The Role of Economics - Essay Example

Study Skills The Role of Economics This essay is a chapter analysis of chapter three, ‘the role of economics’. This task is aimed at examining the depth in which the learner understands the ideas presented in the chapter and how well he can develop an argument pin pointing the main ideas that have been presented. Therefore, in this work I shall disseminate the author’s ideas and try to make understandable to an individual who may just have the chance to read the analysis and not the chapter. On top of this, upon a critical evaluation, the argument raised should depict a deep understanding of the concepts put across as well as a good mastery of language that is used to put the ideas presented across. The chapter is adopted from chapter 3 of ‘Small is Beautiful’ by E. F. Schumacher (1973). To start the argument, Schumacher uses a pessimistic approach that should create the interest of the reader. By proposing that economists are not the sole determiners of the economic future of a given country or a nation, he manages to capture the interest of the reader and make sure that he continues reading to understand how this proposition is tied to the chapter ‘the role of economics’. However, the author is fast to note that the role of economists as well as economics in general is far reaching and the effects will be felt by a country in any way. Therefore, in short, what he wants to say is that economists play a critical role in shaping the activities that surround the economic growth and position of the modern world but they should not be mistaken as the only stake holders or determiners. What is the role of economists and economics then? According to Schumacher, economics plays a central role in determining as well as setting the criteria that is used to determine what is economic or not. There are many factors that are involved when one talks about the economy of a given region. Therefore, economists will be in place to determine how the factors can be brought together to ensure that there is maximum production or the returns that are realized are at the peak. An economist will therefore be given the role of deciding whether a given idea or investment is economic or uneconomic. This is done by weighing the inputs that need to be put and the returns that are to be realized after the idea has been actualized. Schumacher (1973) notes that when an economist makes the verdict above (whether an idea or an investment is economic or not) the questions that arise are on the criteria that was used to make the final verdict. This should therefore be explainable by the economist to a layman or another individual who does not have a sound understanding of the subject. On top of that people are interested in understanding how the verdict means. Can one continue with the investment or should they halt it at the grounds? Are there any options that can be adopted and make the idea work? All these need to be addressed by the economist. This therefore makes the role of the economist critically important. Engaging in an investment without a prior advice from an economist may be a great risk as there are various issues that one needs to understand. These may include market factors such as the ease of the entry of a new product into the industry, the factors of production that are needed and the ways of ensuring that the chances of making loss are minimized. Schumacher goes back in history to bring the concept of professorship which was founded for political economy at Oxford about 190 years ago. He cites Edward Copleston who was among the people unhappy about the introduction of a science into the curriculum that was likely to usurp the rest. Therefore, immediately it was developed, Nassau Senior predicted that the science was most likely to rank high when compared to other disciplines offered at the time. This came to happen with the role of economics becoming increasingly important at all levels of production and also to countries who need it to manage their income and the way the income can be increased. As indicated earlier, an economist has the knowledge to term an idea economic or not. This is done in by showing the worth of the idea based on the two questions above. So when something is termed as uneconomic, the economist simply means that it is not a worthwhile investment. One would rather do without it. However, this should not be the end of the story. The economist through education and experience is in a position to disseminate the problem and come up with the ideas or the solutions to a given problem. So if something is uneconomic, he should propose that should be done to make it economic. What inputs should be added and in what quantities should be put to ensure that the expected goal is achieved? This should be in a report that is produced. At times, this is not possible and so the only feasible solution is to discard an idea or an investment plan. This should be done with an alternative at hand. This shows that the role of economics cannot be overlooked in any society. It is important to note that just like any other human, economists are fallible. They are therefore in a position to make poor decisions. Therefore, when it comes to diagnosis of a problem and also in giving an alternative or a working plan, they often differ. The opinion of a number of them is therefore needed before coming to a concrete solution that can be adopted. This is important as it prevents a later situation where a cure is needed when the damage has already been done. According to Schumacher, something is termed uneconomic if the set amount of profit or benefits are not realized upon its actualization. At times, it is hard for individuals to understand whether a given investment is profitable or not. At such a point, the role of an economist is needed. An economist will not only establish whether the investment is profitable but will also advice on ways that can be implemented or put in place to make it more profitable. He also emphasizes the words ‘those who undertake it’. To show the meaning, he wants to mean that those who are undertaking it may realize a profit that is not only economical while an economist may fail to realize that as his approach will be too economical. Some projects are put up for social benefits and so an economist will be totally wrong if the evaluation he puts will be from an economic point. Economics also deals with goods in accordance with their market value and not in respect to what they really are. This means that the value of a given commodity will not be the same in the market from time to time. There are market forces such as the demand and supply curves that determine the value goods and services will have in the market. When the supply of a commodity is high and there are limited individuals willing to pay for the goods or services, the value of the goods will most likely drop as the consumers will have a higher bargaining power. Also, if the supply is limited, the demand for the commodity will most likely go up and the sellers will have a higher bargaining power. They can therefore adjust the price of the commodity as they wish. This should be explained by an economist to know when the demand for certain commodities is high to maximize production and hence the returns. Economists therefore greatly simplify the business field. They will examine the market forces and offer timely and accurate advice to investors therefore securing the investment. Meta-economics is also introduced in the chapter as the understanding of the relationship or the interdependence between man and nature as far as economics is concerned. The study of the two is largely in meta-economics. Therefore, understanding economics involves a great understanding of nature as well as man. One of the greatest fallacies that a modern economist can purport is ignoring man’s dependence on the natural world. On the contrary, a good one should invest much of his time to make sure that the economic approach that he uses is closely aligned with the understanding of nature. The same way economics deals with no limit when it comes to goods and services, the same applies when it comes to people. It deals with limitless people and traits making it quite complex. The economic theories that have been developed are therefore important though they do not cover all the people in a given society. A good theory should however be in a position to aid in understanding economics to a great level. In conclusion, the role of economics cannot be overlooked in today’s society especially with the societal and economic dynamics that need to be understood to make a worthwhile investment. Bibliography Schumacher, E. F. (1973). Small is Beautiful: Economics as if People Mattered. New York: Harper Perennial Publishers. Read More