Laying the foundations

In this entry, please let us present briefly some basic ideas and principles of where our thoughts (and the subsequent entries of this blog) are going to be in the coming weeks.

 

Let´s move to a theoretical scenario where we have thousands or millions of human beings (economic agents), ready to offer their job capabilities to the economy (we could say also country) in exchange of money. The work of these human beings is used to produce goods and services which are subsequently bought by these economic agents with the money they earn working.

We do not have equal value for the economy as we are not equally valuable for economic processes (namely, for working in businesses). The value which the economy attributes to the economic agents is not constant but it varies within people. In other words, people do not have the same value, even if they have had the same education and are grown up in the same cultural environment: there are always differences among them. These differences are quantified via what we earn for (the price of) our labour. For example, think about your classmates in high-school or university: they do not have the same occupation as you reader, they may have got a better career or a slower career, but not the same. To sum up, some of the economic agents are able to provide something to the society, which, in economic terms, is valued differently than the average, whereas others remain under the average.

All economic agents have equal right for life, for which we need food, water, sleep, home, security of body, health and security of property. These are fundamental needs which should be granted to everybody. If we want to have a human life (slavery does not count here), we need all of them. Nonetheless, they are not for free and economic agents must acquire them in the market.

Measurements are at the core of economics; everything must be quantified in order to be introduced into the economic mechanism. We have seen that the basic fundamental rights above (food, water, sleep, home, security of body, health, security of property) are not free in most of the countries, they belong to somebody. For example, we in Spain have to pay money to get food, water, home,... We also pay taxes in order to have a State granting security, health insurance,... Therefore, economic agents need to acquire these basics (together with the other goods and services) in economic transactions, since nobody is providing them for free. As in every economic transaction, the equivalent to these basics must be of the same value. If not, the transaction does not take place. But we have said in the first point that the economic agents do not have the same value in economic terms.

Good working economies are able to produce products (including those fundamental rights above) which are accessible to everybody willing to pay for them, also to those with lower value of their labour. But this is not happening now in our world. A significant part of the labour force cannot access these basic rights because they are not enough diversified and are out of their possibilities. For example, it is possible to acquire cheap houses but some economic agents owning the land always decide to limit the supply of land available for houses. As a consequence of these (and of many others) forces introducing distortions in our economies, they do not produce enough products to allow all the economic agents to cover their basic needs, exchanging their labour for that purpose.

These are just four basic ideas which are now fixed into our minds. They will be the basis of further ideas to come, so stay tuned. We will be talking about the government...