Economics is, in essence, a social science. This discipline that today stars in this article is in charge of studying how to satisfy needs that are unlimited, managing resources that are very scarce and of alternative use. But despite this, on too many occasions, the economy has been reviled by many other scientists, as well as misunderstood by the public. For this reason, it is worth asking, what is the economy for?
So the word “economy” comes from the Greek. Specifically, from the union of two words: “home” and “administration”. Therefore, and in the first place, this definition seems to express something that is part of its essence, to manage the home. But, in the same way, it should be noted that this statement does not only refer to the physical home, through domestic accounting. Well, in practice, it also refers to cities, urban districts, different regions, different countries, as well as, ultimately, the planet. That is why the economy is important, because without it, that planet in operation that it is in charge of managing, as the definition says, would completely stop.
In addition, it should be noted that this science draws on the philosophy of thought, so that, as society and its thinking evolve, the economy develops.
Fréderic Bastiat, for example, was a French economist and philosopher who wrote about the so-called “broken window fallacy”, something we have told here on many occasions. Adam Smith, another great economist, showed how an “invisible hand” operates in the market that regulates the market. Karl Marx, Smith’s great ideological enemy, believed that the capitalist system that Smith was pursuing was neither the ultimate nor the best, since it causes some exploitation, which is why he described, and proposed, communist systems. And finally, other great economists, such as the prominent John M. Keynes, defended the benefits of interventionism in this wonderful science.
And it is that, despite the fact that we speak of a science that presents theories that may not be debatable, that high social component that this science presents, and in which the individual is at the center; those opposing interests that, on many occasions, are presented by individuals who live together in a certain society; and, finally, these unlimited needs, which must be satisfied with scarce resources, lead us to decide on the use of those resources, assuming that opportunity cost that, for many, this decision has. Reason why these economists argue, as well as many others, that we mentioned in the previous paragraph.
But what is the economy for?
A few years ago, the economist Milton Friedman worked and generated an essay under the title “History of the pencil.” In it, Friedman showed that millions of people around the world coordinated through the market to create a pencil. From those who made graphite or wood in the United States, to those who assembled it in India. All of them use the economy and, without it, the pencil, as we know it today, would not have been possible.
For this reason, it must be said that the economy is present in almost everything we do. Even leisure, in the vast majority of occasions, is offered by companies that obtain a return for their services. But it is that even health, education, the police, the army or the roads, bridges, trains or airplanes are an economic activity and, without the economy, none of the aforementioned would be possible. Therefore, to the starting question we must say that the answer is that the economy is useful for a lot.
Therefore, we could say that thanks to this social science, so reviled by many, we have been able to develop. Well, the economy, in short, has created the conditions to improve the quality of life. Today, many are able to access decent and sufficiently paid work, partly thanks to her. And, although there is still a long way to go, advances in this, our beloved science, allow us to go through it in a faster and easier way.
The use of the economy since childhood
As we said at the beginning, the economy is present in many aspects of our life. From the time we are small and go to school, we must make decisions regarding the administration of capital, goods and services. The simple fact of exchanging one card for another with a partner, managing the weekly pay that our parents give us, or the need to choose the gifts this Christmas, for which our parents assigned us a certain capital, and that we have to assign to a certain toy among numerous pages full of alternatives. In all this that we comment, the economy is very present from the beginning of our lives.
When we go to the supermarket to buy because our parents ask us to, it is convenient to highlight the use of finances in this context. When we exchange that chromium for another, in a certain way, we are managing our heritage, at the same time that we start the inventory management –with the chromium that is exchanged the duplicate in our collection– and the commercial practice. When it comes to meeting a boy or a girl, we want our teacher to raise that exam grade for us, or we want to convince our parents to let us go to a friend’s house to sleep, we are developing business skills, at the same time. time we use marketing to expose the compelling vision to those we depend on because of our age.
The economy must spread to everyone
As we have seen, the economy is present throughout our lives, in many decisions that we must make. From the moment we buy a house to the payment of taxes for being a citizen of a certain country, the economy is present in all these actions, having to know it to make the right decision, and in a context in which this is the optimal decision.
For this reason, some very prominent economists such as Mises, Hayek or Keynes, among others, were great popularizers of this, economic science. They all firmly believed that it was necessary as well as imperative. Many even believed that we should all know basic aspects of it, as they are known from mathematics or language. Only in this way would we be free citizens, capable of discerning between what they tell us and reality. Well, how are we going to make the right decision if we don’t have the tools? Would you go rowing without oars?
Thus, citizens must know that the taxes we pay, pay, among other things, health or education, for example. Well, citizens do not make a payment directly, but this is not why they are free services. In the same way, demanding quality in the products we buy promotes efficiency and excellence. All this, as well as the fact that the bank can charge us an interest for lending us that money to buy a house, but not just any interest, are aspects related to the economy that, if we know them, allow us to better manage our resources.
In short, all the above is a clear example of the usefulness of this science. Therefore, we believe that it is convenient that, as we do in Economipedia, economic science is disseminated and shared among all citizens. For only through this economic education, as Nelson Mandela said, can we really change the world.
A complex science? A complete science
Also, lastly, we must know that the economy is not just the stock market or the monetary system. The economy is not just a cast of graphs and data extracted from specialized newspapers. The economy, like so many other sciences, draws on other sciences, coordinating them all in one. That is why we speak of such a complex science, but at the same time so complete.
Thus, as we said, economics analyzes the human being and uses psychology or sociology to complement the study. Marketing, for example, studies how the consumer reacts to a product or service. But engineering is also important. For example, production theories or mathematical methods, such as simplex, are based on it. Ultimately, we are talking about the economy not being a single thing, but being made up of many things, at the same time we are talking about the fact that they are all useful for a certain purpose, all complementing each other.
And we cannot forget, either, about mathematics or statistics. With regard to the first, it helps to reason and use logic. The second, on the other hand, allows you to analyze data and understand, for example, some publications from specialized media. And both sciences help the economist to create macroeconomic models that can predict, to some extent, what will happen.
So, we can only ask: what are you waiting to learn about it?