Economics

Economics

“An economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today.”  
Laurence J. Peter.

Economics plays a central role in our life, because it is all around us. What makes the price of oil go up? Why is there unemployment? What is inflation? All of these are questions where economics plays an important role. So for the person who is curious about how the world works, knowing something about economics is a pretty important thing. Now I’d like to tell you something about economics. Firstly I’ll start with the history of economics. Then I’ll say about macro and microeconomics, continue with definition of system and economic system, after that, I’ll tell you about macro environment, international economics.

Let’s look at the history of how economic has changed over time. In the 1500s there were few universities. Those that existed taught religion, Latin, Greek, philosophy, history and mathematics. No economics. In the 1700s, the sciences were split into natural sciences and social sciences. The amount of knowledge kept increasing, and in the early 1900s social science itself split into subdivisions: economics, history, geography, sociology and political science.

Scottish philosopher Adam Smith is often credited as the father of modern economics for his work The Wealth of Nations, written in 1776. Smith believed that competition was self-regulating and that governments should take no part in business through tariffs, taxes or any other means, unless it was to protect free-market competition. Throughout the 18th and 19th centuries economists such as Adam Smith, Thomas Malthus, David Ricardo and Karl Marx were called Classical economists. The works of Thomas Malthus shifted the focus of economics to the scarcity of things. This increased focus on scarcity led Karl Marx to declare that the means of production were the most important components in any economy. Classical economists developed a theory of value, or price, to investigate economic dynamics. Classical economics is widely regarded as the first modern school of economic thought. The school was active into the mid 19th century and was followed by neoclassical economics. One of its representatives was Alfred Marshall. He wrote the book Principles of Economics. Keynesian economics is an economic theory named after John Maynard Keynes. He is most well-known for his simple explanation for the cause of the Great Depression. His economic theory was based on a circular flow of money. There was such an economist as Milton Friedman. He thought that it would be possible for the economy to operate without any government interference. So, that’s all I have to say on the first point.

OK, let’s move on to the second section. There are two questions to look at here: Macro and Microeconomics. Macroeconomics considers the performance of the economy as a whole. When we study macroeconomics we are looking at topics such as economic growth, inflation, changes in employment and unemployment, our trade performance with other countries.  This includes national, regional, and global economies. Microeconomics is the study of behavior of individual units within the economy. The factors that are studied by macro and micro will often influence each other, such as the current level of unemployment in the economy as a whole will affect the supply of workers which an oil company can hire from, for example.  OK. That’s everything on Part Two. I will now move on to Part Three.

Everybody is familiar with the word system and uses it in everyday language. When we speak about system we mean a complex whole in other words a combination of parts performing as a complex whole. And this definition implies several ideas: interdependency, wholism and synergism. There are different types of systems, such as heating systems, communication systems, transportation system and economic systems.

I would like to say some words about this kind of system. An economic system can be defined as an organized way in which a state or nation allocates its resources and distributes goods and services in the national community. Some common economic systems are: capitalism, communism, market system, mixed economy, and socialism. Every economic system has its aims. The most important usually are price stability, full employment, economic growth and equitable distribution.

It’s time to speak about macro environment. Let’s find out what macro environment means. It is the network of systems composed of culture, political and economic forced technology, skill mixes, and consumer groups. A retailer must understand the role of each to compete within the retail industry. Culture, composed of values, norms, artifacts, and accepted behavior patterns, affects the way the organization is formed. All decisions made in an organization are a reflection of all these components of culture. Political forces typically represent the government agencies and policies. They usually restrict or at least affect the organization. Political forces are closely connected with economic ones. Economic system is concerned with the allocation of scarce resources and distribution of them. Technology also takes place in Macro environment. Technology not only creates new products for retail companies to sell, but also plays a major role in changing the way retail companies do business. And to be able to compete successfully, organizations must have access to modern technology.

I think that the study of economics would be incomplete without an understanding of the nation’s role in the world economy. So let me now tell you about international economics. It is divided into international trade and international finance. To understand significance of international economics we must answer the question «Why do nations trade?». The answer is that nations have different quantities and qualities of economic resources and different ways of combining them. As a result each country can produce certain goods more efficiently, or at relatively lower costs, than others. International economics describes and predicts production, trade, and investment across countries.  In many countries, international economics is a matter of life and death.

That brings me to the end of my presentation. To sum up I want to say that Economics is about choice and the impact of our choices on each other. It relates to every aspect of our lives, from the decisions we make as individuals or families to the structures created by governments and firms. The economic way of thinking can help us make better choices. One economic student said: "I was curious about everything that happens around me. Studying economics satisfies my curiosity." I can’t but agree with him.