Introduction of Economics

Economics Defined

Economics is the proper allocation and efficient use of limited resources for the satisfaction of human needs and wants. It is a branch of social science that deals with the production, distribution, and consumption of goods and services. The aforesaid word is derived from the Greek word "okionomia," which means household management.

Bible of Economics

Sometime in 1776, Adam Smith, also known as the "Father of Economics," published The Wealth of the Nation. The book became the bible of economics for a century (Fajardo, 1990). He argued in the book that the human natural tendency toward self-interest (or, in modern terms, looking out for yourself) results in prosperity (Blenman, 2020). For instance, people will act in an economically rational way when faced with behavioral decisions affecting their own personal income and well-being (Kenton, 2020).

The Invisible hand

The invisible hand is the automatic pricing and distribution mechanisms in the economy. This theory was the primary justification for free market ideologies. Smith stated that the means of production and distribution should be privately owned, and if they are not subject to the regulation of society, they will naturally prosper.

 

The elements of prosperity concerning the invisible hand are the following: Firstly, the practice promoted enlightened self-interest, thrift, and hard work. Example: The butcher does not sell meat with good-hearted intentions; it is evident that his attention is to acquire profit. The butcher sells at a reasonable price, so both parties can benefit. Secondly, the responsibilities of the government are limited to the defense of the nation, universal education, public works (infrastructure such as roads and bridges), the enforcement of legal rights (property rights and contracts), and the punishment of crime. Smith argued that large bureaucratic governments exist and stated, "There is no art which one government sooner learns from another, than that of draining money from the pockets of the people." Finally, stable currency is linked to free-market principles. Smith wishes to limit the government's ability to depreciate currency while adhering to free-market principles by keeping taxes low and allowing free cross-border trade by eliminating tariffs (Blenman, 2020). 

Microeconomics

Microeconomics deals with the economic interactions of a particular unit, such as a person, a single entity, or a company. The interactions refer to the buying and selling of goods by consumers and producers, which take place in markets. Hence, it can be deduced that microeconomics is the study of markets. It is well established in economic theory that there are interactions between supply and demand and scarcity of goods.

Macroeconomics

Macroeconomics is the aggregate unit. It is the study of the performance, structure, behavior, and decision-making of an economy as a whole. It is broader than microeconomics; it refers to national, regional, and global scales. The primary purpose of the discipline is to maximize national income and provide national economic growth, which can translate to increased utility or satisfaction for the people.

Economics as related to other social sciences

Sociology. It is the science of the origin and evolution of society, or of the forms, institutions, and functions of human groups (Webster’s New Collegiate Dictionary, 1970). It attempts to discover the social patterns or human behavior in a social institution, like a family, church, or government. However, economics is more definite; it attempts to understand the behavior of the consumer and producer.

Political Science. A discipline of social science that deals with systems of governance, and the analysis of political activities, political thoughts, associated constitutions, and political behavior (Oxford English Dictionary). It is related to the planning and creation of a sound policy for the people, like the appropriation and disbursement of the national budget and the production and distribution of income.

History. Is the study of the records of past events. Historia, meaning "inquiry; knowledge acquired by investigation. This would provide us with a better understanding of historical events and a solution to our present problem.

Ethics. It is also called "moral philosophy," the discipline concerned with what is morally good and bad and morally right and wrong. It is a science of morals. The aims of ethics and economics may be different; the former may promote material welfare while the latter promotes moral welfare. However, economics cannot be separated from ethics; people should consider the welfare of others in all economic or business dealings. If an individual commits some acts contrary to the interests of his fellowmen, he is directly harming himself because he is a member of society (Javier, Costales, & Rivas, 2002).

Evolution of Economic Society

Direct Appropriation Economy. This society is also known as Hunter-gatherer society, which means that humans relied on their environment; they hunted animals, went fishing on rivers, and scavenged plants for food. The society was very primitive; "man lived from hand to mouth."

Pastoral Economy. It existed 7,500 years ago, when humans learned how to domesticate animals and grow their own plants for greater food security. They recognize their ability to tame and breed animals and cultivate their own plants. It is said that the society was nomadic, moving from one location to another to bless their flocks.

Agricultural Economy. Humans settled down and cultivated soil in addition to the domestication of animals. Technology for farming was developed, such as fertilizer and tools for digging. A manorial system existed in which a lord presided over the manor or a self-sufficient landed estate.

Industrial Economy. The radical changes were based on technological invention, changes in the method of production, and the substitution of factory for household manufacturing. Examples of inventions include the spinning jenny invented by James Hargreaves in 1764, the power loon invented by Edmund Cartwright in 1785, and the steam engine created by James Watt in 1769.

Economic System

It is a set of economic institutions that dominate a given economy and are intended to solve the three (3) basic economic problems. It regulates the factors of production: land, labor, capital, and entrepreneurship.

Types of Economic System

Traditional Economic System. Production and distribution of resources under this system rely on customs, history, and time-honored beliefs, that were handed down from generation to generation. This system relies on farming, fishing, hunting, gathering, or a combination of these activities.In trade, people often use bartering instead of money. They only produce what they require, so there is no surplus.

Command Economic System.  A centralized authority or government exists to make all economic decisions. The government determines what goods should be produced, how much should be produced, and the price at which the goods are offered for sale (Chappelow, 2020).

Market Economic System. It is based on the concept of the free market. The price of goods and services is grounded on the interactions of consumers and producers. Most goods and services are privately-owned. The enactment of fair trade laws, such as those prohibiting monopolies, limits the government's power.

Mixed Economic System. It combines the characteristics of market, command, and traditional economies. It protects private property, and there is a freedom to use capital. However, it allows for governments to interfere in economic activities in order to achieve social aims.

What are the basic economic problems

According to Samuelson, the economic problems of societies are the following: First, determine what to produce- It is important to determine the wants and needs of the people in order to satisfy them. In economics, this is known as demand; if a manufacturer produces something that is not necessary or for which there is no demand, it will not increase people's utility. If a country allocates its resources for a service that is not needed by the people, it is not efficient. Second, how to produce- is a question of manufacturing methods. People have to decide the best combination of factors of production to create the desired output of goods and services. Lastly, for whom to produce- this is known as problem of distribution in economics. Societies need to decide who will benefit from their economic activity and what quantities they will acquire.

 

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Analyze the Nature, Dimensions/Types and Consequences of Power

NATURE OF POWER
 

Power is the ability to direct other behavior to get what you want. The driving force moving the resources from institution A to institution B or the influence of a parent on his child. The authority of a politician to change policies for his interest. The circumstance may amount to coercion or the practice of persuading someone to do something by using force or threats. According to Dalberg, an English historian, power tends to corrupt, and absolute power corrupts absolutely. He warned that power is inherently evil and those who possess it cannot be trusted.

DIMENSIONS OF POWER

Power as Decision-Making
This face of power consists of conscious actions that in some way influence the content of decisions. Identifying who has power is done by analyzing decisions in the light of the known preferences of the actors involved. The implication of this view of power is that the most powerful actors in society are those whose opinions are considered and upheld in the decision-making. The powerful are able to get what they want and make others behave the way they want them to. Decisions can be influenced in a variety of ways. Keith Boulding distinguished between the use of force or intimidation (the stick), productive exchanges involving mutual gain (the deal), and the creation of obligations, loyalty, and commitment (the kiss).
 
Power as Agenda Setting
The second face of power is the ability to prevent decisions being made: that is, in effect, ‘non-decision-making’. This involves the ability to set or control the political agenda, thereby preventing issues or proposals from being aired in the first place.
 
Power as Thought Control

The third face of power is the ability to influence another by shaping what he or she thinks, wants, or needs. This is power expressed as ideological indoctrination or psychological control.

 
TAXONOMY OF POWER                                  

In 1959, John French and Bertram Raven created the six (6) bases of power to understand the influence of a leader.

A formal right to make demands based on his/her authority is known as legitimate power. Example, the President of the Republic of the Philippines, elected by the people, making him a legitimate leader of the Philippines with an authority to direct other servants of the government to help him to accomplish his goals.

The reward power is the capability to compensate other person for compliance. Example, A manager's authority to promote an employee.

The coercive power is the ability to punish a person in case of noncompliance. Example, if an employer forces or threats his employee to do an act whether lawful or unlawful,

If a leader is charismatic the people automatically follow him this is known as referent power. Examples of charismatic people are Pope John Paul II and President Duterte.

The expert power, under this circumstance education or experience is the essential ingredient. Example, everybody, listen to a lawyer, if there is a controversy in law.

When a person holds information that may significantly affects the decision of a person is known informational power.

 
CONSEQUENCES OF POWER
There are three consequences of power: compliance, commitment and resistance. Employing certain types of power in particular ways may result into these consequences.

Compliance refers to the readiness or act of agreeing to do something.

The two types of power most likely to cause compliance are legitimate or position power and reward power.

1.Compliance with the order may occur if it is perceived to be within the leader’s scope of authority.

2.Compliance is most likely to happen if the reward is something valued by the target person.

Commitment is an even more desirable outcome because of the trust and emotional pledge that it causes. It is perceived as loyalty or a sense of dedication or devotion. Commitment is most likely to be the consequence when the powers used are referent and expert.

The common way to exercise referent power is merely to ask someone with whom one has a friendship to do something.

Expert power may result to commitment if the leader presents logical arguments and supporting evidence for a particular proposal, order or policy. It will depend on the leader’s credibility and persuasive communication skills in addition to technical knowledge and logical or analytical ability.

Commitment is a very unlikely consequence if coercive power is employed.
 

Resistance means to refuse or to oppose. It is the most likely outcome when coercive power is used in a hostile or manipulative way. It is best to use coercion power in preventing behavior that is harmful to the society and well-being of the people such as illegal and violent activities. (Heywood 2007)
 
CONFORMITY

Power is abused by compliance with the standards set by the society. People are often quick to conform just to please others.

Sometime in 1960, Stanley Milgram studied conformity to the authority. The participants were paid by the researcher to take a certain role. The participant (as a teacher) was told to shock the participant (as a learner) whenever an incorrect answer was given. In the study, the participants (learners) were confederates who pretended to be hurt by the electric shock. He told the participants (teachers) that they would not be held liable for whatever happened to the participants (learners) and that he needed their help to complete his experiment. The result ended up being that all participants were willing to administer up to 300 volts, and 65% were willing to go up to 450 volts.

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Political Ideologies

Ideologies refers to body of concepts or a set of beliefs or principles, especially those of a particular group or political party. Hence, political ideology is the allocation of power and to what purpose or ends it should be used. Accordingly, political ideologies have two dimensions; (1) Goals –how the society should be organized and (2) Methods - the most appropriate way to achieve the goal.

Aristotle’s Ideology

Aristotle known as the father of political science. He believed that the study is a powerful branch of science which held authority over other branches, such as military science. Moreover, he believed that fundamental achievement happiness derived from state, how it is organized and how the people pursue its ends.
He argued that there are six forms of government, categorize into ruled by one, ruled by few and ruled by many, each where further divided it into “defective or bad and “true forms or good.”

Aristotle classification of government	Defective or perfected for the interest of the ruler(s)	Good or “True forms” For the common interest
Ruled by One	Tyranny	Monarchy
Ruled by Few	Oligarchy	Aristocracy
Ruled by Many	Democracy	Polity

He described that tyrant is a usurper of power or acquired his power by force and rules over unwilling subjects. Based on his book politics: “Any sole ruler, who is not required to give an account of himself, and who rules over subjects all equal or superior to himself to suit his own interest and not theirs, can only be exercising a tyranny.”                                                                                                                         
Monarchy is ruled by one person whose authority derived not from election but through heredity. A form of government where the head of state is called often called king, queen, emperor or tsar. A monarch holds his position until death or abdication. Monarchy is classified into two; firstly, absolute monarchy and secondly, limited monarchy. In an absolute monarchy, the power of the king originated from divine right. The doctrine that king source of authority is from God, not from their subjects. Therefore, rebellion is the worst of political crime, for the reason, defying the order of the king is disobeying God. The monarch holds absolute power without constitution limiting it. All the properties of the nation is under complete control of the king.

Limited Monarchy also known as Constitutional Monarchy. The monarch must act in accordance with a written or unwritten constitution.  He is bound to exercise the powers or authorities within the limits prescribed by law. The country under this form delegates its power to promulgate laws to the parliament and holds the judicial and executive power. However, most of the country today, the monarch is just mere ceremonial leader with a limited executive power and influence, compare to the prime minister.

Oligarchy derived from the Greek words oligarkhia which means few and arkho meaning to rule or command.  This form of government is ruled by the few, to Aristotle it is ruled by rich, for which another term commonly used today is plutocracy. These few people claim that the most essential things to rule are wealth, social status and education. They are motivated by their self-interest to protect wealth. People are not given the rights to participate in the government. In contrary, the term Aristocracy derives from the Greek word aristokratia, meaning “rule of the best.” The few people that were chosen are endowed with the attributes to rule. “
Aristotle observes that the dominant class in oligarchy (literally rule of the oligoi, i.e., few) is typically the wealthy, whereas in democracy (literally rule of the dêmos, i.e., people) it is the poor, so that these economic classes should be included. He argued that the propriety constitution or government is represented by polity of middle class citizens.

In the democratic form of government, the state function through the law created by the politician which they create for their self-interest, to Aristotle “there are two parts of good government; one is the actual obedience of citizens to the laws, the other part is the goodness of the laws which they obey.”

Karl Marx’s Ideology

According to Marx society is divided into social classes: (1) Bourgeoisie, the Capitalist or Business owner who is the owner of the properties and control the production and (2) Proletariat, the workers who transform raw materials into economic goods. The capitalist controls the business, to maximize the profits he pays the laborers the lowest wage and employ social institutions as tools, like government to enforce law to maintain ownership of properties, church and education for propaganda. Laborers view the employment as a means of survival. This circumstance would eventually lead to revolution and end of capitalism.

Economic Determinism

It is a theory that economic relationships are the foundation upon which all other societal and political arrangement is based. This means every social institutions such as religion institution and political institution are determine by economic institution.

Dialectic Materialism

The Marxist theory (adopted as the official philosophy of the Soviet communists) that political and historical events result from the conflict of social forces and are interpretable as a series of contradictions and their solutions. The conflict is seen as caused by material needs.

The haves (the rich or bourgeoisie) refer to the thesis or idea in conflict with the have-nots (the poor or proletariat) refer to the anthesis or counter idea. He founded that this would lead to Synthesis or New Idea. It is very evident to his theory that revolution would bring desire change.

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