Economic – Concept, goods, agents, development and growth

We explain what is economic and what are goods, agents and the economic system. In addition, economic development and growth.

The economic encompasses the production, distribution and consumption of goods and services.

What is economic?

The economic adjective refers to what is linked or belongs to the field of the economy: either in the sense of the set of activities of production, distribution and consumption of goods and services, or of the academic discipline that studies them and that tries to build theories that account for their operation and allow reliable predictions of their behavior.

The term “economic” comes from Latin oeconomicus, taken from the Greek oikonomikós, a word that in Ancient Greece was related to the administration of the home, and that is made up of the voices oikos (“House and nemein (“to distribute”).

Thus, what was initially considered the art of managing the home and family, became the art of distributing the productive forces of the entire society, that is, the economy (oeconomics in latin and oikonomia in Greek). As you will see, we are talking about words that have spent a long time on the lips of humanity.

At present there are other figurative uses for the adjective “economic”, always linked to the administration of finances and the acquisition of goods and services. For example, it is common to say that something is cheap to indicate that it is cheap, that is, that it has a low or at least manageable price. Similarly, it may indicate that a person is modest in spending or thrifty, or in a figurative sense, that he is stingy or miserly.

Enconimics goods

In economics, “goods” are called all those things, material or immaterial, that serve to satisfy human needs. A distinction is also made between two types of goods existing in reality:

  • Free goods or non-economic goods, available in nature and that have neither owner nor cost in the market, since they do not require a production process to obtain them, that is, they do not have economic value. For example: air, sunlight.
  • Economic goods or scarce goods, those that are acquired in the market through the payment of a price established in monetary units, and that, being the result of a process of transformation or production of raw materials, have an economic value. For example: furniture, computers, bottled mineral water or a house.

Economics agents

They are known as economic agents all natural or legal persons that take part in the productive circuit of goods and services, that is to say, in the economy. For this they can carry out any type of economic activity, from producers and distributors, to consumers. In doing so, these agents intervene and make decisions in the market, forming a specific economic circuit.

Generally, economic agents are classified into three categories:

  • The families, the main consumer units, which through the money obtained from their work and their savings, acquire goods and services of all kinds. On the other hand, these actors offer companies their labor for production tasks.
  • The companies, organizations in charge of the production, distribution and commercialization of goods and services demanded by families. For this they require raw materials, inputs, capital and labor, and they do so with the purpose of generating a profitability or profit for those who intervene in said activity.
  • The state, one of the most complex economic actors, since their role generally places them as guarantors of justice and equity in the economic process, that is, regulatory entities; but at the same time they can take part in the production, distribution or commercialization, through public companies, and they are also in charge of managing the raw materials and natural resources of their territory, so that they cannot be exploited without their permission.

Economic system

Adam smith
Adam Smith defended free market systems.

An economic system is called the totality of the economic activities of a society and the actions with which they are organized or structured so that they operate as a cohesive whole, with the purpose of generating wealth and satisfying the needs of the people.

They are part of an economic system the goods, agents and economic activities in their entirety, organized according to economic sectors (primary, or extractive; secondary, or manufacturing; tertiary, or distribution and commercialization; and quaternary, or services) and orchestrated by the social, cultural and legal factors of the society.

Thus, it is a global and general consideration of the economic activities of a society and its way of managing them, to face the five fundamental questions of the economy in general: 1. What to produce and how much? 2. How to do it? 3. For whom? 4. How to sustain it over time? 5. How to make it generate more and more wealth?

According to their way of answering these questions, economic systems can be classified into:

  • Free market systems, whose spirit is to allow the supply-demand relationship and the search for profitability to stabilize and regulate the economy automatically. Something that is traditionally known as the “invisible hand of the market”, in the words of Adam Smith (1723-1790). For this, the State is required to intervene as little as possible in the economy and simply provide the minimum conditions necessary to produce.
  • Centralized or planned economy systems, totally opposed to the above, in which it is considered that human economic activity must be guided, conducted and arranged from the State, in such a way that it satisfies the needs of the majority and not those of an enriched minority. Cooperation, instead of free competition, is the paradigm pursued in these models in which the State intervenes strongly in the economy, often expropriating productive mechanisms or placing them in the hands of the community itself and not private actors.
  • Mixed economy systems, a sort of intermediate proposal between the two previous ones, which starts from the double need to allow the free market but to conduct it from time to time to guarantee the general satisfaction of community needs. There are many classifiable proposals in this type of system, which allow more or less state intervention and different methods to fluctuate between liberation and intervention at convenience.

Economic development

When we speak of economic development (often referred to simply as “development”), we mean the ability of an economic system to create wealth, prosperity and well-being among its inhabitants, in general thanks to the accumulation of capital and the consequent ability to invest in certain important purposes.

Economic development is a goal to be achieved for all countries and societies, since it allows them not only to aspire to higher standards of living, but to plan for the future and innovate, thus providing feedback to the process and reaching ever greater possibilities.

This is, fundamentally, what separates the so-called developed nations (economically) from the underdeveloped ones: the ability to effectively transform the work of their inhabitants into lasting wealth.

This subject is the subject of study in development economics, and it is usually one of the main tasks of the exercise of politics, for which the State is the main tool for change: usually this implies deciding between increasing its intervention or reducing it, depending on the economic conception that is handled, and also in what way to do it.

Economic growth

economic growth consumption
Economic growth includes an increase in production and consumption.

Economic growth should not be confused with economic development. First consists of the increase in the value of goods and services produced by the economy of a country or a region, over a specified period (usually one year).

I mean, it is a measure of economic prosperity, which normally translates into increased production, energy consumption, savings and investment, per capita consumption and a favorable trade balance (more exports than imports). It is thought that the increase of these indicators usually brings with it an improvement in the quality of life of the people.

Economic growth is the opposite stage to that of economic depression, in which the opposite occurs logically: the decrease and slowing down of the volume of economic activity and consequently the impoverishment of the people.

Economic cycle

The economy operates cyclically, through oscillations between expansionary phases and recessive phases, in which the economy grows and decreases respectively, going back and forth between boom and bust.

Each economic school has its own conceptual apparatus with which to interpret this economic phenomenon and try to predict it accurately or, in the best of cases, influence it so that the oscillations are as less pronounced as possible, thus tending to a stable economy, predictable, quiet.

For example, the school of Keynesianism interprets them as something typical of the dynamics of capitalism, but establishes that through public spending their impact can be softened.

On the other hand, the Austrian or Orthodox school understands them as an aberration of the economic circuit, the result of an artificial economic expansion, that is, of bad decisions taken previously, which generate an “economic bubble”: a stage of apparent bonanza that later brings I get a brutal recession.