Defining Economics in the Twenty First Century. By Bhekuzulu Khumalo (2012)

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Defining Economics in the Twenty First Century. By Bhekuzulu Khumalo (2012) by Mind Map: Defining Economics in the Twenty First Century. By Bhekuzulu Khumalo (2012)

1. heir knowledge will find ways to feed themselves. When it comes to development economics, it will be clearly understood that economics is just economics, allow people to use their knowledge and in time society will develop, because people are allowed to use their knowledge.

2. Hayek clearly understood the process of the knowledge process in society and why freedoms must be guaranteed. Hayek of course was mainly concerned with the encroachment of big government and used knowledge as a defense for greater freedoms on that score he was right, he understood the laws of knowledge though not laying them down in point form.

3. Some materials are considered natural resources other materials are not, why is this? The answer is simple, some materials have use for human beings some materials have no use. Iron ore is considered a resource only because of the knowledge humanity possesses about the properties of iron. It is a question of knowledge.

4. It is important to look at probably the most modern definition of economics at present. “economics is the study of how people choose to use resources.” Then they explain what they mean by resources, “Resources include the time and talent people have available, the land, buildings, equipment, and other tools on hand, and the knowledge of how to combine them to create useful products and services.”

5. It is accurate to say knowledge is needed to combine resources to create useful products and services, but it is not enough. It is also knowledge itself that is used to identify and create resources, therefore, knowledge itself is the primary resource and catalyst in every process of the economic process.

6. As resources are scarce and by their nature usually have more than one use, the concept of opportunity cost, again well laid out by Lionel Robbins in his works entitled “An Essay on the Nature and Significance of Economic Science.” What is a resource?

7. The definition given by Richard Lipsey ,“Broadly defined modern economics concerns: 1) The allocation of a society’s resources among alternative uses and the distribution of the society’s output among individuals and groups at a point in time. 2) The ways in which allocation and distribution change over time; and 3) The efficiencies and inefficiencies of economic systems.”

8. Not all humans can be considered a resource, but all humans are a potential resource for a society. People are resources because of their abilities, and all ability over and above physical power comes from knowledge. Physical strength without knowledge of what to do is meaningless.

9. 1. Contemporary Definition of Economics:

9.1. Ronald M. Ayers and Robert A. Collinge define economics as, giving two interpretations, the first, “Economics examines how to make choices well.” They also say, “Economics studies the allocation of limited resources in response to unlimited wants.”

9.2. A second definition of economics from Ayers and Collinge is: “economics studies the allocation of resources in response to unlimited wants”.

9.3. Alfred Marshall at the end of the 19th century, defined economics as, “the study of people in the ordinary business of life.” His definition was opening the door to the modern definition of economics.

9.4. “Economics is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.” From this definition offered by Lionel Robbins springs the contemporary definition of economics.

10. 2. What Was Seen but Not Acted upon:

10.1. “Quesnay had propounded a school of economics known as Physiocracy and devised a chart of the economy called a tableau economique. He insisted that wealth sprang from production and that it flowed through the nation…But the trouble with Physiocracy was that it insisted that only the agricultural classes produced true wealth and that the manufacturing and commercial classes merely altered its form in a sterile way…in describing the industrial sector as performing only a sterile manipulation, it failed to see that labor produced wealth wherever it performed, not just on the land.

10.1.1. Samuelson distils his definition of economics to a “…common theme. Economics is the study of how societies use scarce resources to produce valuable commodities and distribute them among people.”

10.1.2. Wealth obviously does not come from bullion, or fiat currency for that matter. Bullion and only has value because it can purchase something, with no production gold and silver have no claim on wealth. The physiocrats at the least understood that wealth comes from production. Man values what men has produced, man values what has a use to him, food, this must be cultivated, other goods must be manufactured, Adam Smith understood this more of course than the physiocrats. What comes from nature without men’s actions has no monetary value.

10.2. Lao Tzu, just had one sentence to say . “The more skills the people have the further the novelties multiply.” Straight to the point, skills are a direct result of applicable knowledge, the more knowledge, the more skills, the more goods will multiply, the more novelties will multiply.

10.3. By the twentieth century the most original economists understood the power of knowledge and others where no longer afraid to take risks in discussing knowledge.

10.4. Dale Neef thinks that “‘the knowledge-based economy’ describes the ever-increasing proportion of the nations GNP dedicated to computerization and high-technology electronics industries.”

10.5. Neef seems to confuse himself when he says, “I define knowledge in terms of potentially observable behavior, as the ability of an individual or group of individuals to undertake, or to instruct or otherwise induce others to undertake, procedures resulting in predictable transformation of material objects.”

10.6. In his book “The Road to Serfdom”, Hayek said: “This interaction of individuals, possessing different knowledge and different views, is what constitutes the life of thought. The growth of reason is a social process based on the existence of such differences...”

11. 3. Towards a Twenty First Definition of Economic:

11.1. Before humans can create or convert anything into a commodity they must first identify the material that can help convert something into a commodity.

11.2. We can easily understand land, labor, and capital as resources. However, these resources to be resources must be able to produce valuable commodities, either by working on another commodity or being worked upon.

11.3. It is human beings who identify a resource, they identify this resource through knowledge. What is not a resource today can very well be a valuable resource in the future because of the growing knowledge base. Therefore not all materials are resources, but all materials are potential resources that can be commodified, that is can be made into a commodity and commercialized because they have a use for mankind

11.4. Twenty first definition of economics must be the necessity of identifying resources, just as a definition must point out resources are scarce.

11.5. Goods are the result of use knowledge, that is to say knowledge that has been transformed to meet the needs of humanity. Exchanging knowledge can not be a bad thing, international trade therefore should be encouraged, this way the knowledge base of humanity increases, as each society seeks knowledge and shares its knowledge in the market place.

12. 4. Application of Definition to Economic Thought:

12.1. Knowledge is respecting that everything takes time, especially economic development, as knowledge is built upon knowledge. Having knowledge as such does not itself guarantee great economic success, it is allowing people to use their knowledge.

12.2. Take resource rich countries, for a most part all they do as extract resources and sell them. In most instances this countries are static in cases of scientific inquiry, understanding and appreciating knowledge could very well change their attitudes, that they can be more than just resource providers, they can participate at a deeper level in the global economy.

12.3. Maybe it is time to offer development aide to countries that free up their people to use their knowledge, otherwise it will be just the same, countries will just not develop.

13. 5. Towards Defining Knowledge Economics:

13.1. Knowledge economics is the study of knowledge the resource: the properties of this resource and how knowledge affects the mode of living