Quick Thought on a New Beginning

Imagine that you sit down one day with some friends and announce that you are going to invent economics. Great. Economics, you say, will be the study of the economy and its various properties. Great again.

Hmmm. Now comes the hard part.

What, exactly, is an economy?

Gulp.

I don’t know. Do you.

It’s sort of whatever you want it to be at the moment you are talking about it.

Is it a market? In which case, we have to do this, what is a market? That used to be easy back in the old days. It was a physical space. It was a space people went to to exchange stuff. But was is a market today? The internet? A supermarket? A stock exchange? All of them I suppose. It’s a logical space as much as a physical space which makes it seem a little abstract. It still involves people though. If not directly, then indirectly. After all the entire purpose of a market is to function as a space within which transactions take place. And transactions involve people, don’t they.

Maybe.

Is an economy one market? Or many markets? Do those many markets have to intersect? Or can they simply co-exist? Are there many spaces or one space? Are they nested? Are they aggregated? Is the aggregate, which doesn’t exist other than as an abstraction because it exists only as a quantity, an economy? If so, what properties does it have other than those of the markets of which it forms the aggregate?

Phew.

Or is this all a red herring?

Perhaps an economy is a group of people doing transacting. In which case it would seem to be much less abstract and more behavioral. Maybe.

Or is it simply a set of transactions? In which case we would need to investigate the properties of transactions. Whatever that may mean.

Or maybe an economy is all these things?

Is it a history of all these things? Do past transactions, and past generations, constitute part of the current economy? Perhaps, if they have contributed to it.

And then there’s the usual point of confusion: how do we account for the economy once we’ve decided what it is? In money terms? Economists have a terrible time understanding money – which is why many of them like to think in non-money terms. They call non-money terms ‘real’ just in order to annoy us all because we know that most, but not all, ‘real’ economies only function with some sort of money.

And do only those transactions conducted in markets get counted when we add up the economy? What about the others?

It gets very difficult doesn’t it?

Which is why most active economists never actually bother worrying about making the economy explicit when they discuss it. They simply hope we all understand what they are talking about.

Which we do. Don’t we?