Economics

what is Economics?
If we could take an instantaneous photograph of the activities of men and women at, say, n a.m. on any business day, we should see that the majority were engaged in one or other of a great variety of different occupations. We should see people working in shops, factories, fields and offices, on the railways and the roads; on ships at sea and in mines far below ground. We should see teachers in their classrooms, doctors in their surgeries, business men in their offices, bankers in their parlours, shop-keepers attending to the needs of their customers, and civil servants busily engaged on various forms of government work.

A little reflection would show us that the activities of all these different people have two aspects in common. We should realise, first, that all these busy people are engaged in earning their living, and that their earnings the reward they receive for their labours enable them to satisfy their essential needs for food, clothing and shelter, possibly also to obtain, in addition, some comforts and luxuries, and to put something aside for a rainy day. We should realise also that these people, in the process of earning their living, are at the same time contributing to the production of goods or services needed by other members of the community.
The Economic System
This process of earning one's living by producing goods and services for the community is known as economic activity. And the whole sum of economic activities the complex structure or mechanism whose many parts work harmoniously together without a conscious guiding authority is known as the economic system.
The economic system is so bound up with our lives that we are apt to take it very much for granted. But when the 'system is dislocated for any reason, when a strike leaves us without coal, or a war makes it difficult for us to get food, we become painfully conscious of the economic aspect of life. We are then compelled to think of the amazingly intricate system in which we work and by which we live. Then we begin to wonder why things are not going right and why we have to suffer because of conditions with which we have little or no apparent connection. It is here that a knowledge of Economics helps us to understand the situation and to see our selvesas part of a most complex economic organisation.
Although the economic system is thus of paramount importance in our everyday life, very few of us ever bother to learn something about it. Yet it is just as important that we should understand something about Economics, which sheds light on our material life, as it is for us to understand the main principles of health and even of religion. If as thinking men and women we are to understand our position in the great scheme of things, we should know why we have to earn a living, why we enter a particular occupation, how we regulate the spending of our earnings, the organisation involved in buying the goods we need, the way in which goods produced abroad and at home are made available for us as consumers, and the principles that determine the prices we have to pay for those goods. All such matters are part of the subject-matter of the science of Economics.
The Problem of Choice
Briefly, then, Economics is the study of man in his efforts to make a living. It studies the various branches of the economic system and tries to show how they work and fit together to form a harmonious whole. The science of Economics is based upon the facts of the ordinary, business, work-a-day world.. It is the task of the Economist to describe these facts in their proper order and true perspective, so as to explain the working of the system in which we live and work.
There would be no need for economic investigation, and no need for the science of Economics, if all our wants could be satisfied without effort; if we could get food, clothes and shelter without first having to earn the means to pay for these things. Not many of us, however, are fortunate enough to get such things for nothing; most of us have to work to obtain the '' means'' to buy them; we have to work to “earn our living
Even the living we earn enables few of us to acquire all the things we would like to acquire. You might want an aeroplane; I might like a grand piano. But most of us have only limited means. In return for our labour we have only a certain amount of money placed at our disposal. Naturally, therefore, we try to spend our earnings so as to get the greatest satisfaction out of them. We allocate them to buying food and clothes; to paying our rent, rates and insurance; to meeting our travelling and holiday expenses. We have many things to do with our wages and they are rarely large enough to buy all the things we need. Most of us, unfortunately, have to do without many things we should like to have. You may have to do without a holiday so that you can buy a winter coat; I may have to go without certain luxuries so that I can buy a house. Some people cut down beer expenses in order to go to the cinema; others stint themselves on clothes so as to be able to run a car.
Thus we and all our fellows are continually weighing up our want for one thing against our want for another, considering one form of expenditure against another, wondering whether to spend the odd pound note on a new hat or a new picture, on a new rug or a new bed­spread.
Our time, too, is limited. We have not time to do all the things we want to do. We have, therefore, to allot so much of our time to working, so much to eating, so much to sleeping, so much to leisure; and, of course, the time we devote to one purpose is not available for another purpose.
The Economy of Resources
The Economist sums up this position in the state­ment that man is constantly confronted with the problem of choice. Whether at home or at business, he is con­stantly “economising" in one direction or another. If there were no need for choosing, if we all had as much time and as ample resources as we wanted, there would be no need for “economising " and no economic problems would arise. But as things are, because our time and our means are limited and because there are alternative ways in which we can use them, we are continually being faced with economic problems. We are con­tinually considering how to allocate or “economise " our resources and our time so as to get the most satis­faction from them. And such problems have to be faced as much by a Robinson Crusoe, cast away on a desert island with but a few implements and little food, as by the managing director of a great modern business,. or the controller of a great railway.
Doctor or lawyer, business man or manufacturer, clerk or consumer—each is confronted with the need for making a choice. Young doctors have to decide whether to go into general practice or to spend more money on their training and so become “specialists “in a par­ticular branch of their profession. Manufacturers have to choose between different types of possible products and have to apportion their money on machinery, raw material and labour so as to reap the greatest benefit from their expenditure. Consumers, too, have to decide how to lay out their money to the best advantage: whether to buy fish or meat, bread or potatoes, new clothes or new curtains, and in what quantities to buy any such goods as they need from time to time.
Such decisions by producer and consumer are being made so frequently that they are largely automatic and subconscious. Yet the nature and the extent of economic activity are determined by these decisions. The choice between alternatives is the very foundation of the economic system.
The System of Private Enterprise
Our economic structure is based on the system of private enterprise. This implies two main conditions: first, that all property can be privately owned; and, secondly, that people are economically free, i.e., subject to obedience to the law, they are free to use their time and means as they like.
In this country, people own private property in numerous forms and varying amounts: some people own a house; other people own a house and a car; some fortunate few have houses, cars and yachts; others own factories, machines, mills and farms. In respect of all such properties owned by individuals, the owner­ship is under the protection of the State, i.e., the State protects the right of the individual to control his property and his goods, whilst the owner whose property is stolen or damaged can call on all the forces of the law to assist him to obtain redress.

It is not incompatible with the system of private enterprise that the State should itself own property, such as mines, airways, surface transport services, power stations, factories, etc., which it operates for the general benefit of the community.
Economic Freedom means that the individual is free to do as he likes with his own property and with his own time and energy. But we can see at once that, in any civilised community, there must be some limit to the exercise of this freedom. Although the individual is economically free, he must conform to the laws and regulations made by Society for the general good, other­wise we should have many abuses and great social difficulty. An owner of land, if entirely free to do as he liked, might build a slaughter-house in Regent Street, or a tannery opposite the Houses of Parliament. A manufacturer, if uncontrolled by law, might make his employees work eighteen hours a day in a dangerous atmosphere with unprotected machinery, or a grocer might sell unwholesome or even poisonous food.
To avoid the possibility of such abuses, Society imposes certain restrictions. Generally, the individual is free to earn his living as he likes, to buy and sell as he likes, to use his factory and machines to produce what he likes, and to compete with his fellows. But in all such activities his freedom is subject to restrictions imposed by the State for the general good. If a man wishes to build a house or a shop, he must submit his plans to the local authority; if he wishes to sell milk or meat, he must conform with certain State regulations; if he wishes to be a doctor or a lawyer, he must submit to a certain training and comply with the rules that govern those professions.
This system of economic freedom and private enter­prise does not preclude the possibility of State or municipal enterprise. A State telephone system can function in one area and a private telephone system in another. In all States there is public enterprise, and in some a vast and growing amount. In Britain, public enterprise covers several basic industries—coal, rail and air transport, gas, electricity—in addition to the Bank of England, the B.B.C., and several local government un­dertakings such as tramways.
Our economic system, therefore, is one of comparative freedom : the freedom of the individual, whether acting alone or in conjunction with others, is restricted by the standards set up by Society to ensure the welfare of the community as a whole.
Economic Laws
It is the task of the Economist to examine and classify the complicated workings of the economic system so as to reduce them to some orderly pattern for convenience of study and further investigation. When his researches reveal uniformities of behaviour or action, he is able to formulate Economic Laws, which are state­ments that, given certain causes in the economic sphere, certain effects are likely to follow.
An economic law is not like a statutory law. It is not a command that must be obeyed under penalty. It is a statement of a tendency that can be expected to work out in certain circumstances. As all economic questions involve human action, and as human nature is so variable, the same circumstances might not arise in a given case, and the expected tendency will then not work out. Thus economic laws cannot be rigid or permanent. If other things are equal, a certain result can be expected to follow a certain set of conditions; but the conditions may change, other conditions may intervene, and the expected result will not appear.
From his observations, the Economist knows that other things being equal, a shortage in the supply of an article causes a rise in its price. Hence, he is able to say that if there is a shortage of food, prices may be expected to rise and only the richer people will be able to get supplies. But other things may not be equal. The Government may fix maximum prices for food and may ration supplies so that the poor and rich have an equal chance of getting what they need. Then the expected rise in price will not take place. This does not mean that the economic law is wrong, but that its working is checked because other things are not equal. In just the same way, the law of gravity is not proved wrong because a balloon goes up in the air.
The Utility of Economics
The Economist serves a useful purpose in Society because his power of prediction, based on his study and investigation of the economic system, enables him to point out the dangers of a certain line of conduct. As a scientific investigator, he does not approve or dis­approve of such conduct; his job is to analyse facts, to explain the working of the economic system, and to point out what will happen if certain lines of conduct are followed. He can show that a war causes economic loss and a wasteful use of economic resources; but as an Economist, he cannot say whether, in any given situa­tion, war is advisable or not. War involves many non-economic issues which are matters for the Statesman and Diplomat, not for the Economist.
The Economist can explain why the wages of en­gineers are usually high in comparison with the wages of dustmen; but the boy leaving school, or his parents, must choose whether he is to be a dustman or to become an engineer.
A study of Economics thus serves a useful purpose in modern life. By giving us facts and showing us what may be expected to be the outcome of certain lines of conduct, it helps us to decide which of several alternatives to choose. We ourselves have to make the choice; but our problems are made easier and we can choose more rationally if we know what consequences to expect from our conduct. A study of Economics helps us to choose wisely and avoid many pitfalls in arranging our economic affairs. It enables us to understand how the economic system works and to realise our own position in that system. It also arms us with specialised knowledge which we can use when we have to bring judgment to bear on economic issues, such as an increase in local rates or a rise in the income tax, the imposition of tariffs on imports or the granting of subsidies to certain industries.