Post 41

Way back when Adam Smith wrote “An Inquiry Into the Nature and Causes Of the Wealth Of Nations” economics was a part of philosophy. When Charles Darwin wrote “On the Origin of Species” he relied heavily on the economic philosophy of his era, namely Thomas Robert Malthus. Economics has evolved into a science of it’s own standing. The tools are statistics, calculus and the social sciences. While many people will tell you it is “The Dismal Science” because of the professors they had to put up with, the origin of the term dates back to Thomas Carlyle a historian and social critic. At the time David Ricardo and Malthus were writing dismal predictions for the future of man. Carlyle was commenting on the tone of the science. Some people define economics as the study of money, others call it the study of business transactions, and still others call it the study of the allocation of scarce resources. Essentially economics is the study of wants and the satisfaction of them in a world of scarce resources.

Economics questions the benefit we receive from satisfying our wants and the associated costs. Money is a universally recognized yardstick so it is normally used to measure the costs and benefits. Universally recognized does not imply the yardstick is the same for all people. We all have different wants so a dollar does not mean the same thing to everybody. However, if I say $15.00 dollars you know what it means - to you. You have some idea of the value I am implying. If I said a case of beer we may come to entirely different conclusions. We all have different judgments of the value of a case of beer. It may be worth $15.00 to some; it is worth something else to others. We all understand $15.00 and can translate that to our own value system, a case of beer to some, and a couple of happy meals to others. In all economic discussions we need to keep in mind we are talking about people’s value systems relative to an imperfect yardstick. Not all costs and benefits can be classified in dollar terms. Such is life; we have no perfect yardstick to measure costs and benefits.

I hope that helps.