Economic (Meaning and Explanation)

We explain what economics is and what goods, agents and the economic system are. Furthermore, economic development and growth.

What is economic?

The adjective economic refers to that which is linked to or belongs to the field of economics: either in the sense of the set of activities of production, distribution and consumption of goods and services, or of the academic discipline that studies them and that tries to build theories that account for their functioning and allow reliable predictions of their behavior.

The term “economic” comes from Latin oeconomicustaken from Greek oikonomikósa word that in Ancient Greece was related to household administration, and which is made up of the words oikos (“house”) and nemein (“distribute”).

Thus, what was initially considered the art of managing the house and the family, became the art of distributing the productive forces of the entire society that is, the economy (oeconomics in Latin and oikonomia in Greek). As will be seen, we are talking about words that have spent a long time in the mouths of humanity.

Currently there are other figurative uses for the adjective “economic”, always linked to the administration of finances and the acquisition of goods and services. For example, it is common to say that something is economical to indicate that it is cheap, that is, that it has a low or at least manageable price. Similarly, it can indicate that a person is modest in his spending or thrifty, or in a figurative sense, that he is stingy or miserly.

economic goods

In economics, “goods” are called all those things, material or immaterial, that serve to satisfy human needs. A distinction is also made between two types of goods that exist in reality:

Free goods or non-economic goods available in nature and that have neither owner nor cost in the market, since they do not require a productive process to obtain, that is, they do not have economic value. For example: air, sunlight.
Economic goods or scarce goods those that are acquired in the market through the payment of a price established in monetary units, and that, being the result of a process of transformation or production of raw materials, have an economic value. For example: furniture, computers, bottled mineral water or a house.

Economic agents

They are known as economic agents. all natural or legal persons that participate in the productive circuit of goods and services that is, in the economy. To do this, they can carry out any type of economic activity, from producers and distributors to consumers. By doing so, these agents intervene and make decisions in the market, forming a specific economic circuit.

Generally, economic agents are classified into three categories:

The families the main consumer units, which, through the money obtained from their work and their savings, acquire goods and services of all kinds. On the other hand, these actors offer companies their labor for production tasks.
The companies organizations in charge of the production, distribution and marketing of goods and services demanded by families. To do this, they require raw materials, inputs, capital and labor, and they do so with the purpose of generating profitability or profit for those involved in said activity.
The State one of the most complex economic actors, given that their role generally places them as guarantors of justice and equity in the economic process, that is, regulatory entities; but at the same time they can take part in production, distribution or marketing, through public companies, and are also responsible for managing the raw materials and natural resources of their territory, so that they cannot be exploited without their permission.

economic system

Adam Smith defended free market systems.

The economic system is called the totality of the economic activities of a society and the actions with which they are organized or structured so that they operate as a cohesive whole, with the purpose of generating wealth and satisfying the needs of the people.

They are part of an economic system the goods, agents and economic activities in their entirety, organized according to economic sectors (primary, or extractive; secondary, or manufacturing; tertiary, or distribution and marketing; and quaternary, or services) and orchestrated by the social, cultural and legal factors of society.

Thus, it is a global and general consideration of the economic activities of a society and its way of managing them, to address the five fundamental questions of the economy in general: 1. What to produce and how much? 2. How to do it? 3. For whom? 4. How to sustain it over time? 5. How to make it generate more and more wealth?

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According to their way of answering these questions, economic systems can be classified as:

free market systems whose spirit is to allow the supply-demand relationship and the search for profitability to stabilize and regulate the economy automatically. Something that is traditionally known as the “invisible hand of the market”, in the words of Adam Smith (1723-1790). To do this, the State is required to intervene as little as possible in the economy and simply provide the minimum conditions necessary to produce.
Planned or centralized economy systems with a spirit totally opposite to the above, in which it is considered that human economic activity must be guided, conducted and arranged by the State, in such a way that it satisfies the needs of the majority and not those of an enriched minority. Cooperation, instead of free competition, is the paradigm pursued in these models in which the State intervenes heavily in the economy, often expropriating productive mechanisms or putting them in the hands of the community itself and not of private actors.
Mixed economy systems a sort of intermediate proposal between the previous two, which is based on the double need to allow the free market but conduct it from time to time to guarantee the general satisfaction of community needs. There are many proposals classifiable in this type of system, which allow more or less state intervention and different methods to fluctuate between liberation and intervention at convenience.

Economic development

When we talk about economic development (often referred to simply as “development”), we mean the ability of an economic system to create wealth, prosperity and well-being among its inhabitants, generally thanks to the accumulation of capital and the consequent ability to invest in certain important purposes.

Economic development is a goal to be achieved for all countries and societies, since it allows them not only to aspire to higher standards of living, but also to plan for the future and innovate, thus feeding back the process and achieving greater and greater possibilities.

This is, fundamentally, what separates the so-called (economically) developed nations from the underdeveloped ones: the ability to effectively transform the work of their inhabitants into lasting wealth.

This issue is a subject of study in development economics, and It is usually one of the main tasks of the exercise of politics for which the State constitutes the main tool of change: usually this implies deciding between increasing its intervention or reducing it, depending on the economic conception that is used, and also in what way to do it.

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Economic growth

Economic growth should not be confused with economic development. The first consists of the increase in the value of goods and services produced by the economy of a country or a region, over a given period (usually a year).

I mean, It is an indicator of measuring economic prosperity which normally translates into an increase in production, energy consumption, savings and investment, per capita consumption and a favorable trade balance (more exports than imports). It is thought that increasing these indicators normally brings with it an improvement in people's quality of life.

Economic growth is the opposite stage of economic depression, in which logically the opposite occurs: the decrease and slowing down of the volume of economic activity and consequently the impoverishment of the people.

Economic cycle

The economy operates in a cyclical manner, through oscillations between expansionary phases and recessive phases, in which the economy grows and decreases respectively, going back and forth between boom and crisis.

Each economic school has its own conceptual apparatus with which to interpret this economic phenomenon and try to predict it accurately or, in the best of cases, influence it so that the oscillations are as less pronounced as possible, thus tending towards a stable economy. predictable, calm.

For example, the school of Keynesianism interprets them as something typical of the dynamics of capitalism, but establishes that through public spending their impact can be softened.

On the other hand, the Austrian or Orthodox school understands them as an aberration of the economic circuit, the result of an artificial economic expansion, that is, of bad decisions made previously, which generate an “economic bubble”: a stage of apparent prosperity that later brings I get a brutal recession.