ECONOMICS - THE PHILOSOPHY
"THE MAXIMIZATION OF UNITS OF SATISFACTION"
[On this site, I define the end-value in life as "Life Value", a totalling of all of the units that are of lasting value (and satisfaction).]
WHAT IS ECONOMICS, REALLY?
Economics is a "social" science dealing with how to make people the best off given the limited resources available.
It deals with the mechanism of how to allocate and deliver those resources, which are measured in units of value called dollars.
Economics occurs in a real world of real results. Many people wish it were ideal, but that is wishful and unrealistic thinking. (Of course, we "should" try to do the best we can for all involved. That is more of a social question, involving people's personal morality and beliefs, ultimately measured in terms of ethics in the real world where workability (producing beneficial results) is the only criterion. (People believe, naturally, that their beliefs and their morality are "right", but that is often due to "non-thinking". See summary in The Believing Brain.)
SATISFACTION UNITS, NOT DOLLARS
Instead of dollars, the underlying basis for all economics is "units of satisfaction" for people. It aims to maximize those units over a life time, for each person - for the greatest total long term accumulation of "profits".
To get what is wanted one normally has to pay a price. Paying a price, in a sense, is the same as giving up units of satisfaction that you could have gotten from something else (in this case by spending your dollars on something else).
My value of a dollar in terms of it filling ("satisfying") my important needs was pretty high when I was accumulating enough to assure a decent retirement. Consequently, I was willing to work hard for it, paying a price in terms of time and effort (though I added stress to make the cost greater). Once I hit a good level of wealth, the value of earning a dollar plummeted and my time for myself and other objectives became much higher. So, I quit, as there was no longer a sufficient payoff to me for giving up my time to get dollars.
In economics, we say the "utility" (usefulness or value) of a dollar declined (for me). In economics, they measure that in units of utility called, amazingly enough, "utils". Essentially, utils are synonymous with units of satisfaction, which sounds more humane - but all of economics is humane - as its purpose is to maximize the good for all people.
IS IT HARSH OR SIMPLY WHAT'S SO?
Sometimes economics seems "harsh", as there are often prices to be paid. There also is not yet sufficient resources and money to not be limited, so we are subject to tradeoffs in not being able to "take care of all people with no limit". Since economics is a factual science, it does not produce miracles. It just deals with how things work - and sometimes people don't like how it works. But it is a reflection of reality, not a grand moral scheme of justice. Those who have tried to do things like forcing people to give according to their abilities so that others can receive according to their needs have failed - because they didn't let the natural forces work. Of course, we have to restrict the natural forces when they do damage, so there are rules of law, where people can't steal from others or abuse their power in a way that harms others.
Charity is a personal choice, not a mandatory moral thing, though there are people who would love to impose their moral beliefs on others - and that is when force begins to cause problems and a diminishment of how well things work overall. Socialistic states have had to become authoritarian and dictatorial in order to keep imposing socialism on people, because the economics of the state always decline when incentives are diminished. They violated the economic principle that people are driven to achieve personal benefits, and when there are no longer sufficient extra benefits people stop putting out productive efforts.
SEEKING A PERFECT WORLD, BUT WITH COSTS AND SOMETIMES FORCE
But many want a perfect world, where money would be supplied as needed (kind of like having a parent to satisfy all of one's teenage needs). Since the world doesn't work that way, they are not aligned with reality, so they need to use force or coercion to get what they want - from marching and protesting to getting others (such as legislators) to impose restrictions and make demands on others.
And, of course, there are politicians who become quite popular by promising lots of benefits and ignoring the tradeoffs.
And, indeed, some businessmen, like politicians, start overdoing things for their own benefit but at too great a cost for others. What is the limit? Well, that's what laws are for - and, of course, nothing is perfect...
A prime example of force and coercion and overreach is a very simple clause a well-meaning Senator put into a finance bill. He apparently was missing some practical knowledge in this area, since he failed to consider the long term costs of operating a business. The clause said that banks could only charge x% for debit card services charged to the merchant. This is government dictating and controlling, which would be very harmful if it is encouraged and allowed to continue.
PROMISES
Also, people love to get something for nothing, as is beautifully illustrated in a video by Nancy Pelosi's daughter, where the man outside the welfare office said, no, he didn't want a job, he was simply there for "Obama bucks". (Oops! It was not Obama's fault; it was the system.) If this is carried too far, it is an injustice and reduces the incentive of those who provide the money. And, of course, it is normal for one to have no problem with someone else paying the money, such as 'the rich'. That seems logical, but it leads us in the direction of socialism - and has effects for sure where the rich will seek to put their money elsewhere and/or leave the country or not invest in it. And that begins to lead to economic decline or lowered growth so that there are fewer jobs and less money overall to take care of people's needs - not a good idea.
I cannot pretend to know where the right combination is, but I would urge all people to be aware that there are always tradeoffs to consider, if one is to make a good decision.
THE INTERSECTION OF ECONOMICS AND POLITICS
Given that there are scarce resources and limited money, we must put our money where it has the most return - in this case, for all the shareholders in the country (residents, citizens). In some cases, what is deemed to be the best thing to use money for is up to one's beliefs, values, and judgments. Where the right mixes and combinations are is beyond my ability to judge, since I can't know all things and what all people want.
I do know that there is no disagreement among all parties about the commitment to reduce economic misery for those who cannot provide for themselves is a priority, an absolute must in the US. That is a moral decision, not part of economics. It affects economics only in that it affects the allocation of resources away from production. Fortunately, our country is able to afford to do that because we have benefitted from good economics (capitalism). Many countries in the world cannot even afford to provide for their poor.)
Where the parties disagree (and this is based on economics not politics though it can be political) is in the degree to which benefits are to be restricted for those who can work but don't. Besides the direct economic effects of spending those moneys, the more unproductive citizens there are, the lower the growth and prosperity of others. Some people think the cost is only the dollars provided to those unproductive citizens, but, economically, the cost is much greater. Some would consider it "cruel" to require those people to do hard work or suffer the consequences of their choice not to work. But, think about it: What is it that works, for the greater good?
The answer is accountability for doing your share of what creates greater good and the expectation, even requirement, that people do so.
In economics, people are paid for the value they produce. If something isn't valued as much, a lower price is paid.
If there are lots of uneducated people and there is global competition that is increasing together with technological advances requiring fewer workers in an area, the wages for those people will decline - not because of mean "buyers of services" (aka businesses or hirers) but because of the idea that one can't pay more than the value received. Idealists think that this is "unfair", but it is simply how things work. The price of manual services has declined, since many simple manual services are cheaper overseas now that there is competition. If people don't realize the cause, then they'll "fill in" (create) a cause, such as "it's the rich people" and then they'll impose a moral evil upon that - not realizing that what they are themselves doing just what they are objecting to: attempting to dictate to others and judge them, trying to control them or blame them, rather than rationally and cooperatively seek a solution that works, given that we all have self-interest and that no one has the authority to be the grand judge of other human beings.
Reality is harsh, if you resist it. Gravity is harsh, if you disobey it, but is useful if you properly use the force of it.
Realistically, we can take care of those unable to take care of themselves, but everybody else needs to be responsible for creating what they need.
The decision on where to cut the balance is one that only someone with the wisdom of Solomon can make
