Glamor Economics

Chapter 8

Chapter 2 What Is Economics—Lying Economics, or Rational Economics?

Section 1 The economics that can be explained by a car
In the warm-up reading chapter, we learned that economics is a subject closely related to our lives. It penetrates into our daily decision-making and actions from our basic necessities of life, lifestyle, and thinking habits.In this chapter, we will unveil the mystery of economics to you by explaining some basic concepts and principles of economics.First of all, let's talk about what kind of science economics is.

"A successful economist must have been a mathematician in his previous life; a failed economist must have been a sociologist in his previous life." This is a joke that ridicules economists.Although it has a strong sense of ridicule, we can see from this sentence that economics, sociology, and mathematics have a close "blood relationship".

In foreign countries, the word economy comes from the Greek word oikonomia, which originally meant family economic management.Economics was introduced to China in the late 19th century.Initially, "economics" was directly translated into words such as "enriching the country policy", "livelihood", and "financial management".It was the Japanese who first translated "economics" with the Chinese character "经济", and later someone translated this expression from Japan to China, which is what we call "economics" now.Now that we understand the origin of the word economics, let's talk about what kind of science economics is.Simply put, economics is a social science that studies human behavior and how to rationally allocate limited or scarce resources.

This explanation may make some people feel abstract and difficult to understand. In fact, economics is not complicated.Stiglitz, a famous economist and winner of the Nobel Prize in Economics, believes that all the contents of economics can be explained clearly by passing through a car.Stiglitz has a wonderful statement in his famous book "Economics":
"For a teenager, a car symbolizes status, freedom of movement, and exploration of novelty. To a mechanic, a car is like a patient waiting for his treatment. For commuters stuck on the road because of traffic jams, Cars are like prisons for prisoners. To a worker on an assembly line, a car may be nothing more than a bunch of parts put together and a job. To a bank robber or a race car driver, a car is a modern mechanical horse. In the lives of these different people - and their examples are too numerous to list - the automobile, that composite of metal, rubber and plastic, plays an important role. Of course, the nature of this role can vary widely: from car repair to The extreme reality of getting covered in grease, the romance of driving a convertible on the highway on a moonlit night. For an economist, a car can be used to explain almost all of economics.”

Through this classic expression, we can see that the things studied in economics are closely related to us, and it is not difficult to understand at all.It involves consumption, work, production, division of labor, experience and many other aspects in our life.Economists summarize the problems of economic research into four basic questions:
1. What to produce and how much to produce

In this problem, what and how much to produce is determined by supply and demand (the invisible hand), depending on the interaction between producers and consumers.Of course the government (the visible hand) also plays a role.

Every day, there are endless new products and services around us. At the same time, products are withdrawn from the market every day, and their supply and price are constantly changing.

2. How is the product produced?

This question involves production methods, science and technology, enterprise management and other aspects.In most economic systems, the production method of the product is determined by the manufacturer, and there is also the participation of the government, such as some regulatory provisions, the issuance of business licenses, and so on.

3. Who is the product produced for?
Once the product is produced, it faces the problem of distribution—for whom to produce.In a market economy, people with higher incomes can buy more products and services.The education we receive, the savings we have, the ideas we hold, the government's taxation and redistribution plans, etc. determine our consumption level.

4. Who makes economic decisions and what procedures are used to make decisions

In a planned economy, the government is responsible for all decisions about economic activities.This question and the above three questions are all answered by the government.Corresponding to the planned economy, the other is a market economy. What to produce, how to produce it, and who will consume it mainly depend on the free exchange between producers and consumers, which is realized through market regulation.At present, the economy of most countries is a mixed economy with both planned economy and market economy.Government decision-making and private decision-making are mixed.

Through the above four questions, we can see that economics is a study of how society uses resources to produce valuable goods and services, and distributes them among different people.Economics and our lives are closely linked.About the benefits of studying economics, Paul?Samuelson said: "Economics cannot directly bring you wealth, but it can prompt you to think like an economist, better understand the world, and arrange your work and life more intelligently." James?McGill?Buchanan said humorously: "Studying economics will not make you out of the ranks of the poor who receive food, but at least it will make you understand why you are in that rank." These words tell us that economics is a discipline. Very practical knowledge, learning it well and using it well can benefit our life.

(End of this chapter)