What Does The Word Economy Actually Mean?

Posted by Allison on 4 April 2009, 10:06

Economy is a word that most of us who actually pay attention to the news will hear or read virtually every day.  But what do we really make of that word?

It is a word, after all, that can have more than one meaning to us.  In its basic form it means being careful with how you spend money.  You have no doubt heard people saying they buy things as economically as possible with whatever currency they use, for example.  Being economical with your money is a good idea if you want to ensure you are well equipped to cope with whatever happens in the future - whatever country you happen to live in, however strong your own currency is and whatever the economy is doing.

But this word also has a far more ambitious meaning, and one that has an effect on all of us every single day of our lives.

The economy as an actual entity is what every country in the world is interested in.  Put simply it is the process of managing the resources that every individual country has.  As such, although the process of the economy is really much the same in every country, the actual components of it can differ depending on a number of different factors.

There is also a group of people who study what the economy is doing in each country, and these are known as economists.  An economist is basically a researcher, but they don't just look at how the economy has performed in the past – they also use the information they have learned to speculate on what might happen in the future.

In this case we can see that the economy itself and the study of it (economics) is not an exact science.  The more experience an economist has the better their forecasts of what could happen are likely to be, but there is no firm guarantee that they will be able to correctly predict the future.

In a sense though, the way we think of the word economy on a personal level also relates in much the same way on a national or global level.  It is the same dynamics, only on a much larger scale. 

But one of the most interesting aspects of the economy as a feature of all countries is that no two people seem to have the same view of it.  Even well known economists don't always agree on what has happened and what is likely to happen in the future.  In reality many economists are speculating for a living; trying to use the data they already have to carry on plotting a route through days which haven't yet happened.

You may also have heard the term 'a false economy'.  While this doesn't just apply to the economy itself, it certainly does describe events which happen to have an effect on it.

Let's look at a more general example to see how this works.  Suppose a road near to you needs repairing and the council comes out to see what needs to be done before organising a team of workers to repair it.  Let's also say that a normal long lasting road surface costs £10,000 to put down and it lasts twenty years.

The council however has found a money saving alternative.  Another company offers them a brand new road surface laid for just £5,000.  This seems like a wonderful bargain – after all it's half the price of the other one they were going to use.

But what they don't tell the public is that the cheaper road surface actually only lasts about five years.  This is a good example of a false economy, since they will end up spending twice as much over the long term just to save money in the short term.

False economies, although they aren't good in the long term, are very tempting in the short term since they offer the temptation of saving some money.  Some people would argue that our own governments and councils (worldwide, not just in the UK) are good at operating on false economies, always looking for the quick fix instead of the long term solutions that we all need to see.

One of the main issues surrounding the state of the economy at the moment – especially in the UK – is immigrants coming in from other countries in Europe.  Many people are pointing out that these people are working to earn money and then sending that money home to their families in their own countries, rather than keeping it here and recycling it through our own system.

There is no doubt that this must have some effect, since it stands to reason that if a large group of people are earning money from our economy and not feeding it back in again it must show up somewhere.  It's difficult to highlight exactly how this will affect the country in the long term, but many people feel that if you are going to be part of a country – any country in the world, not just the UK – then you should take part in the whole picture and not just the parts you like.

The whole subject of money and the economy is one that will by its very nature never be resolved.  You can only follow its path as it reacts to events taking place over the whole world and speculate on where it might take us next. 

It's interesting to note that even as some economists hang up their calculators and retire from the life of facts and figures, more newly qualified ones are standing ready to take their place.  While being an economist doesn't sound like the most interesting job in the world, it is in fact fascinating and sheds a whole new light on how our world operates.

So the next time you see a news story about the economy flash up on your television screen, don't switch off.  Stop and watch it and see what's happening.  You might find it more interesting than you think.