Economics 101

Economics is a social science that studies people's behavior when it comes to make monetary choices. 

It is different from finance which basically studies money itself.

In simpler words, when it comes to how you decide to buy or not buy something, economics comes into play.

Therefore, since human beings are at the basis of any society and economics is a social science, we must understand who we really are as human beings in order to understand economics.

There's this myth in most of the world that everything is genetic. If you're the son of a criminal, you are or you will eventually become a criminal. According to hundreds of studies, the truth is that almost nothing is genetic.

Genetics gives us a certain predisposition but predisposition is not a synonym of predetermination. In fact, recent studies show that our way of being mostly depends on the environment in which we live. Also, it is critical to notice, that compared to other creatures on earth, we're very underdeveloped. A new born child can't run or walk or even basically do anything. On the other hand, a baby horse can run and eat and digest food since day one. This means that brain development, and therefore human behavior's development, begins in the fetus. Though, it continues when we're born. New studies in fact show that we have two different types of memory. The first one, known as implicit memory, is the one we use from day 1 to 18 months. It's called implicit because no human being on earth recalls events, fact or anythings else between his first day to him 18th month in the world. However, the implicit memory is an emotional memory. babies have feelings! depending on how much attention they receive or don't receive, they will develop different traits. 

On the other hand, the second type of memory, known as explicit memory, is the one "located" in a different part of our brains and it's the one we use from 18 months till the grave. 

This is the reason why, adopted kids for example, will feel rejected for the rest of their lives even though they have never seen their biological mother or father. This example, lets us understand that the environment plays an important role on our lives and therefore on this social science known economics. If by any chance you thought that I would only talk about money when talking about economics, please take this 5 letters word out of your head for a while!

So, now that we roughly understood how we function and develop as human beings, let's analyze economics.

The entire economic doctrine started with John Locke. John Locke is a very well known economist who wrote the " treatises of Government". He spent a long time writing about private property and private  property law and his text is still used nowadays  as a canonical text I'd say. The whole logic of John Locke with regards to his definition of private property and laws can be easily resumed in three parts:

1) You have to leave enough for others

2) You can't let any of it to go to waste

3) You have to mix with the product your own labor.

For example, you can make a chair for yourself but don't waste wood, leave enough wood for others since we live on a planet with finite resources and most importantly you have to work the wood to get to the chair. 

After explaining his theory he destroys it with one sentence. One short sentenced dropped the entire theory written in his own book!  Locke said that when money was introduced by tacit human consent in the economy as a means of exchange, the whole concept of private property doesn't exist anymore. Now money buys labor and therefore private property. 

Then comes along Adam Smith. He came from a different environment than Locke and his theory was the " invisible hand" theory. I'll tell you about him and more in tomorrow's blog.

As usual, dear readers, if you have questions or comments, feel free to email me at newfinancialtimes2011@gmail.com.