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Understanding the Economy – By Philip Mohr

| September 22, 2010

Everything You Always Wanted to Know About the Economy but Thought You Would Not Understand

Published by Van Schaik Publishers: 201 pages
ISBN: 978-0-627-02708-6

When we hear the word ‘economy’ on television news, or read about it in the newspaper, many of us are inclined to switch off. ‘Economics’ is something mysterious that happens ‘out there’, managed by experts – so why should we care?

A text for all – not just Economics teachers and students

We should care, says Professor Philip Mohr, since the onset of the global economic crisis in 2008. In fact, economics – like global warming – affects almost everything we do. Said Alfred Marshall, renowned British economist of the late nineteenth century, economics is “the study of mankind in the ordinary business of life”. Responsible citizens should therefore get hold of Mohr’s introduction to the economy. Even if you don’t teach Economics, as a teacher, you won’t regret it. Chapter one alone (entitled
‘Getting started: some basic concepts and tools’) will make you feel empowered.

I learned many things I hadn’t known before – from the meaning of the word economics, to the concept of opportunity cost, which Mohr says is the essence of economic theory.

“Economic problem” the place to start

He poses for the reader, upfront, “the economic problem”, which involves three central issues with regard to the production and distribution of goods and services in a society: what, how and for whom. An economic system, explains Mohr, is a pattern of organisation aimed at dealing with these three issues. Mohr then discusses the most
common economic systems in existence: traditional, command and market. Mohr weaves economic history into every section, and the ideas of famous economists of bygone ages provide additional perspective. In 1872, for example, Thomas Carlyle described economics as the science “which finds the secret of this Universe in ‘supply
and demand’”. More recently, some bright spark, observes Mohr, gave Carlyle’s idea an update; positing that “one can turn even a parrot into a learned economist – all it has to learn are the words ‘supply’ and ‘demand’!”

Making abstract concepts concrete

Mohr makes the excellent point that, when trying to understand the economy, we have to imagine things. He adds: “No-one has ever seen the South African economy, and no-one ever will. Concepts like the market… do not exist in the physical sense. We therefore need… little schemes, simplified diagrams and basic lists [to] enter the
picture. We need them to think straight about the economy.” As his discussion becomes more complex, Mohr does make good use of diagrams to explain, for example,
production and all its facets (capital and labour, for instance), the production of income and government and the foreign sector’s function in the economy.

Need to be in the know

Mohr concludes this first chapter with brief overviews of the financial sector, the concept of a gross domestic product, the difference between nominal and real values, and the traps to be avoided when reasoning about the economy. Further chapters delve into markets and prices; money, interest and exchange rates; international economic relations; economic growth and business cycles; inflation; unemployment, poverty and income distribution; and economic policy.

I’ll certainly need to read this valuable text twice. At the very least, I now know enough to take a more active role in dinner table discussions about ‘the perilous state of the economy’.

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Category: Book Reviews, Spring 2010 Edition

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