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Bishop's Cleeve

Economics

Status:Active, open to new members
Leader:
When: on Wednesday mornings
Every 3 weeks 10.30am to 12.30pm
Venue: Members Home

The group leader was a consultant economist working mainly for governments, both in this country and in much of the developing world.

The key purpose of the group is to help explain the fascinating subject of economics to people with no previous background in the subject, other than what they may have read in the papers. So, when Government’s appear to do stupid things, they may not (always) be as stupid as they seem. (Although sometimes they are).

The group leader normally prepares a topic for discussion at the meeting but members of the group also suggest topics they would like discussed.

Some of our members are quite voluble, others mainly listen. Both are equally welcome. There is certainly no need to feel that you need to know anything about economics to join the group.

  • Understanding what economics is about?

    Economics is about using the world (or a countries) resources to maximise the “economic welfare” or “utility” of its citizens. Utility is what people want, this may be tangible goods (good houses, good clothes, good food) or less tangible goods, (quick and comfortable transport, clean air, a law-abiding society) or a particular life-style (time to sit and stare, more time in bed. Economics is not necessarily about maximising production of goods. It is more complex than that, it is giving people what they want and if they prefer more leisure and less goods this is what economics should strive to provide.

    Note economics is concerned with “wants” not “needs”. It believes that individuals should have the right to decide for themselves what they want and not be told by a superior judgement.

    Economics is the study of the problem of using available factors of production as efficiently as possible so as to obtain the maximum fulfilment of society’s unlimited demand for goods and services. The ultimate purpose of economic endeavour is to satisfy human wants for goods and services. The problem is that, whereas wants are virtually without limit, the resources (natural resources, labour, capital) available at any one time are limited in supply. The fact of scarcity means that we must always be making choices. If to take an example more resources are devoted to producing motor cars, fewer resources are available for providing hospitals and other goods:

    Collins: Dictionary of Economics

    Economist classify the earth’s resources into three types or “factors of production

    The first is Land. Land is not just land but all the natural resources of the earth which were not created by man. Genesis 1: 1-26,

    The second is Labour. Man is born with certain natural abilities both brawn and brain power. Genesis 1: 27. Man’s capability to produce can be improved by training and education. This is sometimes called Human Capital.

    The third is Capital. Capital is created by the interaction of the first two factors of production. Man uses his labour (brawn or brains) to transform the earth’s natural resources into something different which is more useful. (e.g. he builds a fishing boat).


    Three ship wrecked men are alone with nothing on a previously uninhabited island. The only food available is fish. They need 5 fish a day to stay healthy. They can catch five fish if they work all day long. They do this for a while. The economy is stable but not growing. Production equals consumption. The Gross National Product is 15 fish a day (5,475 fish a year) produced from the two factors of production Land and Labour. There is no Capital.

    One man uses his brain and realises that if he had a net he could catch 10 fish per day. If he had a boat and a net he could catch 20 fish per day. In four days he could make a net. In 10 days he could make a boat. So for 20 days he decides to go a little hungry. He spends 4/5ths of the day catching 4 fish and goes a little hungry. He uses the other fifth of the day to build a net. In this time he is producing but not consuming what he produces, he is saving. After 20 days he has a net. He can now catch 10 fish a day. For two days he has a jolly good binge eating 10 fish each day. After a day off sick he decides to work half a day and build a boat and after 20 days he has a boat. The boat and the net are the first capital on the island. With his saving he has invested in a net and a boat. With his boat he can catch (produce) all the fish he can consume in a quarter of the day. Now that he has created some capital his ability to produce has increased. He can then use three quarters of the day to build a shelter or perhaps a bigger boat with which to escape.

    But the boat is idle for three quarters of the day. If he rents it out the hirer will pay him in fish and he can spend even longer building his house. Or he can rent it to both the other two for half a day and they will work on his house for the other half of the day. Our capitalist has started to exploit his capital.