Tuesday, October 8, 2013

Relativity and Economics

Relativity is an important matter, and in more subjects and fields than it may seem at first. Essentially, everything is relative and everything  is defined in relative terms, which may seem outlandish at first glance. Absolutely everything humans have defined is relative and requires a point of reference. Even a concept such a time, which may seem to be absolute, is relative and that was revealed by Albert Einstein. Since even something as concrete as physics is built takes into account points of reference, so it's quite understandable and even expected that economics can only be explained in relative terms.

It may seem that physics and the other sciences are have absolute, but it's important to remember that even the concepts of length, time, mass, gravity, temperature, pressure, and force don't have absolute reference points because their units are defined on often arbitrarily-set reference points. Thus, it is important to remember that anything that isn't defined relative to something else or a reference point has absolutely no meaning whatsoever. It cannot be ignored that even a written language would have no meaning if its basic building blocks or letters would not be defined relative to one another because words would've had no meaning. Thus, it is important to create reference points in such a subject as economics because otherwise any topic or theory in economics would have no meaning, which is obviously not true. This leads to the question of how well-defined economics is.

Economics is further complicated by the fact that a result can have multiple causes and associations, which causes ceteris paribus to quite a useful, but a certain result doesn't have just one cause as in physics. Thus, it's nearly impossible to test economic theories and it requires for much testing of various theories in economics economics under variable conditions to finally gain an adequate grasp of economics as a whole. As a result, it's of utter importance to understand the basic underlying principles before trying to understand more complex subjects within economics.

One such basic concept in economics is the boom and bust cycle and the chapter covering The Roaring Twenties and Austrian Business Cycle led me to examine everything read in relative terms by comparing the boom to a bust in the most generic terms. Also, the theory of the business cycles seemed to hold much merit, but it's very difficult to call it a true in all cases without further background, which was somewhat provided by the theories developed by Keynes and Mises-Hayek explaining booms and busts. Still, it's nearly impossible to call one of the semi-conflicting views correct or incorrect because each one has its merits.

One of the most interesting parts of the reading was on how there are stages of production of consumer goods and why a bust must follow a boom. Still, I was not too convinced that I understood the reason entirely because of my relatively little exposure to economics, and that search is the reason why I find economics to be a very interesting subject to explore. After reading the chapter, I have once again reaffirmed that the exploration or search for better understanding of subjects within economics can be a worthwhile and lifelong hobby.

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