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A friend asked me the other day, what really is the economy? It’s funny, just a few years ago, I wasn’t really sure, nor did I care what the economy was. It just wasn’t something that interested me and it wasn’t in the news every single day like it is now. But now the economy matters.
The economy is the financial condition of, for our purposes, the U.S. When we talk about the economy, we’re generally talking about the US economy. Some people talk about the global economy, meaning the financial conditions of the whole world, but when they do, they typically refer to it as the global economy, not the economy. Then we might be referring to the conditions of a particular nation.
For example, we might talk about the economy in France or the economic conditions in Canada, but then we would refer to them by country, not calling it just, “the economy.” Further, how do you describe economics? Economics are the social sciences that studies economy. Back to the definition of the economy.
Even further than just saying the economy is the financial condition, it pertains to the way we meet our financial needs. The economy specifically focuses on the production of goods, the exchange of those goods, the way they are distributed and consumed and services required for these conditions. This is all called consumption. Market conditions affect the economy. Consumption, saving and investment affect the market conditions.
The word economy originates from the Greek words that actually mean, “one who manages a household.” The first time the word economy was used can be traced back to 1440 and was used by a monastery in a report called, “The management of economic affairs.” But really, the economy always has been here. As long as someone was making goods and distributing them, by whatever means, there was an economy.
Back in ancient times, people traded their goods and services making an economy. Then the economy was based around farming. Aristotle (who lived in 834-322 BC) came up with words like use value and exchange value of goods. Then he came up with an exchange ratio balancing the two. This was early economics.
Banks were created in the 1400’s adding to the conditions of the economy by introducing the concept of saving. Investment began when the early conquerors raised venture capital so that they could have the financing they needed, also in the 1400s.
Photo: commons.wikimedia.org
Now the economy is measured using all kinds of factors. One of those is GDP or gross domestic product. GDP measures the size of the economy, based on the money that is exchanged. The economy is also based on the exchange rate which is how much the US money is worth in other countries. Consumer spending, employment (or unemployment) and the stock market also factor in.
There is so much involved in the economy these days that it would be very hard to determine, on your own, where the economy is at. However, every day in the news we hear how the economy is doing, which is probably the best thing for us to go on (unless, of course, you are an economist. Then go for it on your own!) I know some of the economic conditions as reported don’t always feel right.
For example, they are saying the economy is coming back, improving. Yet I still have family and friends being laid off from their jobs every week. So I don’t feel it improving. However, you might. What do you think? Post how you feel here.
