Note: Rather than use a lot of economists' professional jargon, I've tried to stay with the descriptions usually provided to students and the general public. For an overview of the usual way The Economy is described see the Economic Lowdown from the St. Louis Federal Reserve podcast or video series.
Most of us tend to tune out when abstract terms are thrown around. But our lives depend on the economy. So stick it out for a bit and read on.
The Economy - The Usual Definitions Are Centered in Money and Profit
A simple definition for kids stresses that the economy concerns money and resources: "The [economy is the] way a country manages its money and resources (such as workers and land) to produce, buy, and sell goods and services."
Other terms used to describe the economy include consumer, consumption, trade, industry, wealth, choice, capital, labor, purchases.
Thus, businessdiectionary.com defines Economy as "[a]n entire network of producers, distributors, and consumers of goods and services in a local, regional, or national community."
Scholastic.com describes the US economy as a "market economy" in which people can "freely buy and trade goods and services." Prices of goods and services are determined by supply and demand.
According to another website, The Balance, whose tagline is "Make Money Personal," "A market economy is a system where the laws of supply and demand direct the production of goods and services. Supply includes natural resources, capital, and labor. Demand includes purchases by consumers, businesses, and the government." (The Balance) FYI, The Balance is part of the DotDash company, which was About.com. The website "makes personal finance easy to understand. It is home to experts who provide clear, practical advice on managing your money."
[Stay awake! Read on....]
Other important terms usually included in describing The Economy are self interest and competition. "Self Interest is the motivator of economic activity.... To be self-interested simply means that you seek your own personal gain.... Competition is the regulator of economic activity.... Because other self-interested people are competing in the marketplace, my self-interest is held in check." (St. Louis Federal Reserve, Economic Lowdown)
Self interest is not necessarily greedy or immoral, although it can be. (Economic Lowdown Podcast 3)
[Come on now. No dozing.....]
Economics is frequently defined instead of Economy. "The economy is, according to the Oxford Learner’s Dictionary, 'the relationship between production, trade and the supply of money in a particular country or region'.... [whereas] "Economics is a science that studies economies and develops possible models for their functioning." The Economist's "Economics A-to-Z" website has no distinct definition of "Economy," but rather defines "Economics [as] "the study of how society uses its scarce resources."
This last definition includes another term that sometimes is included, the concept of scarce or limited resources, constraints, choosing how "to get the most out of limited resources." In Economics for Dummies, "ECONOMICS is the science that studies how people and societies make decisions that allow them to get the most out of their limited resources." (p. 9)
Self Interest and Morality
Discussions of our market economy are usually reduced to impersonal, abstract relations among money, business, jobs, consumers, producers, buyers, and sellers competing about goods and services in their self interest. The concept of self interest isn't fleshed out much and often degenerates into individual self interest, without including the common good. So moral considerations, whether a society considers certain behaviors to be good or bad, whether everyone in the community benefits, are at best side issues in economic discussions. If the notion of the common good enters the discussion, it will be achieved indirectly, perhaps by some trickle-down theory.
A search of "Moral" in the St. Louis Fed website turns up a one-page opinion by Aaron Steelman, Is the Market Moral?, "The role of the economist is to describe the consequences of public policies, not to prescribe them." (italics in original). He then briefly describes three ethical theories and concludes that "Ethics has its role, as does economics, but the two should remain clearly distinct." Search of "Moral" resulted mostly in a lot of Moral Hazard results though, so I changed the search to Morality. Very little turned up:
"Economists generally do not regard environmental cleanliness as an absolute good. Instead, they consider environmental quality as an economic decision with trade-offs." "Economics and the Environment," by Scott A. Wolla.
A general web search of "Economics and Morality" turned up an exchange of opinions between Paul Krugman (Economics and Morality) and Eric Schoenberg (Zombie Economics and Just Desserts) towards the top of the innumerable results. There is much to consider, more than most of us have time for. But do Americans really think that economic considerations really should be kept apart from moral considerations? What do you think?
The connection between self interest and morality is an everlasting philosophical concern. From Plato to the present, humans have wrestled with moral theories of the economy. This wrestling match is not just for philosophers in ivory towers: it's everyone's problem: We live on one planet with many other people. What is our place in the world? What do we value? Do we have any responsibility to the planet and others? How do we live our lives and choose what to do with them? If we can do whatever we think is in our self interest, should we? How do we decide?
We all make assumptions and value different things as we go through life, and there's no end to debates about self interest and/or/versus morality. Here is some food for thought, from Ta Nehisi Coates in an Atlantic Article, Morality vs. Self-Interest, November 11, 2008:
...Perhaps this is where I break with my fellow lefties, I don't know. But I don't think people really do things--en mass and maybe even individually--that isn't in their interest. I don't believe whites began supporting Civil Rights in the 60s strictly out of an attack of moral conscience--they were not interested in being a member of a community which sanctioned the fire-hosing of children. It's clear that Jim Crow and segregation worked to the immediate advantage of some white people, but I've never believed that it worked to the long-term advantage of most white people. The price of international embarrassment, of essentially shrinking the middle-class, of destroying valuable brain-power, of sowing resentment amongst a substantial minority of the populace, of creating ghettos is high.
"I firmly believe that the case against racism is not just that it's unfair to black people, but that [racism] doesn't benefit the country as a whole. When I look at the large numbers of black men in the justice system, I'm not very interested in how much the justice system hates blacks. I'm interested in whether our justice policy is in the best interest of the country.
"Perhaps, I define "interest" too broadly. I include in that definition, not simply your short and long-term well being, but how you want to live your life."
[Italics and bold my additions - sk.]
[ I don't know about you, but this is getting my attention....]
Timothy Taylor, in an essay on the IMF website, "Economics and Morality," concludes:
In his famous 1890 Principles of Economics textbook, the great economist Alfred Marshall wrote that “economics is the study of people in the everyday business of life.” Economists cannot banish the importance of moral issues in their field of study and should not seek to do so. But when moral philosophers consider topics that touch on the ordinary business of life, they cannot wish away or banish the importance of economics either.
For more points of view see The Economy: More Food for Thought.
The Economy - Centered in Life
FYI, the word Economy is the title of a Socratic dialog by Xenophon in the 3rd century B.C., about Household Management. and Agriculture.
See also the overview of What Is Economics? by an economist, Kate Raworth,
The environmental and social justice movements share the belief that taking care of the planet and all living creatures, which includes all human beings, is good for everyone. Here is a proposed definition of The Economy which focuses on LIFE rather than PROFIT:
The Economy is a system for sharing and exchanging goods and services to get all the necessary work done so that everyone, including the seventh generation forward, has an adequate living.
Some comments (whole essays and books could be written about each of these):
LIFE, not MONEY or PROFIT, is the purpose and center of The Economy. Human beings are creatures and cannot exist without the other living creatures on the Earth. Life must be valued over amassing money and making a profit. This is vital, it's about life and death.
JOBS are not the same as WORK. Jobs are cherry-picked work that will make a profit or provide part or all of a living to some people. Babies in supportive families, retirees with adequate resources, some people born into wealth, don't have or need jobs but they have adequate livings. All WORK can never be monetized, and much of it SHOULD NOT be monetized. WORK is expenditure of energy by people, animals, machinery, technology, etc., and actually includes getting up, dressing, feeding ourselves, etc. Babies and sick, helpless people are a lot of work to take care of. You can retire from a job, and you can stop doing the activities of daily living, but as long as you live, there's work. When you die, there's work involved in dealing with your remains and settling your affairs.
BUSINESS is not the only JOB creator. There are jobs in government and nonprofits, and many people are self employed. Businesses, as we know them, originated centuries ago to provide essential goods and services their neighbors needed. So in the early English settlement of Providence, RI, the first business was probably trade - because the people didn't have everything they needed in their settlement. Someone built a gristmill, no doubt, and another set up a forge, etc., cooperating for the common good. Everyone knew each other and knew they were dependent on each other for their continued existence. If they tried to get rich at the expense of their neighbors, they would have destroyed the settlement. (In fact, some people were greedy for land and caused a lot of trouble, nearly undermining the independence of Providence from Plymouth and Massachusetts colonies -- but that's another story).
ADEQUATE LIVING is what a human being (and this could extend to every creature) needs to both SURVIVE and THRIVE. SURVIVAL requires air, water, food, the right range of temperature, dealing with human waste, protection from various dangers, and health. What is enough? What is too little or too much? THRIVING requires that the air, water, and land be clean and as pure as possible, that everyone has enough nutritious food, and that people are free to pursue happiness, as our American founding document, the Declaration of Independence, asserts. "All [people] are are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness."
The SEVENTH GENERATION FORWARD are our descendents none of us will live long enough to see. This is a wide-spread Native American awareness, stressed by Narragansett tribe members at a recent preview showing at URI of the second Native Americans PBS program. [I am writing this the day after the first program aired (October 23, 2018), but if you missed it, you can see it in full on the PBS website for about 4 weeks after it aired.] We live in harmony with nature so that those who come after us will also have adequate livings in the place we care for.
***NECESSARY WORK is what must be done so EVERYONE has an ADEQUATE LIVING. After centering the definition in LIFE, this is the most important concept missing from definitions of The Economy. What work is neglected? How could things be rearranged so that all that necessary work is done? We need to reframe the discussion to identify the WORK needed to provide ADEQUATE LIVINGS FOR EVERY PERSON and not be distracted by the relentless focus on job creation as an end in itself. Once we identify the necessary work, we can rethink how to rearrange things to get the necessary work done.
There are obviously a number of assumptions in this life-centered definition of The Economy. But there are also assumptions in the usual money-centered assumptions. What is more important, money or life? Whose money? Whose life?
Other people are making similar points as well as raising other important issues. See The Economy: More Food for Thought.
As an example of Necessary Work, let's take human's need for health. Read on about: