WHAT IS ECONOMICS?      Most of us spend our lives balancing what we earn with what we would like to spend. Economics touches every part of our lives and yet most of us are complete halfwits when it comes to understanding what goes on. However, understanding something usually depends on how you look at it.      Take for example, a football match. To someone not particularly interested in football, it is 22 men running around a field after a ball – they may also be dimly aware of the referee and the linesmen.      To the passionate football fan, however, there are two opposing teams, each made up of strikers, mid-fielders, defenders, and a goal-keeper. There are rules, tactics, and, hopefully, GOALS!      There are leagues of teams, managers, transfer fees, special pages in newspapers, interviews with star players who can be ‘over the moon’ or ‘sick as a parrot’ – it is the same with economics. Once you know the basic rules, everything else falls into place.

WHAT'S IN A NAME?      So what is economics anyway? As the name suggests, it is to do with all forms of economy – ‘the management of expenditure’ – from basic housekeeping to the theoretical science of the laws of production and distribution of wealth.      OK, that's a bit of a mouthful, but when words are taken one at a time, what they generally mean is simple enough.      (The Greek word ecos – meaning ‘house’, together with the suffix – nomy – which relates to law and distribution, gives us the ‘modern’ word economy.)

A hundred years ago, Alfred Marshall said that ‘economics is merely the study of mankind in the ordinary business of life.’ In other words, supply and demand – with money and human nature somewhere in between. Easy! So far so good . . . .      More recently, John Kenneth Galbraith has refined Marshall into: ‘Economics is the study of the way people are organized for economic tasks by corporations, by trade unions and by government.’      Oh dear! But don't be alarmed – an economic task is simply whatever we do when we earn or spend money – at work or play. How we are organized – is how we sell our labour and skills and how we buy the things we need or otherwise value.      In their own long-winded way, today's economists are mainly concerned with the valuation of everything. So where did they get their ideas from?      WHO STARTED IT?      In the past, it was bishops and kings who made value judgments, not economists. Apparently, the power and wealth of the merchants and their mercantilism – trade or commerce – put an end to all that.      By the beginning of the Sixteenth Century, the Portuguese had gone all over the place and Columbus had discovered America and world trade suddenly expanded so rapidly that the value of money, above all other things, began to undermine the power of both church and throne.      Around this time, scholars began writing down what could be described as the first theories of economics.      In 1515, only 23 years after Columbus had opened the door to the South American gold and silver mines, Thomas More, son of a merchant, published his book Utopia.      Full of moral values and no nonsense from land-owning nobility, Thomas More advocated the complete abolition of private property as the only cure for the ‘poverty, hardship, and worry’ of the ‘vast majority of the human race’.

He further rejected money as a domestic currency – gold and silver were for trading with foreigners – because he preferred to believe in natural, innocent behaviour, all too easily corrupted by the presence of money as the only thing of value.      Necessities and comforts, not luxuries, were all that was to be consumed in Utopia: everyone would share equally in a common wealth. Merchants would unite with labourers and craftsmen against aristocrats and goldsmiths (who were in the process of becoming the first bankers).      Thomas More sided against the nobility in the great class struggle which was dividing people all over Europe.

AND IN THE BLUE CORNER . . .      In stark contrast, 150 years later, Thomas Hobbes deduced that there must be an unquestionable sovereign power for any society to survive.      In his book Leviathan, he assumes that hostility between individuals is inevitable as they struggle for their own ends.     Leviathan describes a society where the fear of being poor forces all to compete for wealth and only a really strong authority can maintain any civil order.      Only the Sovereign should have the absolute right to distribute and redistribute the means of production among subjects – especially land and international trading opportunities. No wonder they had a civil war and chopped the King's head off!

POURING OIL ON TROUBLED WATER      By the Eighteenth Century, the ‘Age of Enlightenment’, Adam Smith had declared firstly, that self-interest guides people to serve the common interest as though by an invisible hand.      Secondly, that competition in each line of business or trade not only regulates market prices, it also sets them.      Thirdly, thanks to competition, there was no reason for the state to interfere in the market place. All a government had to do was keep law and order and defend the country.      Lastly, since competition and the market brought the best results – more money for everyone – Smith advocated there should be as much of both as possible. The bigger the trading area, the more competition, and therefore, the stronger the market.      This was the first argument for free trade and also the founding or ‘classical’ design of an economy.

It may also be worth noting that 1776, when Adam Smith wrote The Wealth of Nations, was also the year in which the Americans signed their Declaration of Independence – and that the French Revolution was only just around the corner.      THE NEVER-ENDING STORY      Smith's ideas were gradually refined by other economists, into the neo-classical economies of the industrialized countries like the United States, Britain, Germany, and France at the beginning of the Twentieth Century.      So, like football fans, it would seem that economists can disagree in theory about many aspects of their science or art and, while they may agree on where they disagree, they hardly ever agree on why they disagree.      However, to the innocent bystander or economic halfwit, why they disagree is perfectly obvious – it is purely political – and, since the world is populated by people with differing self-interests and therefore different political solutions – why should economists be any better than the rest of us?      They, too, have to earn a living and all sorts of economists are employed to interpret what is happening to money in the way that most favours the various interests of their employers.      If things are looking bad, very often government economists will advise politicians to be ‘economical’ with the truth – and why not? People are basically nervous and insecure, and given that money plays a part in everything we do, telling people how bad things really are could only make matters worse!