Basic Business Resources

Economics isn’t about money or business. This can often be confusing when listening to media throw the term around without understanding its meaning. Simply put, economics is the study of incentives. A basic definition is the allocation of scarce resources that have alternative uses. A resource is any item that can be used for more than one end product. For example, harvesting carrots and using them as cooking ingredients with little preparation, or preparing them for sale to a juicer who’ll transform them into drinkable treats, or selling them to a farmer to use as part of his feed.

All resources have many uses. The ultimate end product is dictated by what the market, or consumers of those products would have. It makes little sense for the baker to produce beautiful cakes for sale, if his consumers and patrons demand bread roles or cookies.

When too little of a product that is in demand is available, a shortage is said to exist. More people desire to consume a product than is available of the product. When few people desire a product that is present and that product is not consumed, a surplus is said to exist.

Economics is understanding the incentives that go along with the use of those resources. In a truly open market, where buyers and sellers are free to interact and fulfill each other’s needs and wants, the incentives will be to produce or manufacture those items that are most wanted. If that is accomplished, a profit is said to be made, which is the reward for supplying individuals with those items that they choose.

Incentivizing people to act a certain way can be accomplished with manipulation of the open market. Offering discounts, fixing prices, raising prices, taxing and subsidizing all contribute to the incentives present in the open market. When a product or process is taxed, less of it will be manufactured or produced because it is more costly. When a product is subsidized, it’s true price isn’t known, (because the actual cost of production is disguised), but usually ends up selling for less than the true cost of manufacture.

Differing schools of thought exist with regard to economics. Incentivizing people to care for themselves via the open or free market is one. Having a government entity care for the people and make their decisions for them is the other.

Historically, no society has ever prospered as much as the societies that have allowed free trade, the open market or capitalism; they are all essentially describing the same idea. History has abundant examples of societies that provided their citizens with little during their existence, despite the proliferation of natural resources within its boundaries; the Soviet Union being foremost.

Ultimately, choice is the deciding factor. Do you want to decide what is best for your needs and wants or do you want a third party deciding for you, based on numbers and availability? In the free market, individuals are free to make their own choices. In regulated markets, be they monarchies, feudalism, socialism or communism, individuals are not free to make their own choices. Those choices, including the allocation of those scarce resources is left up to someone else to decide for you.

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These 3 political/economic theories can be best illustrated on a continuum.

At the left is communism, simply stated; From each according to his ability, to each according to his need.

At the right is capitalism, simply stated; Winner takes it all, Loser takes the fall.

In the middle lies socialism, simply stated; He’s got the whole world in his hands…

Pros and Cons (Whether these aspects are Pro or Con is a personal choice)

Communism – No reason or incentive to produce or excel. Government controls all aspects of your life..) There are no taxes as there is no income. Production and innovation are severely limited.

Socialism – Government controls most of the major aspects of life. Education, Medical, Retirement, and Housing to large extent. Taxes (60% -80%) are very high and the demand for services often exceeds the supply, resulting in excessive waiting periods, shortages and/or rationing. There is some incentive to produce, however, there is little reason to as all or most basic needs are taken care of.

Capitalism – Government controls few aspects of everyday life. Supply and Demand governs all economic functions and survival of the strongest/smartest is the rule for most other aspects of life. Taxes are low with proceeds designated for defense, law enforcement, and administration. The citizen has the most to gain but also the most to lose. Innovation and Productivity are maximized.

In a perfect world all 3 of these systems are sound and will have a large measure of success. It is not a perfect world which has shown each of these systems wanting. Attempting some type of amalgamation has had some success, but requires a delicate balancing act.

Current events would seem to indicate that several of the world’s economies are out of balance. The US and the rest of the world are trying to walk the fine line between providing a basic safety net yet still providing a reason and an incentive to excel.

In summary

COMMUNISM: You have two cows. The state takes both of them and gives you a portion of the milk.

SOCIALISM: You have two cows. The state takes one cow plus a portion of your milk and gives it to someone else.

CAPITALISM: You have two cows. You sell one, buy a bull and start a ranch.

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Wherever we go, economics is everywhere all over the world and it can be located in all major continents around the globe. This begins in domestic up to global approach. In my own opinion, economics is a social science. There are several branches of economics to deal with and these are: Sociology that studies the society and culture, Physics that studies the useful in the production of goods and services that produces machines and electricity,Political Science because it will study the economic policies of each leaders across the globe because it influence from the government of economic activities,History that studies the past, present, and future events of economic developments, Religion because it will based on the studies of religious traditions and beliefs that can encourage or discourage of economic development.

Readers and Viewers must discover and know the content of economics. This article will be tackling fundamental and basic principles of economics. Fundamentals of economics is focus on banks or banking, business, business cycle, depression, economic freedom, income, inflation, investment, labor force, manufacturing, marketing, money, monopoly and competition, consumer price index, cost of living, physiocrats, price, production, profit, property or dealing with real estate business, recession, rent, standard of living, supply and demand, trust, unemployment, value added tax in which I believed that this term will be understand by the viewers. The meaning of economics is very simple. According to Fajardo, the author of his book titled “Economics” third edition, The meaning of economics is the social science that deals with proper allocation and efficient use of available resources for the maximum satisfaction of human needs and wants.

Here in economics, there is also an economic system and theories to be learned by the readers and viewers. They must know the information of capitalism, communism, economic determinism, Facism, laissez faire theory, Theories of business cycle, Manioralism, Mercantilism, Socialism, and Syndicalism. They must take note that economic system is a set of an economic institutions that dominates a given economy. There is also a history in Economics from past to present times, even in the future. According to Fusfeld, who has a knowledge of John Meynard Keynes or known as “Baron Keynes of Tilton” that has a famous books which is very popular until now titled “Keynes General Theory of Employment, Interest and Money” which was written in the year 1936 which ranks among the most important books on economics. Aside from this, among his other works are A Tract on Monetary Reform written in year 1923, The End of Laissez Faire Theory written in year 1926, and also A Treatise on Money written in year 1930. There are also future in economics and these are called “ethico-economics in which I will discover it on my next article and next is economic crisis that cannot predict when will it happen so it belongs to the future.

After mentioning the introductory part and historical background of Economics, this time I will proceed to domestic approach. The writer of this article will focus on the Philippine Financial System in order to share ideas, thoughts, and opinions from other nations. This article is a big help for those who will take Master’s and Doctoral Degree in Economics. In Philippines, the most common financial institutions are based on banking, pawnshops, insurance companies,lending, financial or lending companies. The Banngko Sentral ng Pilipinas or known as BSP (former Central Bank of the Philippines) is the central monetary authority and their purpose is to maintain monetary stability, and to promote a balance and sustainable economic growth.

The last part content will be international approach because it deals with global economy. In our planet Earth, seven continents around the globe gather to participate in International Trade. To those who are interested in this part of my article, they can find or search it in tariff, trade, International Monetary Fund or known as IMF, Asian Development Bank or known as ADB, Exports and Import, Common Market, Exchange Rate, World Bank.

To understand the meaning of international trade, according to James B. Calderwood, “International trade is the exchange of goods and services between countries and it is sometimes called “world trade” or “foreign trade”. to explain this meaning, it enables a nation to produce the goods it can make the most cheaply and exchange them for goods it finds more costly to produce from one country to another countries. That is how the international trade means to the economics. The good example that practice International Trade is Japan because they can compete with other countries.

The World Bank, International Monetary Fund, and Asian Development Bank are the major lenders to our country. Their development funds have been focus on economic development such as agriculture.

After mentioning my content of economics from domestic up to global approach, they must take note that we are in the concerns of social responsibility this is not referring to the rich or poor people.

A. Books

Calderwood, James B. “International Trade” Vol. 10, The World Book Encyclopedia. Chicago, World Book, Inc.,1985.

Fajardo, Feliciano R. “Economics” 3rd Ed. Sta. Mesa Heights,Quezon City:Rex Printing Company, Inc. May,1996.

Fusfeld, Daniel R. “Keynes, John Maynard” Vol. 11, The World Book Encyclopedia. Chicago, World Book Inc.,1984.

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