It’s an incredible thought to consider that economics is king of the world and all other disciplines, subjects and values are secondary to it. But isn’t the environment, health and safeguarding society all way ahead of mere economic considerations I hear you cry.
Well, take a look at the facts and they probably won’t surprise you when you think about it. They may depress you but not surprise you.
The order of things
Let’s start with the environment. In real terms the environment is now seen and indeed used as a bank of natural resources to enable the wide range of economic activities indulged in by societies throughout the world. This is a bank we seem to continually plunder but never replenish.
Ask the question why we have food mountains and such high levels of food wastage in the western world when people are malnourished and still dying of starvation in different areas of the world. The answer boils down to economics.
When you look at two and three tier health systems in Western countries and sometimes zero tier health systems elsewhere, the answer is again a matter of economics.
This is not to say that economics and all its founding principles is a bad thing or that it doesn’t serve society, it is just to say that it is without doubt the overriding master discipline in the world today.
The benefits of economic progression
Economic output has grown enormously in recent decades and with it has come huge benefits in medicine, health care, technology and seemingly continual improvements in wellbeing and living standards for many.
The fundamental of economics as a subject haven’t changed that much over the years and many of the core principles still stand the test of time.
Economic schools of thought
The core economic schools of thought consist of the following:
- Neoclassical synthesis
- Austrian School
The economic schools of thought describe the different concepts in the evolution of economic theory.
An economic system is an organised way in which a state or nation allocates its resources and apportions goods and services in the national community.
Traditional economic systems are categorised as follows:
- Free market capitalism
- Market socialism
- Central planning
- Shock therapy
- Washington consensus
Economic cycles depict the constant fluctuations of economies as the ebb and flow between expansion and recession.
The principles of economic cycles are categorised under the following headings:
- Keynesian (normative)
- The Phillips curve
- Permanent income hypothesis
- Rational expectations
- Time consistency
- Financial accelerator
- Financial instability hypothesis
- Lender of last resort
Global supply chains underpin the growth and development of international trade which continues to connect countries around the world.
Key global trade theories include:
- Comparative advantage
- Heckscher-Ohlin trade model
- New trade theory
- Optimal currency area
- The impossible trinity
- Purchasing power parity
A market is a method by which goods and services can be exchanged through buyers and sellers being in contact with one another.
Market principles, theories and concepts have been detailed by many eminent economists, one of the most famous being ‘the invisible hand’ propounded by Adam Smith in his book The wealth of Nations.
Important economic market theories include:
- The invisible hand
- The tragedy of the commons
- Property rights
- Polluter pays principle
- Adverse selection
- Moral hazard
- Efficient market hypothesis
- Rent seeking