Science as human
behaviour
Science, in fact,
reflects a basic drive to examine nature, seek knowledge and search
for the logical consequences of reasoning. It is a collective
endeavour spanning generations and, as such, its practice and
ability to flourish largely depends on the social and cultural
contexts in which it is pursued.
To different
degrees, all societies have practiced science, perhaps because the
scientific method, despite its imposing name, is the simplest, most
natural and universal way of acquiring knowledge and applying it
for survival and a better life. It is the extension of our innate
instinct to discover regularities in the world surrounding us. Our
brains are pre- wired to build models where assumptions of
regularity are encoded. Our brains are also pre-wired to detect
exceptions.
Component
economies
In a nutshell the
human production system involves setting apart nature and human-
made processes while viewing the natural system as a domain in
which we have a given right to exploit
It relates to a
linear process of
-
getting stuff-- anything,
anywhere at the lowest direct price;
-
making stuff--getting it out
the door as quickly as possible;
-
and dumping stuff--shoddy
products in the marketplace, waste in the garbage and pollutants
into the environment.
The rate of
formation of the biological inputs originating from the capture of
solar energy by plants energy underpins all human production.
It maintains the material connections between people and the
cosmos.
Biological
productivity is therefore of great importance as a focus of human
economics. It is a consistent feature of human adaptations to
environment that cultures have to strike a balance between their
command of natural resources as inputs to communities (natural
economy), and the primary production of biological materials and
energy that is driven by planetary and solar forces (planetary
economy). Natural economy defines the organanisation of resources
from the planetary economy for production. Political economy
defines the organisation of people for production.
Economic
activity
The main purpose of
economic activity is to satisfy the wants of people for food,
clothing, housing, and all the other commodities and services which
they consume and which constitute their standard of living. The
central economic problem for any community is how to make the best
use of its labour and resources. All wants cannot be completely
satisfied. The problem is to satisfy them as fully as possible from
the means of production available. These means of
production—labour, land, and capital (physical
assets)—are limited in amount. Many of them are capable of
alternative uses. Youths and girls can enter any one of a number of
occupations, some workers can move from one industry to another ;
some land can grow any one of several crops or can be used for
pasture, or for building sites ; and many buildings and machines
can serve any one of several purposes. The community must,
therefore, choose what assortment of goods and services shall be
produced out of the infinite number of assortments which it could
produce. In this sense economics has been defined as " the science
which studies human behaviour as a relationship between ends and
scarce means which have alternative uses.
Methods of
organisation
One method of
dealing with this problem is by complete central planning, as in
Soviet Russia. A good deal has been written on the merits and
defects of this form of social organization. But most countries
retain the institutions of private property, freedom of enterprise,
and freedom of choice by consumers, all subject to greater or less
control by the state. Hence most economists writing in English
assume the more common framework of social
institutions.
Under these
conditions, the problem is solved mainly through the price-system.
A large part of economic analysis deals with the formation of
prices, and the relations between prices: in other words, with the
theory of value and its applications. Everything which can be
exchanged for money has a price : for example, wage rates in
different occupations and rates of interest are prices, and form
part of the price system. The price of a commodity or service tends
to equate the demand for it (the amount which buyers are willing to
take at that price) with the supply of it (the amount which sellers
are willing to sell at that price). Demand reflects the preferences
of consumers and the relative spending power of different
consumers; supply reflects the relative scarcities of the various
commodities and services. The demand for means, or factors, of
production is derived from the demand for the commodities and
services which they help to produce. In the absence of monopoly,
the price of a factor tends to equal the value of the addition
which an extra unit of that factor would make to output (known as
its marginal product) and the price of a commodity tends to equal
the extra money cost of producing a further unit (known as its
marginal cost).
How the Price
System Works
In the absence of
monopoly, therefore, the central economic problem would be met in
the following way. An increase in the demand for a commodity would
tend to raise its price; that industry would become a specially
attractive field for investment; labour and other factors of
production would be directed towards that industry, where they
could now earn more; and so more of that commodity would be
produced in response to the increased preference for it of
consumers. An increase in the supply of a commodity, due perhaps to
a big harvest or to an invention which reduces costs of production,
or to the movement of capital to an industry in excess of the
limits of demand at a high price, tends to reduce its price and
thereby to expand its sales. Conversely with decreases in demand or
supply. Costs represent alternatives forgone, for they are sums of
money paid to attract factors away from other industries, where
they could contribute (nearly) the same value to
output.
But the price system
does not work perfectly. While 19th century industrialists
considered it good policy to make a small profit on a great many
items, in the 20th century it was found to pay a monopolist
deliberately to keep down output in his field in order to raise
prices and increase profit on each item. Economies studies these
phenomena of monopoly and imperfect competition, associated with
trade marks and advertising. It is generally agreed that the state
should supplement the price system by preventing or controlling
monopoly and by paying for services such as defence and public
health and education which private enterprise would not provide
adequately.
Economic activity
under free enterprise has large swings up (booms) and down (slumps)
; mass unemployment often occurs during the slumps. Hence economics
studies the nature and causes of this " trade cycle" to discover
whether general economic depressions, or slumps, can be
avoided.
An important
contribution to economic theory in general, and especially to this
branch of it, was made by J. M. Keynes (Lord Keynes) who published
in 1936 The General Theory of Employment, Interest, and Money. He
showed that if people spent less, in order to save more, this
tended to create unemployment unless it was offset by increased
expenditure on " capital goods " such as buildings, ships, plant,
and machinery. Much has been written, largely inspired by this
book, on methods of preventing mass unemployment. Suggestions
include public works, control of investment, and deliberate budget
deficits when slumps threaten.
Fluctuating Value of Money
Industry and trade
on the modern scale would not be possible without the use of money.
Money is a generally acceptable purchasing power. A man will take
it in exchange for his goods and services because he knows that
others in turn will take it from him in payment for what he wants
to buy. The purchasing power of the monetary unit may change from
time to time. If it falls (in other words, if the general level of
prices rises), this hits people on fixed incomes and creditors due
to receive fixed sums of money, for the money buys less than it
used to do. On the other hand, the prospects of a rising price
level often stimulate borrowing and economic activity, although
sometimes firms embark on enterprises which do not survive after
prices cease to rise. The theory of money and banking deals with
these questions, and also how changes in the amount of money and in
the desires of people to hold money rather than income yielding
securities (" liquidity- preference ") may affect the rate of
interest.
The theory of
international trade explains why a country specialises in the
production of certain commodities which it exports in exchange for
others, which it imports ; and discusses " the terms of trade
"—what forces determine the volume of imports a country gets
in exchange for a unit of exports. A country also engages in other
transactions with the rest of the world. It may receive payments as
interest or profits on its foreign investments, or for shipping and
other services which it renders, or from tourists. All the various
payments which it makes and receives together form its balance of
payments. Equality between its payments and receipts can be
attained in various ways. These include changes in the rate of
exchange between its currency and other currencies ; restrictions
on imports and subsidies on exports ; and, under fixed exchange
rates, inflation or deflation of the national money income. The
money income of a person for a year is his total receipts,
including the value of any items such as farm produce which he
produces for his own consumption, less his business expenses. The
national income for a year is the net sum total of all incomes of
persons, firms, and institutions for that year. It must be measured
net. For example, dividends paid by companies must not be counted
in the incomes of the companies as well as in the incomes of the
shareholders ; income tax must not be counted in the incomes of
both the taxpayers and the government.
National Income
The national income
of a country is the best single measure of its economic position,
but for comparison, with other years or with other countries
allowance should usually be made for differences in population and
in the purchasing power of money. The latter allowance can be made
by taking some year as the " base" year and then altering the money
figures for other years to make them represent money units of the
same purchasing power as in the " base " year. The result gives a
comparison of " real," as opposed to " money," income. For example,
if in the year 2000 the price level should be twice as high as in
1950 (taken as the base year) the actual national income of 2000
should be divided by two in order to compare it with that of
1950.
The main determinant
of real income is the volume of production. This is influenced by
many factors. These include the natural and acquired capacities of
the people, and the natural resources and other assets (the size of
the population relative to these resources, the amount of
specialisation, and the state of technical knowledge) of a country.
Part of the economic activity of a country is devoted to providing
for the future by increasing productive equipment, and improving
health and knowledge ; this investment keeps down current
consumption, but tends to increase future output.
Technical
Knowledge
The great economic
progress which has taken place in the western world over the last
hundred years or more has been due to the continued growth of
technical knowledge combined with increased investment and greater
specialisation, including large- scale production. But technical
progress may be offset by over population, by wars, or by natural
catastrophes.
The study of
economics is an aid to clear thinking and is useful to the citizen
as well as to the statesman. Economists do not always agree among
themselves on practical issues. This is usually for one or both of
two reasons. In the first place, these issues may involve personal
judgements about the extent to which one aim (for example, greater
output) should be sacrificed to another aim (for example, greater
equality or social security). In the second place, they usually
involve forecasts about how people would respond to the proposed
measures. But the citizen should know enough economics to form his
own judgements on these issues of policy.
British economic
history
Human history is a
minute fraction of the millennia that have elapsed since talkative
animals with the trick of using tools began to people our
planet. In the broadest sense of the term, history
should acquaint us with the record of human achievements and
failures. These are a guide and spur to the exercise of human
reason directed to the survival of human life on earth. However,
history is not just "past politics" nor even is it merely politics
diluted with economics. It is the story of the life of mankind, the
natural history of an animal species with habits so peculiar and a
record so unique as to justify a science devoted to its own
past.
Each new generation
makes new demands on the scientific study of the past, and faces
new problems which should encourage the exploration of new facets
of the human record. Much of dynastic history is irrelevant to the
problems which we now face in the age of semiconductors and
globilisation. Historians of the Victorian age had other
preoccupations. Legal and constitutional issues, the rise of
nationalism and religious controversies inescapably circumscribed
their approach to the political set-up of their time. History today
has to display the past as a balance sheet of our increasing
command over nature by advancing knowledge and applying new social
technique to the multitudinous activities of practical life. Our
own century calls for a new kind of history, a history of human
life in its entirety focused on environmental
management.
Britain is a small
patch of earth; a small island off the coast of the smallest of the
five continents. To know something about its comparatively recent
past is a paltry substitute for knowledge of the historic record in
its entirety; but for those of us who belong to the Anglo-American
speech community, the record has a peculiar interest. We are bound
to it in a special sense which extends beyond its laws, its
conquests, its trade or even its inventions. Its story is the clue
to why we do things in our own way.The patch of earth to which its
narrative refers more especially is a small island off the coast of
the smallest of the five continents. To know something about its
comparatively recent past is a paltry substitute for knowledge of
the historic record in its entirety; but for those of us who belong
to the Anglo-American speech community, the record has a peculiar
interest. We are bound to it in a special sense which extends
beyond its laws, its conquests, its trade or even its inventions.
Its story is a model of why people of different countries do things
in their own way.
This model of
British economic history has been developed from the 'History of
the Homeland' by Henry Hamilton. It has been
prepared as an Acrobat downloadable pdf file (hamacro.pdf).
The file may be downloaded from
http://users.aol.com/belcardiff The contents are listed
below.
Section 1 Resources and Managers
Section 2 An Age of Civilisation
Section 3 Producers
Section 4 Traders
-
Bankers
-
Merchants
-
Imperial investors
-
North American investors
Section 5 Consumers
Section 6 Service providers
-
Education
-
Public health
-
Welfare
-
Medical care
