По дисциплине Профессионально-ориентированный иностранный язык

Unit 1. BASIC ECONOMIC LAW. THE ECONOMICENVIRONMENT

Text A. The basic laws of economics

  All wealth is a result of the interaction of desire and scarcity: In order to have value something must first be desired. The amount of value placed on the desired object (goods) or action (services) is based on both the strength of the desire and the scarcity of the object or action in question; nothing else matters including the amount of labor involved in the objects production.

An Axiom of this Law is: Economics is the study of human interaction in the form of trade. Since trade itself is an act based in an emotion, desire, and influenced by emotions like fear and self-esteem, it only follows that economics is primarily social science.

Differing amounts of desire for objects or actions is the foundation of all trade: The strength of an individual’s desire for objects or actions differs from person to person and from one time to another. This fact is the power behind the desire to trade; the ability to trade what one desires less for something one desires more.

An Axiom of this Law is: Trades (monetary or direct) in the absence of coercion or fraud are always mutually beneficial. Consequently in a world of free trade all parties tend to become better off.

The amount of wealth within a society is based on its productivity: Almost all things of desire either are consumed, wear out or lose their desirability in some way or another and must be replaced. Wealth increases when a society is able to produce more then it consumes and decreases when it does not.

An Axiom of this Law is: Wealth or lack thereof is directly connected with a society’s productivity. Poverty is a result of a lack of productivity and correspondingly societies and individuals become wealthier as their productivity rises

The production of wealth is linear: it moves from idea, to production, to desire, to consumption: It should go without saying something must be produced before it is desired, desired before it is purchased and purchased before it is consumed.

An Axiom of this Law is: All reductions and increases in economic activity originate with producers. Consumers for their part are reactors, reacting to desires for products already produced and how secure they believe their income from their employers (producers) is. It is producers, who by dismissing workers or threatening to do so, that create economic uncertainty and lowering consumer confidence. Consequently any economic recovery needs to first begin with producers.

We measure value (amount of wealth represented) by the price people are willing to pay. Price is the primary means by which the desire and/or need for a product or service is transmitted to others: This is reflected by the fact it is prices that balance supply with demand, determine where and how fast goods and services are provided and are basis by which producers are rewarded or punished for their efforts.

Some Axioms of this Law is: Since value (often represented by a product or service’s price) is based in desire and the amount of desire/what is desired is constantly changing; the only way to determine value of things is by through a free market where consumers tell what things are worth by what they are willing to pay. Managed markets consequently are inevitable dysfunctional markets.

   One of the most important types of economic interactions that is based on value/price law involves labor (described better as applied skills and knowledge). Wages are nothing more than the price paid for services of applied skills and knowledge. The higher the skill and knowledge needed to do a task the rarer it is, this combined with desire for the application of that skill and knowledge creates wage levels. This is again just a reflection of the price law.

  Wages for applied skill and knowledge cannot exceed the wealth the applied skills and knowledge create (unless wealth is stolen from others to subsidize it). This is similar to the balancing function of prices. This also infers what studies have shown, artificial increases in wages make some jobs and people no longer economically viable as the price paid for their level of skill and knowledge exceeds its value. Just like raising the price of candy bars will reduce demand for them raising wages, even the minimum wage, increases unemployment.

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