INTRODUCTION
Humanity has always experienced various and innumerable situations that require special attention, one of the most important is undoubtedly the economic aspects under which it is governed for its proper development. The economy that refers to the production, consumption and distribution of wealth has been and will continue to be a central theme in people's lives.
The way in which these economic aspects are raised will depend on the specific interests that are in conflict and the degree of development to which society is subject. That is to say, the economy –even though some characters have more resources than others- aims to promote a collective and chain impact that is generally in a descending way by the high command and officials who have the responsibility of manage a country economically.
Opportunities for individual economic growth are largely based on being able to become familiar and up-to-date with the economic models and systems that govern and dictate the conditions of the individual. In the same way, the theories and foundations that generate the greatest impact worldwide can be implemented in a personal way and based on our possibilities for progressive economic development.
Therefore, it becomes of great importance to assimilate what is included in the study of the main elements that make up economic science and above all, to value and understand the reason for the economic models that currently govern us and the way in which these influence life. daily of the people.
BACKGROUND
The Economy manages to conquer the status of science in 1776 thanks to the contributions established in the publication of the work The Wealth of Nations by Adam Smith. In this work, Smith promotes economic liberalism and the division of labor. Liberalism is understood as the minimum intervention of the State for the generation of the possibilities and economic development of a nation, in other words, to give total "openness" to each person so that they develop economically from their possibilities and needs. For its part, the division of labor proposed by Adan Smith fostered increased productivity and specialization.
Then Karl Marx considers that the problems are inherent to the economic system, where the "capitalism" known as the "dictatorship of the bourgeoisie" is carried out by the wealthy families who own the means of production, for their own benefit. Therefore, he argued that the way to promote equity was through socialism that would be governed by the working class in what is called the "dictatorship of the proletariat."
Later, other economists such as A Marshall would consider that the capitalist system is a viable means and that the problems it might face are temporary, thus supporting liberalism. Years later, Keynes argues that the system is capable of solving adversity, but requires the intervention of the State; and in a moderate way M. Friedman proposed the return to liberalism and global neoliberalism that we live today.
NEOLIBERALISM IN MEXICO
Once the world financial institutions of which the World Bank, the IMF, the WTO, etc. they accept neoliberalism, they begin to exert pressure through the credits granted to the countries. In this way, in Mexico –as in other countries- for the year 1977 there begins to be a growing inflation, an increase in the fiscal deficit and more than anything a productive crisis arises.
Mexico is forced to join this system with the signing of the Intervention Letter to the IMF, with said agreement as a guarantee, the Mexican nation received support from the IMF, the US government and the main world institutions. Mexico progressively experienced a free market revolution. The neoliberal economic model presented the following objectives:
- Fiscal consolidation Macroeconomic stabilization Maintain external balance.
With such objectives, the following internal structural reforms were presented:
- Trade liberalization Internal financial liberalization Capital account opening Privatization Tax reform
With the passing of the years and the results that have been generated, it can be observed that in the current neoliberal economic system there is an outrageous distribution of wealth, where millions of Mexicans thicken the list of poverty. This indicates what the economic system really produces, but above all that there are underlying interests of neoliberal strategies, where they keep Mexico on the world periphery and growing poverty.
DEFINITION OF ECONOMY
Etymologically, Economy means: "Equitable distribution (nomus, nomia) among all members of the community wealth (oikos. Eco)". Thus, economics is the science that is dedicated to the study of social relations that have to do with the processes of production, exchange, distribution and consumption of goods and services, understood as the means to satisfy human needs and individual results or collective of society.
ECONOMIC SCIENCES
Economic science has been defined in two different ways: either it highlights scarcity or focuses on material well-being.
For example of scarcity, for Lord Robbins, economics "is the science that studies human behavior as a relationship between ends and scarce means that have alternative uses."
For his part, for the emphasis on well-being Alfred Marshall presents that "Economic science examines that part of social and individual action that is most closely linked to the achievement and use of the material requirements of well-being."
Because human needs are unlimited, that is, you will never stop having the need to eat, dress, medical assistance, etc., and on the contrary, material aspects are limited, since you cannot have all the goods that you need. wanted, it is decided to adopt the definition proposed by Lord Robbins visualizing economics from the point of view of scarcity.
Economic Science is called the means and study techniques that allow determining past, present and future factors, allowing to predict the laws and behavior models of people and companies in relation to the use of scarce resources, in order to obtain profits, returns and benefits, that impact economically and socially.
ECONOMIC OBJECTIVES
The main economic objectives are:
- Economic development Price stability Economic efficiency Absence of unemployment Trade balance Economic security Equitable income distribution Economic freedom
It should be mentioned that economic objectives are not universal, and their degree of importance varies considerably from one country to another. Furthermore, these objectives are not always complementary, and therefore may be in conflict or mutually exclusive. For the best performance and specification of their objectives they are divided into two types:
MACROECONOMY
Macroeconomics is the study of political relations and measures applied to an entire country. For example: unemployment can affect and affect the entire society of a country in one or more ways. Another typical concern in macroeconomics is what all the individuals in a nation want to buy. For example, this will determine what goods companies should produce and therefore how many employees they will need.
MICROECONOMICS
It is the study of the typologies of behavior and economic policies applied to individual participants (families and companies) in a market economy. It deals with what an individual in a particular way wants to buy. In the same way, analyze what a specific company wants to sell. This type of study can cover, for example, how the prices of specific products are decided.
IMPORTANCE OF ECONOMIC SCIENCES
Economic science is transcendent because it is put at the service of people, groups, businesses and societies, through the study of the relationships that are exercised between the social and the monetary, the needs and their degree of satisfaction, well-being and capital as a resource capable of providing tools to achieve growth.
This type of science is dedicated to quantifying the development and availability in the use of resources, so that with the knowledge obtained, distribution can be improved and the generation of wealth and opportunities can be fostered. For example, in everyday life a person could make use of economics to determine where it is best to save and invest money, in the case of a business, economics would be used to maximize profits and profits.
TYPES OF ECONOMY
- Descriptive economics: also known as positive economics, its purpose is to study "what is". Models are used to deduce the theories, laws and principles that can be observed in the relationship between each of the economic agents. Relationships are often expressed in mathematical terms and with the use of graphs. Two phenomena that change in the same direction are considered to be directly related (and inversely if they change in the opposite direction).
For example, an economics specialist may try to establish the factors that explain why companies want to hire employees, such as the need to sell more products.
- Normative economics: also called political economy, it aims to study “what should be” and uses models to make forecasts. These forecasts are compared to the commonly accepted goals of our society (such as the absence of unemployment, economic freedom, equality) with their foundation in values or norms (for example, the desire for a higher standard of living). Subsequently, measures or a series of recommendations are proposed, which derive from the results of this comparison.
For example, once the economist has determined that selling more products will cause companies to hire more employees, he can recommend measures to the government to stimulate sales if there is a high level of unemployment.
WHO USES THE SCIENCES OF ECONOMY?
Despite the fact that we are all positively or negatively impacted by the decisions that are made regarding the economy, there are groups that spend more time studying and decoding them. These groups generally have the ability to be the intermediaries to transmit and put into practice economic models throughout society and as a consequence they also have the ability to influence and affect the future and economic development of these models.
Of the two large groups that have the ability to introduce models and theories in society are:
- Politicians: they use economic sciences as a tool to project and improve the growth of countries, to overcome difficulties and negative indicators such as unemployment and recession in some sectors. Company managers: economics are also very useful for managers who, within their objectives, seek to achieve the survival and prosperity of the businesses they lead.
KEY CONCEPTS OF ECONOMIC SCIENCES
The key concepts of the sciences of the economy contemplate:
- The analysis of production and consumption The analysis of the generation of wealth and its distribution The achievement of resources and the efficient use of them The evaluation of spending to pursue its effectiveness The relationships between raw materials, processes and customers.
All these elements intend within an interdependence to allow all those involved to earn and grow in well-being and prosperity under the following benefits.
BENEFITS
It allows achieving balance and growth for all the agents that intervene in the system, including macroeconomic and microeconomic variables, as well as promoting comprehensive benefits for countries, companies and individuals.
Another of the main benefits of investments is:
- Perceive significant valuation of assets High financial returns Increasing profit margins in purchase negotiations.
ECONOMIC MODELS
Economic science uses models, which are simplified structures of the real world that use different generalizations and assumptions. First they raise the hypothesis, which is contrasted with empirical data and, if verified, becomes a theory, law or principle. Models are also often used to make forecasts.
The works developed by the great thinkers in economic matters are applied over the years and their results are beginning to be seen progressively. The most prominent characters usually obtain the award of the Nobel Prize in Economics, through which it is possible to understand and predict the current and future situation, respectively. Two cases where the findings have been worthy of such recognition will be mentioned below.
THE THEORY OF GAMES
Economists Alvin Roth and Lloyd Shapley were the 2012 winners of the Nobel Prize in Economics for their contribution to the theory of stable resource location and their practice in market design, both derived from game theory.
In summary, game theory deals with the study of choices between people, when the results of the decision depend in turn on the decisions made by other people. An example of how this theory is formulated and analyzed is the so-called “Prisoner's Dilemma”. It consists of simulating the following situation with people.
Two suspected implicated in a crime are detained by the police. By not yet possessing sufficient evidence to prove their guilt and questioning them separately, the prosecution offers to agree to the following.
- If one of them confesses and his "alleged" accomplice does not do so, he will go free and the accomplice will be sentenced to 10 years in prison. If on the contrary, his accomplice confesses and he does not, he will receive a 10-year sentence. If both confess Both will be sentenced to six years, but if neither confesses, both will be sentenced to less than six months.
The rational decision is that neither confess but, in this case, the perception that one has of what the other will do will determine the conduct and decision that each one assumes separately.
This exercise is used to analyze behavior in cases of conflict between countries or world regions, conflicts between companies over market positions or when you want to analyze how to organize and regulate a market.
IN PRACTICE
Alvin Roth uses this theory to propose the organization and formation of non-financial markets, as is the case of organs for transplants with exchanges between potential living donors that allow reducing the mortality of patients with kidney failure. It consists of understanding and taking advantage of people's decision-making to increase the possibility that they become donors.
The same treatment is being used to organize financial markets that allow interested parties to access more adequate financial services and maintain the profitability of the companies in charge of providing them.
THEORY OF CONTRACTS
The most recent Nobel Prize in Economics is the one obtained by Oliver Hart and Bengt Holmström, thanks to their contributions in the so-called "Theory of Contracts", which analyzes how contracting is made and its various effects, especially in the world of business. For example:
- It studies whether teachers or prison officials should have fixed or variable remuneration. Whether a hospital should maintain public or private management. It also develops hypotheses on how to set the remuneration of the directors of a company to benefit shareholders and achieve greater long-term value.
In today's daily life, the economy works thanks to contracts, which establish the risks and incentives to which the formators become creditors. There are contracts of all kinds, to mention some of them we can observe:
- Those that are signed for insurance Loans Those established to formalize a job Property rights Marriage The constitution of a country, etc. Remuneration based on performance for senior executives Deductions and copayments in the The privatization of public sector activities.
Oliver Hart and Bengt Holmström, explain the appropriate incentives that should be promoted where both parties obtain a degree of satisfaction for said action, based on the logic in the case at hand. For example: insurance companies never reimburse 100 percent of the damage caused by the loss of a house or a stolen car for a simple reason, to give 100 percent, people would not care to lose their home or car.
During the 1980s, both characters worked on the development of the so-called "incomplete contracts" regarding how to deal with the impossibility of contractually specifying all eventualities, indicating the best way to control risks, since it is impossible to specify in a contract everything that could happen, therefore it is necessary to have the general bankruptcy rules that make clear the rights of all parties.
Regarding incentives for managers of companies listed on the stock market, where the share price determines the bonus that the manager receives; These authors emphasize, given that share prices can respond to factors external to the company itself, it may be rewarding or punishing based on luck. Therefore, they propose to establish a model in which the payment is established based on the performance of the action in relation to the competition, that is, with other companies in the same sector.
Another example of remuneration is the way in which teachers can be evaluated to receive their compensation, based solely on the results of examinations as these are very easy to measure, but if the evaluation focuses only on this factor, there would be an imbalance of assertiveness by leaving out other equally relevant factors but with greater measurement difficulty, such as promoting teamwork and promoting the creativity of their students.
The importance, impact and significance of the contracts can be seen in the comment made by former US President Jimmy Carter, "Unless both parties win, no agreement can be permanent."
CONCLUSION
It would be good for everyone to do an analysis of the positive-negative impact generated by the economic system that currently governs us, global neoliberalism. One of the sectors most vulnerable to this incursion were the unions, which despite being in diapers during its boom, somehow provided protection and stability to their employees.
With the extermination of the unions, the idea that unemployment is necessary for the economy is consolidated in economic policy, with this ideology unemployment grows. The idea of the companies and their leaders that currently predominate in the market is that "cutting is essential to be a competitive organization."
Some of the most wrong ideas that we currently have is to believe that in reality there is a change because we sell our products abroad or because there are more and more investors within the national territory, the question that should be asked is under what working conditions are they being carried out? these changes?
How to improve the standard of living when salaries are getting lower and the products on the market higher. When the division of social classes is so uneven and the possibilities of growth are so difficult, being practically nil. Because the lower-middle class is the only one that contributes to the sustainability of the country with the contribution of high taxes compared to the income received.
The economy is an issue that not everyone is struck by and therefore generates different points of view and opinions. Some consider the economy as an unimportant issue and that it has no positive or negative effect on them, arguing that the possibilities are generated by themselves with their will and desire to do things.
However, for people with a different point of view, the economy is compared with the global situation that can happen with a seed and the ability it has to germinate and bear fruit. Unquestionably, its ability to grow and develop depends on the attention paid to it, the number of times it is watered, the place where it is decided to plant, etc.
But what happens with all those aspects that are not within our reach to be controlled, such as the climate in terms of rain, sun and the fertility of the earth; These aspects resemble economics. All those variables that cannot be seen or touched but that exist and determine the direction of a nation.
The taxes that as a company or client must be paid, for example VAT, ISR and the adversity in the purchasing power of the currency in contrast to the rise in the prices of the products and not to mention the high costs of electricity, fuel, legal procedures, etc., are variables that within this neoliberal system are a limitation for true freedom and healthy growth.
To understand economic theory, Ludwig von Mises argues that “it is not about knowing about material things and objects; but rather of men, their appreciations and, consequently, on the human actions derived from them. Goods, merchandise, wealth and all the other notions of behavior are not elements of nature, but elements of the mind and human behavior. Whoever wishes to enter this second universe must forget about the outside world, focusing their attention on what the actions that men pursue mean ”.
BIBLIOGRAPHY
- Economic Sciences. (November 8, 2014). Retrieved on April 7, 2017, from: http://www.inversion-es.com/economia/ciencias-economicas.html Urgent 24. (2016, October 11). Retrieved on April 8, 2017, from: http://www.urgente24.com/257606-que-es-la-teoria-de-los-contratos-nobel-de-economia-2016 Esteban, J. (sf). Frontiers of Economic Sciences. Retrieved on April 7, 2017, from: https://www.bbvaopenmind.com/articulo/fronteras-de-la-ciencia-economica/?fullscreen=trueMontaño, B., & Krugman, P. (March 25, 2017). Economic science. Retrieved on April 7, 2017, from: http://www.cienciaeconomica.com/Solares, RM (October 16, 2012). What is economic science for? Retrieved on April 7, 2017, from: http://eleconomista.com.mx/finanzas-personales/2012/10/16/que-sirve-ciencia-economicaSolares, RM(2016, October 11). The 2016 Nobel Prize in Economics. Retrieved on April 8, 2017, from El Economista:
Shortage. It is not synonymous with poverty, but despite the abundance of resources at some point they become insufficient before the wishes of the individual, so that scarcity can be reduced but not eliminated.
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