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Gross domestic product in 2005
An 'economy' is the system of human activities related to the production, distribution, exchange, and consumption of goods and services in a particular geographic region.
The composition of a given economy is inseparable from
technological evolution, civilization's
history and
social organization, as well as from Earth's
geography and
ecology, e.g. ecoregions which represent different
agricultural and
resource extraction opportunities, among other factors.
Economy refers also to the measure of how a country or region is progressing in terms of
product.
Etymology
The word "economy" can be traced back to the Greek word ''oikonomos'', "one who manages a household," derived from ''oikos'', "house," and ''nemein'', "to manage." From ''oikonomos'' was derived ''oikonom'', which had not only the sense "management of a houseold or family" but also senses such as "thrift," "direction," "administration," "arrangement," and "public revenue of a state." The first recorded sense of the word "economy", found in a work possibly composed in 1440, is "the management of economic affairs," in this case, of a monastery. Economy is later recorded in other senses shared by ''oikonomi'' in Greek, including "thrift" and "administration." What is probably the most frequently used current sense, "the economic system of a country or an area," seems not to have developed until the 19th or 20th century.
The range of activities involved
★ The fields of study exploring, registering and describing the economy or a part of it, belong in general to the
social sciences and include
economics as well as branches of
history (
economic history) or
geography (
economic geography).
★ Practical fields directly related to the human activities involving production, distribution, exchange, and consumption of goods and services as a whole, range from
engineering to
management and
business administration to
applied science to
finance.
★ All kind of
professions,
occupations,
economic agents or economic activities, contribute to the economy.
★
Consumption,
saving and
investment are core variable components in the economy and determine market equilibrium.
★ There are three main sectors of economic activity: primary, secondary and tertiary.
Sectors
Main articles: Three-sector hypothesis
The economy includes several sectors (also called
industries), that evolved in successive phases.
★ The
ancient economy was mainly based on
subsistence farming.
★ The
industrial revolution lessened the role of
subsistence farming, converting it to more
extensive and
monocultural forms of agriculture in the last three centuries. The economic growth took place mostly in mining, construction and manufacturing industries.
★ In the economies of modern
consumer societies there is a growing part played by services, finance, and technology -- the (
knowledge economy).
In modern economies, there are three main sectors of economic activity:
★ 'Primary sector:' Involves the extraction and production of raw materials, such as corn, coal, wood and iron. (A coal miner and a fisherman would be workers in the primary sector.)
★ 'Secondary sector:' Involves the transformation of raw or intermediate materials into goods e.g. manufacturing steel into cars, or textiles into clothing. (A builder and a dressmaker would be workers in the secondary sector.)
★ 'Tertiary sector:' Involves the provision of services to consumers and businesses, such as baby-sitting, cinema and banking. (A shopkeeper and an accountant would be workers in the tertiary sector.)
More details about the various phases of
economic development follow. As this process was far from being homogenous geographically, the balance between these sectors differs widely among the various regions of the world.
History
Ancient times
The ancient economy was mainly based on
subsistence farming. The exchange of goods happened within a
barter economy. In
Ancient Greece, when the word 'economy' arose, the majority of people were
bond slaves of the
freeholders. Economic discussion was driven by
scarcity.
Aristotle (384-322 B.C.) was the first to differentiate between a
use value and an
exchange value of goods. (Politics, Book I). The
exchange ratio he defined was not only the expression of the value of goods but of the relations between the people involved in
trade. For most of the time in history economy therefore stood in opposition to institutions with ''fixed'' exchange ratios as
reign,
state,
religion,
culture and
tradition.
Middle ages
In
Medieval times the great conquerors raised
venture capital (from ''ventura'', ital.; ''risk'') to finance their captures. The capital should be refunded by the goods they would bring up in the
New World. Merchants such as
Jakob Fugger (1459-1525) and
Giovanni di Bicci de' Medici (1360-1428) founded the first
banks. The discoveries of
Marco Polo (1254-1324),
Christopher Columbus (1451-1506)
Vasco de Gama (1469-1524) lead to a first
World economy, meaning international trade between the continents. The first
enterprises therefore were trading establishments. In 1513 the first
stock exchange was founded in
Antwerpen. Economy at the time meant firstly
trade.
Early modern times
The European captures became branches of the
European states, the so-called
colonies. The rising
nation-states
Spain,
Portugal,
France,
Great Britain and the
Netherlands tried to control the trade through
custom duties and
taxes in order to protect their national economy. The so-called
mercantilism (from ''mercator'', lat.:
merchant) was a first approach to intermediate between private wealth and
public interest.
The
secularization in Europe allowed states to use the immense property of the church for the development of towns. The influence of the
nobles decreased. The first
secretaries of state for economy started their work.
Bankers like
Amschel Mayer Rothschild (1773-1855) started to finance national projects such as wars and
infrastructure. Economy from then on meant national economy as a topic for the economic activities of the
citizens of a
state.
The industrial revolution
The first
economist in the true meaning of the word was the Scotsman
Adam Smith (1723-1790). He defined the elements of a national economy:
products are offered at a
natural price generated by the use of
competition -
supply and
demand - and the
division of labour. He maintained that the basic motive for
free trade is human
self interest. The so-called
self interest hypothesis became the
anthropological basis for economics.
Thomas Malthus (1766-1834) transferred the idea of supply and demand to the problem of
over population. The
United States of America became the place where millions of
expatriates from all European countries were searching for free
economic evolvement.
In Europe
wild capitalism started to replace the system of
mercantilism (today:
protectionism) and lead to
economic growth. The period today is called
industrial revolution because the system of
production and
division of labour enabled the
mass production of
goods.
Capitalism and communism
Especially in
England the ideas of
Adam Smith became reality while the
economization—the process of always diminishing the
efforts of production—lead to
mass poverty,
starvation,
urbanization and
pauperization of the population.
Karl Marx (1818-1883) and the German industrialist and philosopher
Friedrich Engels (1820-1895) described economy as the "system of capitalism".
The
exploitation of
labour and nature by the capitalist is creating a
surplus value. The
capital will
accumulate itself and finally destroy the
competition. Therefore the system of
communism should liberate the economy from the reign of capital. The first
centrally planned economy was established after the
Russian Revolution of 1917 by
Lenin.
Other states launched
social security systems in order to minimize the effects of uncontrolled capitalism, called
Manchester capitalism.
After World War II
In order to build up the countries destroyed in two
World Wars new definitions of economy were needed.
Friedrich August von Hayek (1899-1992) and
Milton Friedman (1912-2006) pleaded for a global
free trade and are supposed to be the fathers of the so called
neoliberalism. In contrast,
John Maynard Keynes (1883-1946) argued for a stronger control of the
markets by the state. The theory that the state could alleviate economic problems and instigate economic growth through state manipulation of aggregate demand is called
Keynesianism. In the late 1950s the economic growth in America and Europe—often called
Wirtschaftswunder (ger.: ''economic miracle'')—brought up a new form of economy:
consumption. In 1958
Kenneth Galbraith (1908-2006) was the first to speak of an
affluent society. In most of the countries the economic system is called a
social market economy.
Postmodern society
The
globalization pushes national economies and rules in the backyard. The global and controversial discussion on the politics of the
World Bank, the
World Trade Organization and
Global Players within the
World Economic Forum as well as the discussion of global
ecology and
sustainability issues influences the definition of economy.
Joseph E. Stiglitz today defines economy to be a ''global public good''.
Economists like
Peter Barnes and
Alexander Dill are reclaiming the
commons and give new definitions including new phenomena like
freeware.
Game theorists such as
Ernst Fehr and
Klaus M. Schmidt are disproving the
self-interest hypothesis. A so-called
gift economy is the topic for widespread activities of
grassroot movements as well as of the credit programs of Nobel laureate
Muhammed Yunus. The Wealth of Nations Report 2006 of the
World Bank for the first times tracks
social and
human capital. The change of definitions is to be continued. There's also
neoclassical economics.
Economic measures
There are number of ways to measure economic activity of a nation. These methods of measuring economic activity include:
★
Consumer spending
★
Exchange Rate
★
GDP
★
GDP per capita
★
GNP
★
Interest Rate
★
National Debt
★ Rate of
Inflation
★
Unemployment
★
Balance of Trade
GDP
The
GDP - Gross domestic product of a country measures the size of its Economy.
See also
★
Ecological Economics
★
Economics
★
Economic system
★
Economist
★
Economic history (includes list by country)
★
Primary sector of industry
★
Secondary sector of industry
★
Tertiary sector of industry
★
Quaternary sector of industry
Further reading
★ Friedman, Milton, Capitalism and Freedom, 1962.
★ Galbraith, John Kenneth, The Affluent Society, 1958.
★ Keynes, John Maynard, The General Theory of Employment, Interest and Money, 1936.
★ Smith, Adam, An Inquiry into the Nature and Causes of the Wealth of Nations, 1776.
References
★ Aristotle, Politics, Book I-IIX, translated by Benjamin Jowett
[1]
★ Barnes, Peter, Capitalism 3.0, A Guide to Reclaiming the Commons, San Francisco 2006
[2]
★ Dill, Alexander, Reclaiming the Hidden Assets, Towards a Global Freeware Index, Global Freeware Research Paper 01-07, 2007
[3]
★ Fehr Ernst, Schmidt, Klaus M., The Economics Of Fairness, Reciprocity and Altruism - experimental Evidence and new Theories, 2005, Discussion PAPER 2005-20, Munich Economics
[4]
★ Marx, Karl, Engels, Friedrich, 1848, The Communist Manifesto
[5]·
★ Stiglitz, Joseph E., Global public goods and global finance: does global governance ensure that the global public interest is served? In: Advancing Public Goods, Jean-Philippe Touffut, (ed.), Paris 2006, pp. 149/164.
[6]
★ Where is the Wealth of Nations? Measuring Capital for the 21st Century. Wealth of Nations Report 2006, Ian Johnson and Francois Bourguignon, World Bank, Washington 2006.
[7]
External links
★ http://www.weforum.org - World Economic Forum
★ http://www.worldbank.org - The World Bank
★ http://www.paecon.net - Website of alternative "postautistic" economists
★ http://www.rtable.net/index/rt/economics/recent/ - Blogs of the British magazine ''The Economist''
★ http://www.vanderbilt.edu/AEA/ - American Economic Association
★ http://www.rgemonitor.com - Website of the Analyst Nouriel Roubini
★ http://www.whatiseconomy.com - Website of Alexander Dill with new definitions of Economy
★ http://www.grameen-info.org/agrameen/profile.php3?profile=1 - Website of Nobel Laureate Muhammed Yunus
★ http://www.vanderbilt.edu/AEA/ - traditional American Economic Association
★ http://www.josephstiglitz.com - Website of Nobel Laureate and critic in Globalization Joseph Stiglitz
★
Baudrillard; Economy, simulacro y regimen de mortandad en el Sistema de los objetos | Eikasia by Adolfo Vasquez Rocca PhD
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