Economics of a Social System or General Economic Theory

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 ( 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



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Economics of a Social System or General Economic Theory
Global Journals | Science Innovations & Stories Blog
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