We are all already experts in economics, although we may not realise it. Economics is not finance, numbers and mathematics. It is not strictly about business.
These are important aspects and areas of economics but at its core the field of economics is defined by a narrower yet all-encompassing study: it is the challenge of producing the maximum outcome of value using a limited quantity of resources.
Looked at this way, it is clear that we are all economists and we can show that without even talking about money.
Each one of us has 24 hours in a day - a limited and non-producible resource. We also have a desired level of output, whether that is getting a certain amount of work done, finding the time to stretch out on the grass with a good book or develop deep connections with our loved ones. We have desires and a limited amount of time to achieve them.
Developing, studying and using methods to make better use of our time so that we can have more - whether that “more” is material or not - are activities that we engage in every day.
Analysing and attempting to improve these methods is the essence of what any economist does, the only difference lies in the resources that are being managed and the outcome desired.
Investors want to increase returns in restricted time, companies want to maximise revenues at minimum cost and governments should want to improve the quality of life of their citizens using their limited tax income.
Regardless of whether we earn money or not, we are all economic agents and appreciating that role is the key to growth, both in the economy and in our quality of life (although we should not always assume that growth creates quality).
Evonomics - a publication that encourages an evolution in economic thinking - proposes that the market is like a garden. Markets, like gardens, are not linear systems that self-correct.
Equilibrium
They are never static or in perfect equilibrium, rather they evolve and are always growing or shrinking depending on the behaviour of their individual components. They do not allocate benefit fairly - it is survival of the fittest.
Evolution, innovation and competition determine survival, but just like a garden, the strongest are the first to get stronger.
And just like a garden, the result of maximum production does not always result in maximum benefit. Some of the most successful gardens, if measured by biomass created, are full of weeds.
In a separate example, Evonomics advocates that the wealth of a country should be measured by the number of problems that its economy solves.
Markets are very good at solving problems - they bring us food, housing, technology and innovation - but at the same time, they need to be tweaked so that their problem-solving outcome can be fairly spread across society.
If we are to build this kind of wealth in our societies, we - as independent economic agents - need to dedicate ourselves to solving problems and not measure success as the accumulation of assets.
The two are highly related and those who develop a way to turn the sun’s energy into a form that powers our oven, for example, should be rewarded.
But the value placed on growth should stem from the value of problems solved, not the expansion of output.
The market is agnostic to what we create. It can just as successfully produce guns as it can food; it is a vehicle for transforming resources into production.
The impact of the market therefore, lies not in its existence but rather in the decision-making of each economic agent operating within it: us.
Markets and economies are not systems that we live in; they are systems that we create. And as we are imperfect, unpredictable and inefficient - so are our economies. We create the whole and the quality of our actions affects the quality of the collective result.
Somebody always takes action - if we do not, then we leave it to our competitors or governments to do so and as such relinquish our power as decision-makers.
* Pierre Heistein is the instructor of UCT’s Applied Economics for Smart Decision Making course. Follow him on Twitter @PierreHeistein.
* The views expressed here do not necessarily reflect those of Independent Media.
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