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Economics 001



Economics 001 The following article is the first of three that the author is, or soon will be, submitting. The second will be on understanding the basics of money. In both this and the next article, it is the author’s intention to deal strictly in very basic economic fundamentals and refrain from making or drawing political connections. The third, and last, article will reverse the focus and concentrate on the politics that affects economies and people as a result of either not understanding or of intentionally ignoring the fundamentals described in the first two articles.
When writing about the fundamentals of a subject an author will sometimes use a title such as: “Whatever 101” as though referring to a beginning college class on “whatever”. In this article, however, the author is choosing to back up even a step before “101” as the fundamentals being covered are so very basic that a college level course designation is really too advanced. This will be about some of the very basics of economics. Understanding how the economy of a country functions can be difficult due to the enormous number of variables involved. However, there are a few fundamental factors that will always be in play regardless of the political environment. Recognizing and accepting these factors will always have a significant effect on any country’s economy and, most especially, on how its people will be able to live their lives. Unfortunately today, it appears that there are far too many who either fail to grasp these fundamental factors or are intentionally ignoring them in order to pursue ends other than economic success. Principal 1 All humans need and want to consume a great variety of commodities and services. However, none of what everyone wants or needs exists in nature, readily available and ready to be consumed by anyone. Therefore we have the principal that “Before anything can be consumed it must first be produced”. Principal 2 Nothing produces itself. Production only occurs when an individual or group of individuals expend thought, effort and wealth in an effort to produce something.” Principal 3 All humans primarily need and want similar commodities and services so it is always very likely that anything that is produced will be consumed by someone. “In the production of the commodities and services that humans need and or want, more is always better than less”.

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Principal 4 All production comes from someone’s effort and incentive always plays a very major role in determining how much is produced. Production Incentives can be either positive or negative and produce widely differing results. With positive incentive, the producer stands to gain more from producing more where with negative incentive the producer is, to some extent, forced to produce in order to avoid a negative outcome. “Positive incentives always result in the production of more while negative incentives always result in the production of less.” Principal 5 Commodities and services move from producer to consumer by distribution in a process which determines “who” gets “what” and “how much” in any economy. In market distribution, commodities and services flow from producers to consumers in response to the consumer’s willingness and ability to pay for them. All other forms of distribution involve, to some extent the use of force from outside market that determines or influences “who” gets “what” and “how much”. “Where force is applied in distribution it always involves “taking” from those who produce and “giving” to those who produce little or nothing. Whenever producers cease to receive a positive incentive to produce more they always produce less. Whenever minimal or non-producers are “rewarded” for not producing it destroys any minimal or potential productivity they might have resulting in the production of less. Principal 6 Distribution never has nor ever will be equal in any political and economic system. There will always be those who receive more and those who receive less for a variety of reasons. “Whenever less is produced in any economy it affects everyone negatively from top to bottom but has the greatest negative impact on those at the bottom. As such, the condition of those at the bottom will always be improved the most by the production of more and harmed the most by the production of less”. The above fundamental principles of economics and how they are applied will always have a significant impact on the success of any economic system and, most especially, on the living conditions of those living within it.


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Stan McHugh -- Bio and Archives Stan McHugh is a freelance writer.

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