Understand economics from scratch

Chapter 4 If you don't understand economics, you can't understand this era - 10 key terms in the economic world (1)
Social historian Edmund Burke said: "The age of chivalry is over, and with it comes the age of wise men, economists, and computer experts." Without the basic concepts of economics, it is impossible to accurately grasp the current world characteristics of the times.

Economists play an important role in building a scientific picture of the economic world.In other words, economists define the operating rules of the age through a set of terms.

Therefore, further study should start with the key terms of economics.

Economic Premise: Homo Econ Hypothesis

A woman advertised a BMW car for $1 in several newspapers in New York City. People didn't take it seriously, because it was impossible to buy a BMW car for $1.A week goes by and no one buys this cheap BMW.John, a young man who has just graduated, saw this advertisement and hoped to buy this BMW car with one dollar according to the address in the newspaper.Soon, John finished the formalities with the woman who sold the car.John asked: "Why is this BMW car only sold for 1 dollar?" The woman said: "Because my husband passed away, all his inheritance is mine, only this BMW car belongs to his lover. According to his According to the will, the car will be auctioned, and all proceeds from the auction will go to his lover. So, only $1 is enough.” So John happily drove the BMW home.

The assumption of economic man, also known as rational economic man, is the most fundamental assumption in economics, and the entire economic edifice is based on this assumption.

The hypothesis of economic man believes that because of the scarcity of resources, everyone is constrained by the scarcity of resources (such as income constraints, time constraints, price constraints, etc.), and people's thinking and behavior are to pursue their own interests under the established constraints of maximization.Like John above, he would happily buy a BMW for $1.The so-called economic man hypothesis means that as an individual, no matter what position he is in, his human nature is the same, that is, the basic motivation is to pursue personal interests and maximize personal interests, and he hopes to get the most with as little effort as possible. harvest, and do whatever it takes to do so.

A passage from Adam Smith's "A Study of the Nature and Causes of the Wealth of Nations" (referred to as "The Wealth of Nations") has a relatively clear explanation of the rational economic man: "The food and drink we need every day are not from butchers, The favor of the brewer and the baker, but out of their self-interest. We speak not of what is altruistic to them, but of their own, and what is good for them, not of our own needs. "This discourse of Adam Smith shows us that there is an exchange relationship between people, and food and drink can be obtained because the merchants want to obtain their own maximum interests.

David Ricardo put forward the "rogue hypothesis" of economic man, which believes that society is composed of a group of unorganized individuals, each of whom acts for his own interests in a way that calculates pros and cons; think and act logically.

In the eyes of economists, living people in thousands of ways are rational economic people—rational people who relentlessly pursue their own maximum satisfaction.Obviously, economic man is self-interested, and takes the maximization of self-interest as his pursuit.When a person is faced with several different choices in economic activities, he always tends to choose the opportunity that can bring him greater benefits, that is, he always pursues the greatest benefit.

Therefore, rational economic man is self-interested, but self-interest does not necessarily mean selfishness.For example, a pious believer is influenced and filled with the desire to do good, and when others are happy, he will feel that he is also happy—he is self-interested, but not selfish.

Regardless of whether an individual's behavior successfully brings positive economic benefits to the individual or negative economic benefits, the individual is a rational economic person when making a decision.In social and economic activities, everyone is a rational economic person.For example, when buying a commodity, everyone hopes to buy a product with "high quality and low price", and never wants to buy a commodity with "low quality and high price", because in economic activities, people will maintain the greatest self-interest, maybe As a result, I bought "high-quality" commodities, but this will not change the fact that the individual is a rational economic person.

It can be said that rational economic man is one of the most basic concepts of economics.

Commodities: What items cannot be bought or sold

Nauru in the Pacific Ocean is an island country formed by coral reefs, rich in minerals, but there is no land for crops to grow on the island.To solve this problem, Nauru exports ore on the one hand and imports soil on the other hand so that it can grow crops.

The most exotic commodity in the world is the iceberg exported from Greenland, Denmark.This is 10-year-old ice, which is considered the purest, with no pollution and few impurities.

Japanese businessmen use modern technology to store fresh air from fields, valleys and meadows into "air cans", and then sell them to citizens who have lived in the busy city for a long time and suffer from air pollution. , Refreshing.

Commodities are all too familiar to us.We eat, drink, wear, live, use, and travel every day, and everything is inseparable from commodities. As long as we have money in our pockets, we can buy all kinds of commodities we want at any time.But what exactly is a commodity?
As a commodity, it must first of all be a product of labour.In other words, if it is not a product of labor, it cannot be a commodity.For example, although air and sunlight in nature are necessary for human life, these are not products of labor, so they cannot be called commodities.

As a commodity, it must secondly be used for exchange.Commodities are always inseparable from exchange.In other words, if it is not for exchange, even if it is a product of labor, it cannot be called a commodity.For example, in ancient times, in the traditional family production of men farming and women weaving, although the food grown and the cloth woven were all labor products, they were only used by family members themselves and were not exchanged with others. Not a commodity.

Therefore, commodities can be briefly summarized as: labor products for exchange.

Commodities have not existed since the emergence of human beings, but are the product of human development to a certain historical stage.For its generation, the following two conditions must be met:

The first is social division of labor.It is the basis for the production of commodities.Because of the social division of labor, the request for exchange is put forward, and there is the possibility of exchange.The characteristic of social division of labor is that each laborer only engages in some partial and unilateral labor, and only produces some or even a single product, while people's needs are multifaceted. In order to meet the multifaceted needs, production They must mutually exchange the products they produce for the products they do not produce but need.This kind of commodity production and commodity exchange is the commodity economy.

The second is different ownership.It is the prerequisite for the production of goods.Exchange occurs because the means of production and the product of labor belong to different owners.Under the condition of private ownership, the two parties in the exchange of products become independent stakeholders and the opposite of economic interests.This determines that the exchange between the two parties cannot be unequal, but can only be equal, that is, the principle of equivalent exchange in the commodity economy.Since the exchange of labor products is equivalent commodity exchange, the production process of producers becomes a commodity production process aimed at direct exchange.

It can be seen that commodities are not only the product of social division of labor, but also the civilizational achievement of the exchange of labor surplus in human society after the establishment of private property ownership.

Currency: dog teeth can also buy things

In addition to the commonly used currencies that we know, there are some novel forms of currencies that are not familiar to us.For example, among certain islands in the Pacific and among some African peoples, taxes are paid in a currency called the "Gamari", a shell.Another example is that the residents of the Melanesian Islands generally keep dogs, so they use dog teeth as currency. One dog tooth can buy about a hundred coconuts, and to marry a bride, you must give her hundreds of dog teeth as currency. Gift money!In recent years, some greedy crooks have shipped a large amount of dog teeth to Melanesia to defraud the indigenous people of various useful materials, which once caused "inflation".

According to the explanation of economic theory, any commodity that can perform the functions of a medium of exchange, a measure of value, a deferred payment standard, and a fully liquid store of wealth can be regarded as a currency.

Some people can't help but question the above-mentioned thesis: Renminbi, the US dollar, and the euro are currencies. Can commodities such as soap and washing powder also be considered currencies?In our daily life, soap and washing powder certainly cannot be counted as currency.To understand money, one must look at its origin.

The predecessor of currency is an ordinary commodity, which gradually evolves into a general equivalent in the process of exchange.Money is a commodity, but it is not an ordinary commodity, but a special commodity.After the emergence of money, the entire commodity world split into two poles, one pole is a special commodity - money, and the other pole is all ordinary commodities.

The history of people's use of money originated in the era of barter.In primitive society, people used barter to exchange the materials they needed, such as a sheep for a stone axe.Sometimes limited by the types of materials used for exchange, we have to find an item that can be accepted by both parties. For example, a sheep can be exchanged for a stone axe, and a stone ax can be exchanged for a pile of salt. Here, the stone ax has the function of currency. Function.

In the early history of mankind, shells served as a general equivalent because they were difficult to obtain, so "shells" became one of the most primitive currencies.Today's Chinese characters such as "earning", "losing" and "wealth" are all next to the word "bei", which is the imprint of the circulation of shells as currency in the past.

After years of natural obsolescence, in most societies, the objects used as money are gradually replaced by metals.The advantage of using metal currency is that it needs to be made artificially, cannot be obtained in large quantities from nature, and is also easy to store.Gold and silver, which were scarce in quantity, gradually became the main monetary metals.People in ancient Greece, Rome and Persia cut gold and silver into thin slices of different sizes, and engraved stamps on them to accurately mark the weight of each slice.In a transaction, people only need to look at the sign on this piece of precious metal to know its value.

As the economy developed further, the weight and bulk of metal money became annoying.It is not easy to carry, and there will be problems with wear and tear during use.According to incomplete statistics, since humans used gold as currency, more than 200 tons of gold have been worn out in mints, or in people's hands and purses.Thus, paper money, a symbol of metal currency, appeared.The earliest banknotes in the world were "Jiaozi" in Chengdu, Sichuan, China during the Northern Song Dynasty.At present, there are more than 193 kinds of banknotes in the world, which are in circulation in [-] independent countries and regions.

Since currency is a general representative of value and social wealth, whoever owns currency is equivalent to possessing value and wealth; the more currency he owns, the more commodities he owns.With the help of money, people can not only transact, but also get rich more easily than in the past.The power of money is not as sharp as swords and spears, but its effects are more durable and long-term.

Cost: Gain and give up
Pyrrhus was born in ancient Greece, which was divided after the death of Alexander the Great, and was the prince of the small country Epirus.Pyrrhus has always been obsessed with the "great cause" of Alexander, the Macedonian king, in an attempt to establish a great country in the Mediterranean.

In 281 BC, Pyrrhus led a large army to attack Rome.Near the city of Osculen in Apulia, a fierce battle broke out between the two sides.In this battle, Pyrrhus suffered extremely heavy losses.Although he won the victory, he lost a large number of vital forces.After the battle, the soldiers congratulated him. Pyrrhus looked at the battlefield where the gunpowder had not yet cleared, and sighed: "If there is another victory like this, I will be completely collapsed."

This is the famous allusion "Pyrrhus' victory", which is extended economically to mean that the cost is too high and the benefits are too little.

Cost is the value category of commodity economy and an integral part of commodity value.If people want to carry out production and business activities or achieve certain goals, they must consume certain resources (human, material and financial resources). The monetary performance and objectification of the resources spent are called costs. All expenses incurred.

With the continuous development of the commodity economy, the connotation and extension of the concept of cost are constantly changing and developing.It has the following meanings:
(1) Cost is the economic value measured in currency by consuming resources in the production and sale of a certain type and quantity of products.Enterprises need to consume production materials and labor for product production. These consumptions are measured in currency in the cost, which is expressed as material costs, depreciation costs, wage costs, etc.The business activities of an enterprise include not only production, but also sales activities, so firstly, the expenses incurred in sales activities should also be included in the cost; secondly, the expenses incurred in order to manage production should also be included in the cost; thirdly, in order to manage production and operation activities The expenses incurred also have the nature of forming costs.

(2) Cost is the economic value that needs to be paid to obtain material resources.The price and expenses paid by an enterprise to purchase various means of production or purchase commodities in order to carry out production and operation activities are purchase costs or procurement costs.With the continuous development of production and operation activities, these costs are converted into production costs and sales costs.

(3) Cost is essentially a sacrifice of value.It is the value sacrifice of resources to achieve a certain purpose, which can be the value sacrifice of multiple resources, or the value sacrifice of resources in some aspects.It can be measured in monetary units.

(4) Cost is the economic value sacrificed in order to achieve one purpose and give up another purpose.To give a simple example, Xiao Zhang is going to open a clothing store. When calculating the cost, she may take into account the rent of the store, the cost of purchasing goods, the interest on loans, the wages paid to employees, utilities, taxes, etc.After deducting these expenses, she thinks she will still make money.However, she needs to be reminded that such a calculation formula is incomplete: she has omitted her salary, the interest on the funds she advances, the opportunity cost of opening a clothing store, etc.Only by taking these costs into account can you decide whether to open a clothing store.

Scarcity: Two peaches also kill

During the Spring and Autumn Period, Qi Jinggong had three fierce generals, Gongsun Jie, Tian Kaijiang and Gu Yezi, who all made great contributions to Qi Jinggong.These three men were brave and brave, and Qi Jinggong didn't pay much attention to them.Yanzi suggested that Qi Jinggong cut off these three people, so as not to leave troubles in the future.Jinggong also felt that they should be cut off as soon as possible, but the three of them had made great military exploits and were extremely brave, so Qi Jinggong also felt very helpless.Yanzi said, we should fight skillfully.He suggested to Qi Jinggong to give the three of them two peaches and let them share.Rewards are given only to the most meritorious.After getting the peaches, the three ministers began to compete, competing to state their contributions to the country.In the end, two people got peaches, and the other committed suicide in shame.Seeing that their companion died because of themselves, the two people who got the peach committed suicide in shame.

This is the record in "Yanzi Chunqiu", three generals were killed by two peaches - the famous story of two peaches killing three soldiers in history.Some people may think that if a partner commits suicide, does he also commit suicide?It's not worth it. Don't forget that people in the Spring and Autumn Period were very loyal, so it's not surprising that they committed suicide when they saw their companions committing suicide.Yanzi took advantage of the scarcity in economics. He only gave two peaches, and the three people could not divide them well. It was not the two peaches that killed the three warriors, but the scarcity. Compete and scramble, and finally die in the scramble.

We often hear that a certain mobile phone number or car license plate is sold for a sky-high price, which is a manifestation of resource scarcity.Because the number of this mobile phone number or car license plate is very unique and unique, there will be no second one.Rare things are expensive, and everyone wants to buy such commodities, so they will be sold at very high prices.Lu Xun said that the cabbage in Beijing is too cheap, but the cabbage in the south is not called cabbage when it is brought to Beijing, it is called Jiaocai, and the price is much higher.So he coined a phrase: Rare things are more expensive.

The word "scarcity" represents two different meanings: one is rare; the other is scarce.In economics, scarcity is used to describe the limited availability of resources, relative to people's unlimited desires.An item can be sold as a commodity, most importantly because it is scarce, not because of people's needs, such as sunlight and air, everyone needs it, but because there are too many, it will not become a commodity.However, fresh water resources are getting less and less, so the price of fresh water has started to increase from the original free supply.When a commodity becomes scarce, it starts to become more expensive.Gold is expensive because it is a rare metal.The reason why everyone seeks power is also because power is scarce.

The scarcity of resources is one of the premises of economics.Scarcity has a huge impact on society and people's lives. It is scarcity that leads to competition and choice and promotes social development.Imagine if resources were not scarce but extremely abundant, the world would be completely different.In nature, there will be no survival of the fittest, no fighting, and every creature can be satisfied.People don't need to work, and they don't need to think about buying a house, because the land is abundant, and they don't need to think about food, clothing, housing, and transportation. All resources are abundant.Such a world would have no vitality, would become a pool of stagnant water, and would eventually be destroyed.

(End of this chapter)