What is "the economy"?

Discussion in 'Politics, Religion, Social Issues' started by Sydde, Feb 9, 2012.

  1. Sydde macrumors 68020

    Sydde

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    #1
    During a lively discussion about policy matters, I was "advised" to go read some serious business magazines in order to be able to properly understand the Economy, to clearly see how wrong-headed I have been/am. Which got me to thinking, as lively discussions do (once you strip out words like "moonbat").

    In looking at economics from the perspective of business and investment, does a complete, or adequately complete picture emerge? Is that all it is about? I see numbers (DJIA up 6.51/0.05%, a 3-year high — what does that even mean?), I see the living people around me, and the two do not even seem to correlate.

    What is "the economy"? Is it about industry, retail, consumerism, profits and ROI? Does anything else matter, or are we, people, trees, cattle, oil, capital, just resources here to feed some nebulous leviathan that sometimes trickles upon us?
     
  2. MorphingDragon macrumors 603

    MorphingDragon

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    #2
    Brotip, If a bro tells you to look up Economy or Politics and is neither a Political Scientist or a Economist they are just as wrong as you.
     
  3. Merkava_4 macrumors 6502a

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    #3
    Yeah the NASDAQ was up 3.5% today. :)

    Whatever that means. :confused:
     
  4. Mord macrumors G4

    Mord

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    #4
    Ha! If you want to learn anything about economics I would not recommend reading a business magazine. Why would you attempt to learn from such an obviously biased source?
     
  5. jeremy h macrumors 6502

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    #5
    There's an old joke:-

    If you took every economist in the world and laid them end to end they still wouldn't reach a conclusion.
     
  6. MorphingDragon macrumors 603

    MorphingDragon

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    I shouldn't laugh at that, its so cheesy. :D
     
  7. Zombie Acorn macrumors 65816

    Zombie Acorn

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    #7
    The stock market is detached from the real world economic situation as it is ran on perception and speculation. It is not a good indicator of economic well being IMO, especially when you have computers dumping and trading stocks in milliseconds without human interaction.
     
  8. mcrain macrumors 68000

    mcrain

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    #8
    I agree. The stock market is really nothing more than people betting on whether each particular stock is going to be worth more or less in the near/long term future. The markets are really nothing more than a very public way of seeing what the "experts" think is going to happen. How many times have you seen a stock go down after good news is released? That often happens when the experts predict something good, but the price overreacts. Once you see the market as the betting, not the race, you can get a better feel for what's happening on the track.

    Stock prices are going up, people think their horses are fast. Stock prices going down... the track is muddy, horse is sick, or any number of other reasons.

    There is also a mass psychological component, but that's beyond my understanding.

    Zombie - great point about the computerized stock trades. The market is hardly as reliable an indicator of the experts or their research because of those damn dirty machines.
     
  9. Ugg macrumors 68000

    Ugg

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    #9
    I agree 100%. The stock market is legalized public gambling. Anyone who thinks differently is a shill for Wall Street. The initial stock sale is the only one that benefits the company, every time it's traded after that point, the trades are for the benefit of gamblers.

    The mass psychological component is very fascinating and allows manipulation on a massive scale.
     
  10. skunk macrumors G4

    skunk

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    #10
    George Bernard Shaw, not that old.
     
  11. Raid, Feb 10, 2012
    Last edited: Feb 10, 2012

    Raid macrumors 68020

    Raid

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    #11
    Well your friendly neighbourhood wiki states:
    By extension then 'the economy' is the mechanisms and factors that impact the production distribution and consumption of goods and services.

    It's easy to say but it's quite difficult to explain the interaction of minutiae that result in decisions to produce, distribute, consume, and save commodities or resources.

    As an economist I can't really say if I'm offended by that joke... :p
     
  12. torbjoern macrumors 65816

    torbjoern

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    #12
    "THE economy" = Goldman Sachs' financial state of affairs
     
  13. flopticalcube macrumors G4

    flopticalcube

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    #13
    Oh! Oh! Economist jokes!

    Ask five economists and you'll get five different answers – six if one went to Harvard.
     
  14. Sydde thread starter macrumors 68020

    Sydde

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    #14
    So it really is essentially a matter of business and finance, almost mechanistic in its function? People, communities and their lives amount to but a component or resource (except those that have eight-digit-plus incomes)? And when the average person is told the state of the economy, what should they do with that information? Buy more stuff?
     
  15. Iscariot macrumors 68030

    Iscariot

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  16. VideoFreek, Feb 10, 2012
    Last edited: Feb 12, 2012

    VideoFreek macrumors 6502

    VideoFreek

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    #16
    An illustration:

    Cute joke, perhaps, but it contains some truth about how economies function.

    "The economy" is the sum total of all the goods and services that are transferred between parties participating in the economy, plus the capital (money) that flows through it to facilitate these transfers. Economics is the dismal science that seeks to understand how various factors such as supply and demand, availability of labor and capital, money supply and cost of borrowing, among many others, interact to influence the behavior and decision-making of the many participants in the economy.
     
  17. mcrain macrumors 68000

    mcrain

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    #17
    The economy always does better when money is circulating. The economic effect from money in the hands of the poor is always greater than the effect in the hands of the wealthy because the money is almost always immediately used, and used in a way that causes circulation.

    Higher taxes may feel like they hurt, but they almost always have a stimulative effect. If for no reason other than getting the $100 bill out of the pocket and onto the desk.
     
  18. MorphingDragon macrumors 603

    MorphingDragon

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    #18
    Tax goddamn tax. America seems to do the opposite of what you should do during the GDP bust and boom cycles.
     
  19. Raid macrumors 68020

    Raid

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    #19
    While the economy is a matter of business and finance, economists try to determine the relationship of events and decisions (using both quantitative and qualitative methods to model) that led to engaging in a particular activity. The mechanics though don't necessarily have 1-to-1 relationships or stay at a static value, are impacted by time frames, and effected by random events; so it can be very difficult to ascertain a precise outcome. So it's best not to think in terms of input of x means output of y in absolute terms (especially from a macroeconomic perspective).

    From a perspective of 'pure' economics? Yes people are considered as both an input and/or a consumer of goods... at all income levels... (input could be labour, but can also be capital). Freakonomics is a good site to look at if you want to see how economic principles and statistics can examine other behaviours outside of traditional economics.

    Well when given information about the economy they should interpret the information as it would apply in their circumstances. Two of the guiding assumptions in economic modeling is rational behaviour, and shared information amongst participants in the economy. Thus if your mortgage was coming up and you knew that interest rates were at historical lows and not expected to go lower, a rational consumer may chose to lock in a fixed rate mortgage.
     
  20. mkrishnan Moderator emeritus

    mkrishnan

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    #20
    In the end, economics is a science of predicting human behavior, much in the way that psychology is.

    If you do a classical mechanics problem, like figuring out how a block slides down a slope, you may call the block a "point mass," but you don't really think it is a point mass. You just do it because it works. I think, in this light, it's important to understand that economics is measured more by the extent to which it makes predictions that are right than by the extent to which the concept is necessarily right is essentially the equivalent of "truth" in science.

    Money is frequently used in economic analysis in part because it's easy to measure. There are lots of economic predictions that can be tested and vetted without really drawing money into the equation at all, because something else of value passes from hand to hand. There are lots of economies, even if we kind of all loosely mean the same thing when we talk about THE economy. But in the end, economics is predicated on some kind of idea that people engage in predictable patterns of behavior and that it's interesting to understand what those patterns are, and maybe useful too.

    Without venturing off into the obvious, have you read Freakonomics or anything of the kind? I think understanding economics and/or the economy is potentially useful to people. Even if you do look at THE economy, it can tell you all kinds of things about... how to plan for your future, how to make more money or succeed in various kinds of endeavors (not necessarily of a mercantile nature), etc.
     
  21. tktaylor1 macrumors 6502a

    tktaylor1

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    #21
    "First we have to ask ourselves, what is physics?" - Dr. Sheldon Cooper

    The rest should become clear.
     
  22. dsnort macrumors 68000

    dsnort

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    #22
    If only more people understood this. It is why certain economic philosophies work sometimes, but not others.

    Economic behavior is about how people, as a group, feel, about the immediate future. , ie, if a lot of people are concerned about the national debt, then a umteen bazillion dollar "stimulus" package, borrowed from China, aimed mostly at politically friendly areas, if of dubious benefit.
     
  23. Rampant.A.I. macrumors 6502a

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    This reminds me of a classic bro move: Telling someone they don't understand basic economics, usually in response to a rhetorical question about why the price of one good is WAY higher than another comparable good.

    "Why the hell is this $300? I saw one of these for like 25 bucks yesterday!"

    "Bro, you obviously don't know anything about basic economics. You need to educate yourself, bro." [bro adjusts $300 Ed Hardy trucker cap.]
     
  24. Iscariot macrumors 68030

    Iscariot

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    #24
    Stop talking about me like I'm not in the room :mad:
     
  25. paddy macrumors 6502a

    paddy

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    #25
    Not really, they've been cutting taxes, boosting govt. expenditure and lowering interest rate. Exactly the right thing to do, if you follow that orthodoxy.
     

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