1. Introduction.
Often, when you ask a definition of economics, the outsiders who come for the first time in this area tend to concepts related to money, the value of things or the wealth of individuals or countries . If you ask a person on the street their opinion on economic issues, his response probably allude to unemployment, rising prices or the stock market situation.
Indeed, the field of study Economy conventional covers all issues related to pricing of things, with the analysis of activities involving costs and produce measurable benefits in cash, in short, with the production and distribution of goods and services to satisfy human needs. But money is not everything. In fact it is possible to solve many economic problems without using money. There was a time when human beings lived without money. More recently, in 1976, the Cambodian government of the Khmer Rouge abolished all forms of money and remained in the country demonetized economy for over three years. The results were very negative with a large fall in production and it is estimated that the labor camp killed three million people, but in any case was proved it was possible.
Moreover, the price of many things is not expressed in monetary units, the offender is arrested, for example, pays his debt to society in jail time. The same method which calculates the effect on the consumption of olive oil, a rise in price is also used by some theorists of the Economics of Law to estimate the effect of a rise in penalties for criminal activity . That said, we will study other concepts.
2. Concept Economics.
economy deals with managing scarce resources to produce and distribute goods and services to consumers. And they can be divided into two groups:
a) Microeconomics studies the behavior of economic units such as families, businesses, ...
b) Macroeconomics studies the functioning of the economy as a whole, reflected in a number of variables.
addition, this science is related to other sciences as Social Science: Philosophy (based on logical reasoning), History (explain the phenomena past economic), Law (define property), geography (environmental studies, trade relations and transport and communications), Anthropology, Sociology, Psychology (study of human behavior) and instrumental sciences: Math (to quantify), Statistics ( facilitates data).
The economy and the satisfaction of needs.
As explained earlier, the Economy, is to meet the needs of individuals, peoples, nations, etc ... ....
For example:
a) The resources are insufficient to meet our needs (Biological: eat, breathe, I want to improve and develop education, culture, pleasure, social factor, as civilization evolves increasing human needs.
b) may be material needs (food, clothing, housing) or intangible (education, leisure, self-esteem, affect).
c) The material needs are met: Real books that cover everyone's needs and economic goods that meet such needs housing, clothing, food. Education, leisure, ... are met with scarce goods and services and susceptible of different applications (eg the materials used in the construction of a house can also be used for a school, a bridge). This type of goods and services is the field of study of economics. Therefore an economic commodity must meet three conditions: serve some purpose, be low, and open to alternative uses.
d) The satisfaction of needs requires the company to engage in productive activities, which after manufacture is distributed for consumption.
e) The ratio of production (goods manufacture and decide that means) and consumption (the families decide how to distribute income to meet their needs.)
f) The property meets all that, directly or indirectly, the wishes or needs of human beings.
But also, we can study according to their typology:
a) According to nature, economic or scarce goods
= those who can not get enough to satisfy the desires. Free Real
= those for which there are enough to satisfy everyone.
b) According to materiality:
tangible property, works, ...
intangible assets or services: activities, knowledge, intangible object ......
c) According to nature: Consumer
: these are for the direct satisfaction of needs can be sustained as the computer or not lasting as gold.
capital or investment goods: are the goods used in the production of other goods, not directly satisfy human needs as an excavator, is divided into physical capital and human capital.
d) According to the function, can be: Real
end, have been the changes needed for use or consumption; car
Intermediate goods: they must undergo further changes before becoming a consumer or capital goods such as steel, flour ...
e) According consumption would be:
public goods: they are consumed simultaneously by several people, lighting, education ..
Private goods: they are consumed by one person.
we can say in general, the economy is to answer three basic questions: what, how, to whom. Regarding the first question is to determine:
a) what needs to be covered first, with what priority and in what proportion (basic needs, secondary or sumptuous).
b) what technology to use: with a lot of manpower or the equipment is key to the production.
c) decide whether to first meet basic survival needs of those not covered or have high needs or luxury of those who have amply covered the basics.
The economic problem: scarcity and the need to choose.
scarcity becomes an economic problem because the desire for gain is greater than available. This imbalance between needs and resources forces us to make economic decisions to decide where to allocate more resources (State) or how to distribute income (family).
To do this, let's explain some definitions and concepts:
is called opportunity cost when we decided to use the scarce resources given up the opportunity to use otherwise (prevents sports movies, build weapons makes you give up make roads). To calculate the difference between the two options. And the result is the opportunity cost of choosing an option.
The production possibility frontier (FPP) is the line or chart that reflects the options offered and the need to choose between them. If you are in the line (or indifference curve: it does not matter any points): When all available factors are being used efficiently to produce, inside: poorly produced, on the outside: you can not produce.
The production possibilities curve shows: the amount we can produce in a given period of time and resources and existing technology is limited and the opportunity costs (we can only obtain additional quantities of goods by reducing the production potential of another).
efficiency is called the maximum output that can be obtained from a well with specific resources. And economic efficiency when it can increase the quantity produced of one good without reducing the other.
production inefficiency is the minimum that can be obtained from a well.
3. Economic activity: production factors and economic agents.
a)
resources or productive factors of production factors or resources are the basic elements or factors used in the production of goods and services. Are land, labor, capital and entrepreneurship.
arable land for both urban and natural resources as land and sea.
b) The work is physical and intellectual powers of human beings involved in the production process.
c) The capital is the buildings, factories, machinery, furniture, equipment, inventory. Real or physical capital (machines, buildings) financial capital: available funds to purchase real capital (stocks, bonds), human capital (the intellectual or manual.)
d) Entrepreneurship is the ability to gather resources or other factors to produce goods, services and technologies.
4. Economic activity and economic actors .
agents of economic activity are the families, businesses, the public sector.
productive activities are grouped into three sectors:
a) Primary (agriculture, livestock, fisheries and mining) are the activities undertaken with the resources or raw materials.
b) Secondary (construction and industry) to transform materials into products or semi-processed.
c) Tertiary (transport, education, healthcare, banking, commerce, leisure) the provision of activities.
-Businesses
companies are units of production that uses factors of production and selling goods and services.
Types of companies
a) According to: industrial (transforming), commercial (do not change compared to only sell then buy), service (provided directly activities).
b) According to legal nature: individual and collective (limited stock, cooperatives, labor corporation, partnership).
c) by size: large (over 250), medium (50-100 / 100-250), small (10-50), micro (1-10).
d) As geographical area: local, regional, national, multinational.
- The home or domestic economy
Families (domestic economies or households) are the units that consume goods and services and provide resources (labor and capital) firms.
- The State public sector
The public sector bodies and all government (local, regional or state) that functions as a unit of production and consumption. It also establishes the policy trying to achieve full employment, GDP growth, price stability and equitable distribution of income.
5. Economic Systems.
economic system is called the way in which economic activity is organized in a society, the production of goods and services and their distribution among its members. Every economic system is characterized by specifying the legal ownership and the terms of engagement between individuals. Is the state that develops and enforces the law and reserves to himself some areas and forms of action. The economic system therefore serves to determine which agents and under what conditions may take economic decisions. The
classical economist Karl Marx suggested that the economic system used by every human society depends on the development of productive forces, especially the expertise, accumulated capital and population. While the law is adequate to the level of productive forces, Marx said, they can develop without severe tensions appear, but there comes a time when the productive forces have grown so much that the social structure, instead of enhancing their development appears as a limitation, a brace that prevents their growth. That's when the legal superstructure and consequently the ownership, is forced to change shape more or less abrupt.
1) What have been the economic systems in the twentieth century?
Market Economy:
This system of exchange founded for the pursuit of profit and at the core market for the widening global and the increasingly more complex forms of activity that opens the new business market. Economic system based on private ownership of the means of production. Decentralized decisions made by individual economic agents who seek to maximize their benefits are guided by the teachings of prices issued by the market, which operates freely without any type of regulation or intervention external to it. The allocation of productive resources are made freely by the operations of a free market in which prices respond to the forces of supply and demand.
Centrally Planned Economy:
a) An economic system based on collective or state ownership of means of production, and that the decisions of individual agents should join all or part of the plans developed by Policymakers in the system, the market is replaced by centralized decision making based on any action plans that are mandatory for all operators.
b) political and philosophical doctrine that proposes the creation of a classless society for which they are required to eliminate the private ownership of the means of production by replacing state ownership to them or by some form of collective control of them.
This involves the removal of the market system and the creation of centralized planning methods of production and distribution of goods and services.
Market Mixed Economy: An economic system where the state intervenes to regulate market failures. Arises from the problems that caused the system market economy where the state began to assume a major role.
2) What have been the contribution to the economy of these characters?
a) Quesnay: Make a remarkable description of the economy as a circular flow is still used in current texts.
b) Adam Smith : analyzed the basis of price and income distribution conducted one of the first empirical studies of inflation but his most recognized contribution was that the market mechanism was a natural order is regulated by itself. In 1776 he published "The investigation on the nature and causes of the wealth of nations ".
c) David Ricardo : He wrote his principles of political economy and taxation are in-depth analysis of the nature of economic rent presented a careful analysis of value. We also analyzed the patterns of international trade and proposed a rudimentary version of the law of comparative advantage. Ricardo autumn presented a vision of capitalism.
d) Karl Marx: Marx cares about the economy. For problems of workers . With this proposed class struggle in establishing the term collectivism as fatal and necessary in evolution of societies. Marx founded the International Workers Association. Marx focused on the capital and the critique of political economy. Those related to the concepts of thinkers of the time especially Adam Smith and David Ricardo, as the work is the only source of income. Its main work is "The Capital" in 1867. In the '90s, some people still argue the validity of Marxist doctrine as a method of interpretation of history.
e) JS Mill: wrote in his classic work on political economy principles relate the national and international trade has been the champion of free trade.
f) TR Malthus: While that work continued to grow, food will tend to increase in arithmetical progression and not in geometric progression. Wrote a book that was used to defend the needs of English law review on the poor.
g) Walras: discovered how to make the economy as a whole (as a simultaneous general equilibrium in all markets of labor, land and production).
h) Marshall: was a hypercritical with their own writing was a founder of the modern economy exposed through graphical representations, was able to make a great synthesis trying to combine the best of classical economics with the afterthought.
i) JM Keynes : dealt a mortal blow to the belief in Say's Law and Keynesian economics, also wrote the general theory in 1936.
j) Aristotle economic thinking began with and continued with the teachings of the medieval Scholastics. These first movements are occupied to a lesser extent policy doctrines such as the idea of \u200b\u200bfair compensation intended to indicate that the value of the goods.
3) arises why the market has triumphed as an economic system?
- began to emerge global consensus around the belief that market forces would help accelerate the development in less industrialized economies, although there is still no agreement on the degree of intervention that governments should have in this process.
During the 1980's and early 1990, more countries, as diverse as China, India, Brazil and Tanzania, imposed reforms aimed at restoring the free market. The experience of Southeast Asian countries was considered, by some, as the triumph of market economies, but for others it was only a demonstration of combining the advantages of markets with an intervention effective government, perhaps too effective so that you can copy any government.
- The market where supply and demand made and puts the fair price of the products as it takes to make the product, this method of exchange is typical of capitalism and is where you perform goodwill.
4) Main distinguishing features of the current economic system.
a) In MARKET ECONOMIES:
Who makes the decisions? Decisions are made
traders in the market, decide what, how and for whom to produce increasing importance of large corporations or oligopolies that interfere the free market.
What is Property?
The property is private. Individuals are the owners of productive assets.
Who directs the production?
The employer makes decisions about what and how to produce.
What the philosophy that drives economic activity?
The philosophy behind saving activity is profit.
How are prices?
prices are set by the market according to supply and demand.
What role does the state?
The state produces the economic framework that guarantees freedom of the market.
b) In the centrally planned economy.
Who makes the decisions?
is the state that plans and decided through the planning institutions (ministries, etc). State enterprises decide on small-scale targets.
What is Property?
The means of production are the collective and state ownership on its behalf consumer goods can be privately owned.
Who directs the production?
The production is directed by the state through planning institutions. State enterprises in accordance with the plan. What
philosophy governing economic activity?
The philosophy that drives economic activity is the equal distribution of income and wealth.
How are prices? Prices are set
planning agencies.
What role does the state?
The State directs all, economically.
c) in mixed economies:
Who makes the decisions?
Decisions are made by economic agents through the market. Importance of state in the provision of certain goods and services (social) importance of multinationals.
What is Property?
property is the state and private property.
Who directs the production? The production is directed
private entrepreneurs in all matters relating to their field. The state sets the goods and services provided to the community.
What the philosophy that drives economic activity?
The philosophy that drives economic activity is that of profit in the private sphere, combined with the improvement of social welfare.
How are prices?
prices are set by the market. The State reserves the setting of public goods.
What role does the state?
The State develops the economic framework and guaranteeing the social rights of citizens.
6. The distribution of surplus in the current economic systems.
"The product of the ground-everything that is derived from its surface by application of labor, machinery and capital is divided among the three classes of the community, namely the owner land, the owner of the stock or capital necessary for its cultivation and workers, through whose efforts it is grown.
But at different stages of society, the proportions of the total output of the land, which will be distributed to each of these classes, under the names of land rent, profit and wages, will be essentially different, depending mainly on soil fertility, capital accumulation and population and the skill, ingenuity, and instruments used in agriculture.. " He said, David Ricardo, in Principles of Political Economy and Taxation, 1817.
Well, in the central planning system are the state economic planning bodies that decide the fate of the surplus, based on political considerations and equity. To this end, encourage the development of public services and certain productive sectors considered of national interest.
In the system of market economy, private enterprise and the market play the key role in all economic decisions. Thus the surplus resulting from deducting the cost of revenue which involves the operation of enterprises, is the benefit to the employer as payment for its initiative, its capital and risk taking.
Finally, in countries with mixed market economy, the situation described above is supplemented by government intervention to limit the inequalities generated by the economy pure market. Thus, labor income, interest on investments and business surpluses have to pay taxes to fund public works for everyone and, besides, scholarships, pensions, subsidies and social assistance aimed at people with fewer resources.
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