Economics Concepts and Theories

What does the author imply by the term “Man is that which fits economic equations”?

Directions: Answer the question based on the following passage.

Mankind is not an entity, an organism, or a coral bush. The entity involved in production and trade is man. It is with the study of man – not of the loose aggregate known as a “community” – that any science of the humanities has to begin.

This issue represents one of the epistemological differences between the humanities and the physical sciences, one of the causes of the former’s well-earned inferiority complex in regard to the latter. A physical science would not permit itself (not yet, at least) to ignore or bypass the nature of its subject. Such an attempt would mean: a science of astronomy that gazed at the sky, but refused to study individual stars, planets, and satellites – or a science of medicine that studies disease, without any knowledge or criterion of health, and took, as its basic subject of study, a hospital as a whole never focusing on individual patients.

A great deal may be learned about society by studying man; but this process cannot be reversed: nothing can be learned about man by studying society – by studying the inter-relationships of entities one has never identified or defined. Yet that is the methodology adopted by most political economists. Their attitude, in effect, amounts to the unstated, implicit postulate: “Man is that which fits economic equations.” Since he obviously does not, this leads to the curious fact that in spite of the practical nature of their science, political economists are oddly unable to relate their abstractions to the concretes of actual existence.

It leads also to a baffling sort of double standard or double perspective in their way of viewing men and events: if they observe a shoemaker, they find no difficulty in concluding that he is working in order to make a living; but as political economists, on the tribal premise, they declare that his purpose (and duty) is to provide society with shoes. If they observe a panhandler on a street corner, they identify him as a bum; in political economy, he becomes “a sovereign consumer.” If they hear the communist doctrine that all property should belong to the state, they reject it emphatically and feel, sincerely, that they would fight communism to the death; but in political economy, they speak of the government’s duty to effect “a fair redistribution of wealth,” and they speak of businessmen as the best, most efficient trustees of the nation’s “natural resources.”

This is what a premise (and philosophical negligence) will do; this is what the tribal premise has done.

To reject that premise and begin at the beginning – in one’s approach to political economy and to the evaluation of various social systems – one must begin by identifying man’s nature, i.e., those essential characteristics which distinguish him from all other living species.

What is the most important role of the first paragraph in the organization of the passage?

Directions: Answer the question based on the following passage.

What is economic power? It is the power to produce and to trade what one has produced. In a free economy, where no man or group of men can use physical coercion against anyone, economic power can be achieved only by voluntary means: by the voluntary choice and agreement of all those who participate in the process of production and trade. In a free market, all prices, wages, and profits are determined – not by the arbitrary whim of the rich or of the poor, not by anyone’s “greed” or by anyone’s need – but by the law of supply and demand.

The mechanism of a free market reflects and sums up all the economic choices and decisions made by all the participants. Men trade their goods or services by mutual consent to mutual advantage, according to their own independent, uncoerced judgment. A man can grow rich only if he is able to offer better values – better products or services, at a lower price – than others are able to offer.

Wealth, in a free market, is achieved by a free, general, “democratic” vote – by the sales and the purchases of every individual who takes part in the economic life of the country. Whenever you buy one product rather than another, you are voting for the success of some manufacturer. And, in this type of voting, every man votes only on those matters which he is qualified to judge: on his own preferences, interests, and needs. No one has the power to decide for others or to substitute his judgment for theirs; no one has the power to appoint himself “the voice of the public” and to lave the public voiceless and disfranchised.

Which of the following can be inferred from the passage?

I. Economic power is the function of totality of public opinion. II. Egalitarianism plays a very important role in the economy especially where choice comes into picture. III. There is nothing arbitrary where the economy is concerned.

Directions: Answer the question based on the following passage.

What is economic power? It is the power to produce and to trade what one has produced. In a free economy, where no man or group of men can use physical coercion against anyone, economic power can be achieved only by voluntary means: by the voluntary choice and agreement of all those who participate in the process of production and trade. In a free market, all prices, wages, and profits are determined – not by the arbitrary whim of the rich or of the poor, not by anyone’s “greed” or by anyone’s need – but by the law of supply and demand.

The mechanism of a free market reflects and sums up all the economic choices and decisions made by all the participants. Men trade their goods or services by mutual consent to mutual advantage, according to their own independent, uncoerced judgment. A man can grow rich only if he is able to offer better values – better products or services, at a lower price – than others are able to offer.

Wealth, in a free market, is achieved by a free, general, “democratic” vote – by the sales and the purchases of every individual who takes part in the economic life of the country. Whenever you buy one product rather than another, you are voting for the success of some manufacturer. And, in this type of voting, every man votes only on those matters which he is qualified to judge: on his own preferences, interests, and needs. No one has the power to decide for others or to substitute his judgment for theirs; no one has the power to appoint himself “the voice of the public” and to lave the public voiceless and disfranchised.

The main principle talked about in the passage is ____________.

Directions: Answer the question based on the following passage.

What is economic power? It is the power to produce and to trade what one has produced. In a free economy, where no man or group of men can use physical coercion against anyone, economic power can be achieved only by voluntary means: by the voluntary choice and agreement of all those who participate in the process of production and trade. In a free market, all prices, wages, and profits are determined – not by the arbitrary whim of the rich or of the poor, not by anyone’s “greed” or by anyone’s need – but by the law of supply and demand.

The mechanism of a free market reflects and sums up all the economic choices and decisions made by all the participants. Men trade their goods or services by mutual consent to mutual advantage, according to their own independent, uncoerced judgment. A man can grow rich only if he is able to offer better values – better products or services, at a lower price – than others are able to offer.

Wealth, in a free market, is achieved by a free, general, “democratic” vote – by the sales and the purchases of every individual who takes part in the economic life of the country. Whenever you buy one product rather than another, you are voting for the success of some manufacturer. And, in this type of voting, every man votes only on those matters which he is qualified to judge: on his own preferences, interests, and needs. No one has the power to decide for others or to substitute his judgment for theirs; no one has the power to appoint himself “the voice of the public” and to lave the public voiceless and disfranchised.

The tone of the passage is _________.

Directions: Answer the question based on the following passage.

What is economic power? It is the power to produce and to trade what one has produced. In a free economy, where no man or group of men can use physical coercion against anyone, economic power can be achieved only by voluntary means: by the voluntary choice and agreement of all those who participate in the process of production and trade. In a free market, all prices, wages, and profits are determined – not by the arbitrary whim of the rich or of the poor, not by anyone’s “greed” or by anyone’s need – but by the law of supply and demand.

The mechanism of a free market reflects and sums up all the economic choices and decisions made by all the participants. Men trade their goods or services by mutual consent to mutual advantage, according to their own independent, uncoerced judgment. A man can grow rich only if he is able to offer better values – better products or services, at a lower price – than others are able to offer.

Wealth, in a free market, is achieved by a free, general, “democratic” vote – by the sales and the purchases of every individual who takes part in the economic life of the country. Whenever you buy one product rather than another, you are voting for the success of some manufacturer. And, in this type of voting, every man votes only on those matters which he is qualified to judge: on his own preferences, interests, and needs. No one has the power to decide for others or to substitute his judgment for theirs; no one has the power to appoint himself “the voice of the public” and to lave the public voiceless and disfranchised.