What Is Economy


What is economy?

Economy is the doctrine of managing with limited resources and therefore something that everyone in a society is affected by. The word originally comes from the Greek “oikos” (house) and “nomos” (law). It is used in many different contexts, and can refer to everything from how a country to an individual manages its resources.

More about Economy

1. What is business administration?

Business administration is the science of the company’s management of limited resources. A company’s finances are important to keep track of and that the company makes a profit.

Business administration also includes other parts such as accounting and marketing.

2. Accounting

All companies are required to record income and expenses correctly, regardless of the size of the company.

There are several different ways to manage your bookkeeping. You can either take care of your accounting yourself in an accounting program, or get help with certain parts of an accounting firm and do selected parts yourself.

3. Business loans

Banks are generally restrictive in giving loans to companies, but there are more to turn to than the traditional big banks, e.g. finance company.

However, most lenders require a security, often in the form of a guarantee.

This means that you as an individual will be liable for repayment if the company is unable to repay the loan.

Business administration – Turnover, expenses, taxes and profit.

As the name suggests, this area is all about a company’s finances. Companies are required to report their income and can make different types of deductions for expenses.

Everything is booked and compiled in a financial statement at the end of a financial year.

There are special courses, both at upper secondary level and at university, where you can study this subject-specific area in economics.

Economics – Economics at the societal level

Economics is a major social science subject. In this area, one looks at what the distribution of resources in a society looks like.

These are partly questions that you often hear about in the news, such as the economic situation, interest rates and inflation targets.

But the subject is broader than that and it can be said that there are a number of subcategories also in economics, for example:

1. Health economics

Where you study health and healthcare from an economic perspective.

2. Environmental economics

Studies on the interplay between economic issues and issues of sustainability and the environment.

Among other things, it addresses the dilemma of how a society should manage its natural resources, in order to benefit both the environment and economic growth in the best possible way.

3. Labor market economics

Includes research and statistics on unemployment, supply and demand in the labor market, wage levels in various professions and questions about trade union life.

There are even more and even narrower areas that can be studied by economists, to find out how society and the economy interact in a certain place or within a certain area.

Financial economy

Financial can actually be said to be part of either business economics, economics or a bit of both. In some countries, financial economics is also studied as a stand-alone subject.

In financial economics, one looks more closely at how money is transferred between different parties and at trade between them.

It includes both securities trading in various forms, but also trading in commodities and other goods, as well as currencies.

There is a lot of research in this economic branch and you may recognize concepts such as “effective market hypothesis”, “portfolio theory” or “capital market theory”, all of which are financial economics concepts.

Economic History

Even in the subject of history, economics has its own branch. In economic history, people study the living conditions in different societies during different historical periods.

Here, too, there are different subcategories of the subject that sometimes slip into other academic disciplines in economics.

One can, for example, study the history of the financial world, company history or labor market history.

Economic systems

The economy of a country works because it falls within specific regulations, so-called economic systems.

There are slightly different theories about how an economic system should be designed and throughout history different systems have been tried.

Current systems are also constantly changing and the systems are not completely static.

Some systems that have been designed over the years are these:

1. Market economy

A market economy is based on all parties in the economy being, as far as possible, free to make their own decisions about how, where and when they want to trade with each other.

This means, for example, that the market itself sets prices and natural competition sets the bar for what is reasonable.

In a market economy, it is not the state that regulates the market, but instead all players on both the buying and selling side that themselves decide the rules of the game.

In practice, it is seldom an action for a completely market-controlled economy, but often there is a certain state control and a law book that sets the rules of the game.

2. Planned Economy

This can be described as the opposite of market economy.

In a planned economy, it is the state that sets the conditions and distributes the financial resources according to a predetermined plan.

The move to its peak will then be the economy according to the model advocated by Karl Marx and implemented in communist countries.

Then the planned economy also includes that it is the state that owns companies and the means of production within a state.

A more common economic variant is a mixed form of economy, where the state regulates a certain part via taxes, subsidies and subsidies, but where there is still a free market in many industries and a vibrant business community.

3. Capitalism

The basic idea of the capitalist system is private property. In this system, individuals and companies have the right to own capital, products, brands and so on.

For a capitalist system to work, there must be a functioning market economy.

A strict planned economy aims for the state to own the companies and so on, which goes against the capitalist vision of private ownership.

Circular economy

This economic model is based on an idea of ecology and has the natural cycle as a model. It is based on production being sustainable and things being recycled as far as possible.

In theory, the intention is in a circular economy to avoid all environmental toxins, hazardous emissions, reduce all waste and take care of everything you use.

In practice, many companies try to adopt the mindset of the circular economy, at least to some extent.

It is often economically beneficial to be environmentally conscious, as it is appreciated by consumers, and provides an opportunity to reduce unnecessary waste in production.

Sources

https://www.tandfonline.com/doi/abs/10.1080/13662719400000002

https://www.taylorfrancis.com/books/mono/10.4324/9780203388365/economy-society-robert-holton

https://www.degruyter.com/document/doi/10.4159/9780674240827/html

Kevin

This article has been reviewed by our editorial board and has been approved for publication in accordance with our editorial policies.

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