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ECONOMICS OVERVIEW

ECONOMICS OVERVIEW

 

(Download Economics overview as a PDF)

The word, economics, comes from the Greek (oikonomos) referring to the manager or management of a household or estate. In Jesus’ parables, it was often translated “steward.”  From there, we think of justice, the way homes, communities, organizations and society ought to function—and the importance of well-functioning systems and responsible partners. As the term has become narrower and more specialized, we should not lose its original meaning—the moral basis of economics. This is important because, economics, as they say, is what makes the world go round.

Economics is "the science that deals with the production, distribution, and consumption of wealth, and with the various related problems of labor, finance, taxation, and so forth." (Webster’s New Twentieth Century Unabridged Dictionary, 1979.)

Basic to human existence on earth is human survival. This is true from an individual, familial, or societal perspective. Such human survival depends upon securing food, clothing and shelter. In this sense, economics is the primary social or behavioral science.

There will still be differences of opinion about the position and relative importance of economics. Marxism and the economic determinists tend to view all of life through economic lenses. But even those who object to such positions see how powerfully economic forces shape individual and institutional behavior. Economics sways elections, convinces legislators, shapes education, and influences the church decisions. It is often considered the bottom line.

The boundaries of this discipline are also subject to debate. Economics deals with a society’s production, exchange, and consumption of goods and services. Microeconomics studies how individuals, families, and business organizations make choices about money, goods and services, and supply and demand. Macroeconomics looks at a nation’s gross national product, the results of production, and income. Achieving national growth and prosperity along with the well being of all citizens is the aim of a just economy.

Economic activity strives toward the highest consumption of wealth (goods and services) within the available supply of human and material resources. Money and prices are disciplines or means of structuring the process in which human desire always exceeds available resources. Households or individuals, on the one hand, are expected to seek maximum satisfaction or utility in the way they spend within the limitations of their wealth. Businesses, on the other hand, try to maximize profit by being responsive to goods and services needed and desired by households and individuals. Household spending choices are interpreted by business in ways that establish the laws of supply and demand.

National wealth is measured in terms of production and income, called its Gross National Product (GNP). A nation’s GNP is the sum total of all final goods and direct services produced during a given year. (The raw materials that go into a final product and services making goods are excluded to avoid double counting.) The size of the GNP along with the national income reflects the level of employment. Most agree that full employment, of all who need income and are able to work, should be the goal of a healthy and just economy.

What makes for a just economy and how it is achieved is, of course, a major academic and political debate. According to the Economic Policy Institute, CEOs made24 times the average worker pay in 1965, 100 times in 1995, 300 times in 2000. In 2005 they calculated the CEO income as 262 times the pay of the average worker; CEOs making in one working day what the average worker made in a year (see their The State of Working America, 1006-2007). With stock options and bonuses, these chief executives, it was calculated, make up to $5,000 per hour while their entry level workers and those at the bottom of the economic pyramid make only a few dollars an hour ([1988]. Dollars and Sense, 138, 10-11). In the early 1990s, American CEOs could expect an annual salary package of more than $2.4 million (determined as the median total). Meanwhile, the median salary of the entire population over fifteen years of age was $17,696, and many families were well below the poverty level (Francis, D.R. [1994, May 20]. Executive pay in the U.S. just goes up and up. Christian Science Monitor, p. 9.) Ethicists call this issue a matter of distributive justice.

In their book, Corporate Predators, Russel Mokhiber and Robert Weissman figure Disney executive Michael Eisner made more than $575 million in 1998—on  top of his $750,000 salary, he claimed $9.9 million in bonuses and cashed in on $565 million in stock options.

The World Institute for Development Economics Research of the UN University in Helsinki, reported in December, 2006 that two percent of the world’s population holds most of the world’s wealth. This wealth is mostly concentrated in North America, Europe and high income Asian-Pacific countries, countries that hold collectively 90% of the world’s wealth.

Such facts lead some to conclude that the American economy is structured, as the global economy, to create poverty and extreme economic inequality. The salaries of sports figures and celebrities are a fitting goal to some and a scandal for others. How to narrow the gap between professional athletes and urban school teachers is a difficult matter, but those working with young people know the power of fantasies of wealth, that there just are not enough good jobs available-especially for urban youth, and that those who go beyond job requirement to educate young people are not fairly compensated. (See MacLeod's Ain’t no Makin’ It)

The Great Depression and more recent business scandals, as well as the financial crisis of 2008, relate to greed and unregulated risk-taking for the benefit of a few. The Charlotte Observer’s Business section ran an article: “Enron’s Corruption Spread Like Wildfire: Collapse was because of ethical misbehavior and bad business decisions, too” (20Jan03, 13A). Acknowledging the roots of such problems links economics to ethics and makes this topic not just a business but a moral issue. The causes of this global crisis are too complex for any single analysis or blame, but significant features and responsibilities beyond debate and generally accepted are outlined in Danny Schechter’s Plunder: Investigating our Economic Calamity and the Subprime Scandal, Cosimo, 2008—even though many will not follow his full polemic.

Nations should strive for high economic performance to secure their international and regional positions and to provide the best for their citizens. How they can reward and motivate their leaders while providing for the poorest of their population is a challenging question. But it is a question that must be discussed in the realms of academia, politics, and faith.

QUESTIONS FOR REFLECTION AND DISCUSSION

 

  1. What questions or issues does this article raise in your mind?
  2. How do you define and describe economics? How does it apply to your life and work?
  3. Do you consider the issue of a just economy to be critical and relevant? How would you pursue it?
  4. Can we reduce the costs of welfare without spending more money on job training and the creation of jobs available to urban and rural poor?
  5. Though the complexities of economics and politics must be respected, what basic principles might move us toward the dignity of full employment?
  6. What do you see as the relationship between national and global economics?
  7. How would you present this material or initiate discussion on this topic with junior high students? With high school students? With other young adults?

IMPLICATIONS

  1. Economic crises and scandals of the twenty-first century are matters of youthful concern.
  2. There is a longing for economic sense, truth, and justice in the hearts of many—including young people—in our world today. But these goals cannot be reached without some understanding of economics.
  3. Economic concerns cannot be separated from other individual and social matters. Our times demand holistic thinking and a systems approach.
  4. There is an interesting and critical relationship between economics and theology, between faith and practice.
Dean Borgman cCYS