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Mrs Economical: the great housewife

Dickson Igwe. Photo: VINO/File
By Dickson Igwe

The subject called economics appears extremely useful to individuals, families and communities. The right type of economic thinking is central to the stability and prosperity of societies, countries and regions. Why is economics at the centre of national and global policymaking? Why are matters of economics so pervasive in the global media narrative? The following story attempts to answer why economics appears so universally relevant.

Now, there are many definitions for economics. One definition that stuck with this Layman, he learned when in high school. He cannot remember the author of the text book. But he can still remember the definition: “economics is the study of scarcity as a relationship between wants and scarce resources that have alternative uses.” Investopedia.com defines economics as, “a social science that studies how individuals, governments, firms, and nations, make choices on allocating scarce resources to satisfy their unlimited wants.”

This Writer is dissatisfied with both of these definitions. Why? They appear to be too academic and too ambiguous for useful application. Current definitions of economics make little sense to those who know next to nothing about economic theory. He therefore prefers a definition of economics that gives him something that he can chew on daily: apply to everyday life, so to speak.

So, after years of reading the economics stories in the international media he came up with his own definition: “Economics is the optimal use of human effort, limited time, and scarce resources, by the individual, family, community, and nation, in pursuit of the best outcomes in well-being, resource management, and wealth creation, all within a well articulated and well defined vision, mission, and plan.” Possessing a vision, mission, and plan is essential to the study of economics. Without these three things, economics becomes purely academic. 

And no! He is not trying to be “too clever by half,” in his definition. He is trying to be practical. He is attempting to make economics useful for himself. What can economics do for him, his family, friends, and wider community? That is the question he needs answering. And that is why he has defined economics for his own better understanding of the subject.

OK. It is clearly a challenge if a business or country does not have a vision of where it wants to be in say five to ten years, in terms of economic planning.

A professional football team has a vision. It wants to win the cup finals and stay at the top of the league. In a developed country that means great rewards for the team players and the staff and management of the football club. In fact, a first division European team possesses football players that are mostly millionaires. But in order to get to El Dorado the football team and club management must possess a mission and plan to get to the vision where it is a frequent cup final winner worth billions of dollars.

The mission of a first division team is probably very complex. The mission is the strategy for getting to the vision. The football club must have the best training available. It must possess exceptional facilities. It must have access to the best players in the world. It must have a manager and management team second to none. Then, it must have a unique scheme of play that places it at the cutting edge of football play. It must also have a kitty worth hundreds of millions of dollars so it can swiftly close deals to buy players.

The mission and plan will decide whether the team gets to the place of victory. El Dorado is where the vision sits.  Success means reaching the vision. The club mission of achieving its vision is executed every day of the year by the board of directors and employees of the club.

A Virgin Islands family may have a vision or dream that it wants to go on a 3-week vacation to say Samoa in the South Pacific in 12 months. For a family of four it may cost $30,000. Achieving that vision means using economic thinking. There will be opportunity cost in that the thirty thousand could have been spent elsewhere in an equally deserving manner. It will also mean belt tightening and saving to get to the place where it can begin to pay deposits and look into hotel accommodations on the island. There is limited time. The family will have to ensure that funds are available by a certain time.

All these actions and decisions sit in the realm of economics. They are choices that have to be made dependent upon limited time, scarce resources, and human effort that always has its limits. A dream requires the right choices in terms of human effort, time, and resources. The dream is the vision. But getting to the dream requires executing the right type of mission, and having the correct planning.

And so it is with a country. For example the [British] Virgin Islands may possess a dream that by 2025, it will triple the present guest arrivals for overnight stays. That may also mean a 200% increase in GDP from present GDP. Yes it is a great vision. But in order to get there the country must decide on a mission and a plan on how to achieve the dream of becoming a tourism El Dorado that is fully developed and that could very well provide full employment.

The mission may involve developing a first world air and seaport infrastructure; building two large five star resorts with guest capacity in the hundreds, in collaboration with  global brands, and building marina facilities for scores for yachts. The mission could involve getting cheap finance to local hotel and guest house owners, to expand and upgrade their facilities. The mission could also mean ensuring a presence on the World Wide Web by acquiring a global media company already dominant globally. That could cost hundreds of millions of dollars that may well have to be borrowed.   

If the vision is right, then even a large borrowing requirement is not necessarily an albatross. A grand vision requires a big mission, and an exceptional plan.  

The aim of economics for everyone, from the single individual through to the small business, and ultimately the large corporation and nation, is the reaching of a dream of prosperity, as defined by a specified vision of prosperity, albeit with scarce resources, restricted time, and limited energy: putting it simply, “getting what we need or want, with what is available.”

On the other hand the subject of economics is like everything else in life. One may have the greatest theories; the most wonderful models; deeply interesting and involving case studies; gravity defying, and mind boggling mathematical formulas. But if the user has no idea where he is going, all these fantastic ideas will get him nowhere.  

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