimted’ vs ‘limited’ resulting in sacrifice – would not have existed!!

The starting point of current economic thought is completely self-contradictory:

Unlimited Wants + Limited Resources = Wants can never be satisfied

I mean, it’s simple math that this is an unsustainable goal – so why pursue it at all? It just doesn’t make any sense! So – the amount of suffering and destruction currently taking place on Earth, is really no surprise if one just consider this one statement, as the definition of economics – which is not only completely beside the point (in terms of wants over needs – humans over everything), but mathematically impossible to be sustained. Yet, this is what we’ve accepted and allowed to be lived within the World – and within this chase of obtaining and achieving the impossible (satisfying all our desires), we are driving millions into their grave, as the sacrifice we willingly give – as pointed out above. And for what? For wants and desires which are apparently worth more than basic needs?

This is completely unacceptable.

Yet no-one seems to question this point – thus economic thought is really just a reflection of our own thought as living beings, as our character as Human Beings, where we all collectively decided within ourselves that our personal desires and wants are to be prioritized over the tending of everyone’s basic needs with what we have, as available resources on Earth.

Isn’t that just plain…..evil?

* Value judgment:
a judgment assigning a value (as good or bad) to something

** Anthropocentric:
1 : considering human beings as the most significant entity of the universe
2 : interpreting or regarding the world in terms of human values and experiences


  1. Great Blog. I also noticed these points when I studied economics last year, that the entire study/theory of economics as it is currently taught/understood is based on assumptions that are essentially value judgments that we have decided to accept - leading to a system that is as dysfunctional as the one we have created and experience today.