Monday, January 25, 2010

Economics - Negativity

          My girlfriend and I spend hours arguing with each other about what economics has done, will do and the effects it has on us and the world so be prepared for much future discussion.


          This discussion begins with a brief talk about what I believe to be economics. Many people that I have conversed with believe that the area of knowledge named economics is derived from math. I myself did before I entered my first economics course. Before long, I realized that economics is ultimately a way of thinking. Math, as a loose definition, is a logical circuit in order to prove something abstractly. Economics is the study of behavior under scarcity and application of theories to allow accurate predictions. In order to study market behavior, we must study the power behind it which is not money (a tool of economics) but the population involved. I personally believe that economics is the innate and natural way of thinking through eons of evolution and can be applied to many other species other than our own. For example, if a tree had the ability to grow to 1000 feet due to the mineral and water constraints, it will not grow to 500 feet and save the available recourses for a later time. It will exploit the resources to the fullest no matter the future consequences. Another example shown from nature: if a given prey population gets too large, the predators have more to eat and their population grows which in turn decreases the prey population due to overexploitation and the predator population decreases once again. We ultimately live in a world of scarcity and so to survive, we must exploit the resources around us. We have had the relatively recently defined concept of economics ingrained into our DNA since the beginning of nature’s interactions.

          Economics assumes that all parties involved in market or other interactions are “rational”. This is a fatal flaw when attempting to understand and predict behavior that is ultimately human. We are simply not solely creatures of logic but irrational beings as well. Even when we act completely rationally from an economics point of view, we cause other people and our world harm. At this current moment, many companies in the western world are exploiting others in developing countries in order to reduce costs and maximize profits. This is sound economic thinking however it is unethical to many people including myself. At this point, a cynic may say that this economic thinking is the reason there is such a gap between the rich and the poor (or developed vs. developing). One must realize that not all companies, in fact relatively few, exploit people in developing countries. Much of economics is not designed around retail selling but services and simple paper value transactions. I believe that the processes that take place within western economics are reviewed harshly and the few negative aspects are blown out of control.

           This leads me to a conversation about hypocrites within society. Many are in disbelief about the lavish western ways of living and the disregard of recourses and acknowledgement of what possessions we have. Firstly, one must be aware of their impact upon the world. Economics must take place whether you live in a democratic, communist or anarchist world. If you need something to live (which you must have at least food and shelter) then you will be willing to go out of your way to get it, hence demand. And because of this need, there needs to be a supply of it in order to fulfill that need. Now that you have understood your own impact on the world, imagine having nothing but what you need to survive. No cars, roads, bikes, sky scrapers, universities etc. None of those things could be possible without the willingness of those that demand it.

          I may have been ranting, raving and digressing about some things within this post but I would just like to make the point that not all economics is negative. The reason that we have higher education is because there is a demand of jobs which need higher knowledge and intelligence which eventually plays into economic models. You may discover that for countries to move out of developing and into the developed category must employ their largest resource which is their population. If the countries people are richer, they can take more time off, purchase more goods and in turn, feed the countries budget. This then develops into better services, hospitals and so on. Some people clash with the ways of economics but I believe that with properly implemented ethics and the embrace of economics as a fact, us as a human race can make large strides towards a better future.

(Please leave a comment or suggestions about what you thought about this post. First one ever)
          - Kevin

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