Friday, 18 October 2013

The Simplicity of Economics

For those who've never been off to college or university, and even those who have....there's this series of classes related to economics that you can take.  Economics experts will tell you their area of study...is a "science".  Some professors will laugh over that comment.....some will just grin....and some will just stand there to assure you that it's all science (believe it or not).

Economics 101 is roughly forty hours.  It's a basic introduction....through a series of lectures....to bring you into the vast world of economics.

Most students yawn through the second class, and barely drift in and out of the remaining lectures.  Economics tends to be awful boring when lectured at this level.  Most professors can't bring the topic down the level of a normal human being.  Abstract lecture, is the most painful of all lectures.  It's like sitting in a Baptist church on a hot July day, with the AC off, and the minister on some tirade over what Moses meant to say, but never said it in that fashion.

For the practical sense of things....there are only six real basic principals to economics.  You can build forty more classes and a thousand hours of lecture into this mess.....but those six principals are the mighty weight in which this world survives, and capitalism thrives.

1.  Economics rides off the premise that you stand up and offer a trade of something of value, for something else of the same or better value.  You work for a living and produce something that sells.  You buy a thousand pounds of apples, and sell them for a tidy profit.  You build a hotel that rents rooms for an exchange of value.  If there is no gain or no profit in the mix....economics fails....either slowly or swiftly.

2.  Consequences determine the future of economics.  You add onto a factory to make more of something, and months later....your consequence pays off.  You borrow money to support a marginal business deal....it fails....your consequence spells dome a year or two later.  You develop something that people will work forty hours to have the money to buy, and you profit off their desires.  All of these consequences are part of the blessings and dead-ends of economics.

3.  Motivation and enticement move economics like a river.  Your neighbor buys a new truck with all the bells and whistles.....you sit for months with desires of the same truck, and you eventually buy one. Your boss gets a new cellphone with various new technology features.....you get the urge to do the same.  All across our society today, motivation is moving tens of billions a month in sales....over things that you really don't need but desire.

4.  Market forces influence economics.  The plain truth is that you walk into a Sam's Club and buy a 100-lb bag of dog food for a very low price, but there's no practical way of you even moving this bag over than leaning it into the trunk and later rolling on the ground in the garage.  You buy the bulk bag because it saves you twelve percent off the regular price.  The same goes for a 800-pill bottle of asprin, the half-gallon apple jelly jar, and the five-gallon container of cheap California wine.  More for less.

5.  Billions of choices.  The simple truth is that an economy survives because so many people have so many different views of success, bargains, deals, and saving money.  Without the choices, the rational side vision of an economy would dry up and disappear.  People now pay millions to travel to Mexico for a beach vacation.  People will flip every three to four years to buy another wide-screen TV....whether they need it or not.  People will go through an entire Christmas season and spend little to nothing....because of a fear of the unknown stability of their job.  Choices drive the economy up, choices drive the economy down.

6.  Anticipation is the turbo-charger of an economy.  A wise CEO can forecast his business model, and develop the right products to deliver....then seize on sales to profit greatly.  Anticipation of a higher gas prices, will drive the public to buy only four-cylinder cars.  Anticipation of a hot summer will drive folks to upgrade their AC unit or replace it entirely.  Anticipation of  crime will drive people to buy guns and security systems for their houses.

Those six basic features of economics....usually take forty lecture hours, and only on rare occasions do most students agree that they got the 'jest' of the whole theme of the lecture.  If you can take the six features, and lay them out in simplicity.....you just wrapped up an entire class.

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