Economics

I’m sorry to say that for this blog I shall be opening with a quote from the musical Cabaret     “Money makes the world go around
It makes the world go 'round.”

In Chris Horrie’s lecture the main theme was money and the economic system. Chris emphasised the idea, well his opinion, that to solve the economic crisis we simply need to print more money. Somehow, I think it’s a little more complicated than that. But one thing that Chris said that did make the world of sense is that money is possibly the most powerful thing in the universe, and in some aspects, it could possibly be more interesting than sex. That’s right, more interesting than SEX. Like Chris said “if you have a lot of money, you can have all the sex you want”.  And people wonder why people are so obsessed with money. If you look at it in this way, money can buy you anything.

Richardo

The process of getting money is initially relatively easy; it’s the work that you have to do to get money that’s the hard part. Every human has specific wants; some can be mistaken with needs. A human doesn’t need anything. The only argument you could make is if a human wants to avoid dying, but not every human has the aspiration to live and in that case, they genuinely don’t need anything. Economics ignores the “need”. Economics tests how much a person is willing to pay for things. Utility or utilitarianism is a word that links hand in hand with the economics of money. Utility is the fundamental, measureable phenomena of human wants. Every person, in a purchasing situation, automatically judges the way to maximise our utility.

Ricardo, an Economist, created the law of value. He believed that things are priced depending on the amount of labour it takes to make it. For example, a pen costs only £1 because it takes very little effort to make it whereas a piano costs over £1000 because it takes lots of hours and man power, with expensive materials used to make it. Another economist, Malthus, wrote the Iron Law of Population. He believed that the wants of people are more important, in that persons own mind, than that persons drive to repopulate. In this particular statement, Malthus is wrong because the human race have grasped the ability to stabilise the amount that they populate. China, for example, has derived the one child per family system in order to stop their population from rising too dramatically. But we have to give Malthus the benefit of the doubt; unfortunately he couldn’t predict the future and couldn’t foresee contraception and abortion being invented. These are main contributors to keeping the population from rising to ridiculous amounts.

Malthus

Today’s lecture also told me that the rates of wages go up and down dependant on the demand for that particular career field and how much profit that industry is currently making. The only problem with this form of working is that if a wage of a certain jobs goes down, people are therefore earning less, giving them less to spend and put back into the market. As a result, other businesses will suffer as they are unable to sell their produce. So clearly the wage system is a cruel thing to come under, it’s a shame that we all have to suffer at some stage. The only thing that can be learned from this is that to survive we need growth; nothing can come to a complete stand still. The economists that think in this order are known as Keynesian Economists.

The second type of Economists follows the works of Adam Smith, the mind that bought us The Wealth of Nations. These Economists are known as Monetarists. These people believe that people plan how the economy is shaped and make accurate assumptions about money. They believe that people instinctively calculate supply and demand. Chris went onto explain that when there is an economic crisis people just need to accept a decrease in wages but people become irrational when they are being deprived of the money they were once receiving. He continued to say that war is a good thing for the economy because it is a perfect way of getting rid of unemployment. £60billion is spent a year on the military, going to war is, therefore, a great way of boosting the amount of money going into the economy. Another great way of achieving this is increasing the amount of people working in systems like the NHS. Allowing more people to work in the health system benefits the people being employed, aiding them to gain some wages, and the people that need the NHS for their health problems because there are now more staff available to deal with their problems. When you look at it as being as simple as that, it makes you gain the outlook; that it’s better to have people doing small, menial jobs than it is to be unemployed.

Chris, at the end of lecture supplied us with an equation for how expenditure works, and with the equation I shall finish this post.
            Where ‘C’ is Household expenditure and ‘I’ is Private Investment and ‘G’ is Government Spending the equation looks something like this;
                                                       Y = C + I + G

If ‘Y’ decreases there won’t be enough money in the economy to keep the population employed.