Quote:
Originally Posted by PaperBagger'14
Google AI had an answer that was rather simple, but accurate based on my understanding. The answer was a blend of both quantitative and qualitative reasons so to some extent it is a man made concept. Here it is:
“ A country's economy is basically the giant system of buying and selling that happens within its borders. Here's a breakdown of the key parts:
People and Businesses: People work in businesses that produce goods (like factories and farms) and services (like teachers and doctors).
Production and Consumption: Businesses use resources to create goods and services that people then buy and consume.
Money Flow: Money flows through the economy as people buy goods and services from businesses, and businesses pay people for their work.
The health of the economy depends on how well all these parts work together. A strong economy means there's a healthy balance between production, consumption, and money flow. This can lead to things like more jobs, higher wages, and a better overall standard of living for the people in the country.”
Based on that definition there is a balance between how much and how freely money is changing hands (quantitative) and how good standards of living are (qualitative).
|
This is probably as good an answer. One person's version of a good economy may be different from another person's version of a good economy (capitalism versus communism being an example of economic systems) and largely subjective. Communism (or more accurately Marxism) in theory focuses more on production above all else which is controlled by the working people. Labor Theory of Value (now defunct but a factor in the industrial revolution) explains that the economic value of a produced good is measured by the amount of socially necessary labor (the tougher or more labour intensive it is to make a product, the higher the value of said product), which became the predominating view around capitalism. Nowadays the subjective theory of value is the main modern theory behind economics. Perfect example of perceived value is lobster, a once worthless source of food cheaper than beans and considered a sign of poverty and food only fit for servants is now considered a delicacy and highly sought after. Another example is diamonds and perceived high value, brands are another one (why does one purchase a 3000$ handbag).
An isolated village society on an island away from modern civilization still has an economy, and it may be good based on that society need.
A group of kids exchanging Pokemon cards based on rarity and demand is an economy.
Economic collapse can occur when the value of goods drop below the ability to sustain. Panic of 1837 in the US was largely as a result of the crashing of cotton prices and lack of a central bank. We saw a localized recession in Alberta as a result of our energy dominated economy impacted by the oil crash, despite the rest of Canada being largely unscathed. The Soviet Union fell largely due to an economic collapse that precipitated an eventual political collapse.
Most people will perceive the economy through their own personal situation. If I am out of a job and struggle to make ends meet, my perception of the economy will be poor even if unemployment is 5% or lower. Governments run and get elected based on perception of a good or bad economy.
It will be interesting how the world's economies adapt to AI and eventual AGI.