By : Alexander Sharov 1. The purpose of the study The purpose of my research is a general understanding of economics...
By : Alexander
Sharov
1.
The purpose of the study
The purpose of my research is a general
understanding of economics as general economic theory. It is not based on statistical
data or mathematical analysis, therefore, for its understanding, special
education or training is not required. Any middle school student can understand
it, but this does not make it less interesting for economists. The search for a
general theory excites the imagination, but so far remains unattainable for
orthodox economic schools. But it does exist. It is beautiful, simple and
logical to understand.
The emergence of the economy (about 250 years
ago) is the most significant event in the history of mankind, which drastically
changed our entire existence. This event we can consider to be the beginning of
civilization. This could not have happened until today if it were not for a
successful combination of circumstances that allowed individuals to form a
social system. The social system that I mean
(https://globaljournals.org/GJMBR_Volume19/5-Social-System-as-the-Environment.pdf)
is any economic society foundation. The very structure of the social system
(economic environment) contains the conditions for economic development. Having
understood it, we can manage the economy.
2.
The result of the study
My economical views were formed 12 years ago
and so far I have not found reasons to change them. On the contrary, I always
find more and more evidence for my theory confirmation, which I will present in
several theses:
- Economics is a social science. It arises
only in a certain social environment formed by society, which I called a social
system. The social system consists of three owner groups (three elements), who’s
behavior defined by the ownership type such as labor, assets or resources. A
society that has not formed a social system or destroyed it has no economic
relations.
The basis of any economic relationship is
profit. The desire for profit is the determining force for the economy as
gravity is for the universe. Profit is the entire social system common product,
but not the representative’s profits sum. It is formed by the whole society and
then distributed between the system elements and within each element.
- Microeconomics and macroeconomics are
subject to the same economic laws. They are in essence the same economic
processes and are inseparable from each other. All macroeconomic processes are
fully reproduced at any scale where owner group representatives (elements) are
present.
- The first economic law is the law of
profit: Profit is the new debt obligations invested into production. Economic
growth is ensured by monetary emission and investments. The economic cycle is
inevitably associated with profit changes but not with of supply - demand
balance deviations.
- Economic fluctuations invariably lead to an
increase in the social system productivity. Productivity is the only
restriction on economic growth and the only way to increase production
profitability. Economic growth is not possible when the productivity limit is
reached, and overcoming it leads to an increase in unemployment. The
technological and technical breakthrough leap determines the scale and duration
of economic growth.
- Aggregate supply and demand are always
equal under free market pricing conditions. Money supply (issue) and the market
management do not represent direct economic regulation. Markets and money are
only social system tools to ensure economic exchange. Markets give money the
functionality as the material goods equivalent and means for profit
realization. Money performs the function of debt obligations.
- Economics is the science of profit.
3.
The complexity of understanding the economy
How difficult is the economy? It is as much
as we delve into its study. An economics researcher is like a climber climbing
a mountain and collecting stones along the way. The probability of him reaching
the top is infinitely small due to the increasing load as he climbs. Understanding
the economy does not consist in complicating the mathematical apparatus and
statistical analysis, but in understanding the object of study and its purpose.
Therefore, I will explain to you the economy, as I would explain it to a school
student.
Imagine a inhabited island where each
resident owns one of three property types. The first owns land (resources), the
second owns machines and mechanisms (assets), and the third has an ability to
work. By combining labor, machines and resources, people can produce all the
goods necessary for life. In order not to waste energy on the goods
distribution, people came up with money as the equivalent of labor, machinery,
resources and the goods costs. The money allowed them to choose for themselves
what goods to consume, in what quantity and when. Money indicates and how much
one must work using machines and resources in order to receive goods. Thus,
residents measured everything with money. The total amount of money on the
island could not change and everything that people produced for themselves was
measured by this money amount. Everyone knew what to spend their money on and
how much it would cost. But the day came when people wanted to increase the
material consumption and for this it was necessary to increase production. But
no one wanted to give their labor, assets and resources for free. And it was
decided to collect resources as debt. And in order not to forget how much
resources everyone added, they wrote each other debt notes. As a result,
production was expanded, the amount of material goods increased, and the amount
of money did not change. But no one wanted to lower prices for material goods,
because this meant that it was necessary to reduce the cost of labor, machinery
and resources. And it was decided to use debt notes as money. After some time,
production increased again and debt receipts became even greater. Soon, debt
receipts became a common means of payment and they began to call them paper
money. Every time people increased production, money was printed. And vice
versa, as soon as money was printed, the production of material goods
immediately increased.
Paper money is not worth anything, but people
consider it real and willingly give their property for it and buy material
goods with it. With the money amount growing - the production of material goods
is expanding and their consumption is increasing. The increase in money and
material goods is profit. A person always has a desire to consume more and a
person always strives for profit. This desire is the economy essence. This
desire can be satisfied only through free three property type owners
association (the social system). It so happened that the union initiator is the
asset owner as the most active fighter for profit. Without the asset owner’s participation
the production expansion is not possible. The
new money is needed to start expanding production, which the government
is printing. This is how the economy works: the government is printing money,
the asset owners expand production, and the labor owners turn plain paper into
material goods with their own hands and intellect. The result is a profit.
Having
formed a social system, people have created an economy. People received a “social
tool” for generating profit, which now provides a person with all the benefits.
4. Research Perspective
Money issue is inherently a means of
increasing aggregate demand. Taking into account the fact that the behavior of
all participants in the economic exchange is dictated by the desire for profit
(income growth), it will be optimal to direct all issue money to production to
provide demand for additional goods. But the decision on investments in
production is made by the assets owners based on their own desire for profit.
This implies two ways to meet aggregate demand: 1 - investment in production, 2
- price increases. Which option the investor (assets owner) will choose will
determine the production profitability. If the production profitability is
high, then the production expansion will increase profits and will be
economically justified. If the production profitability is low, then raising
prices with rising demand will be a priority. Depending on the assets owner’s
profits, cash issue will result in either economic growth or inflation. Having
determined the assets profitability dynamics and the minimum threshold for
profit, after which the refusal to invest in the production expansion (economic
downturn) begins, we will be able to determine the economic cycle duration and
their nature. Besides, it will become possible to build an economy mathematical
model and determine how to manage it.
Alexander
Sharov
