Prior to taking this course, I believed that economic theory consisted mainly of supply and demand. While this is a significant component of economics (Acemoglu, et al., 2017), there is much more to the topic than my original simple understanding: as supply goes up, prices go down, as demand goes up, prices go up. Indeed, a host of other factors influence price, supply, demand, and other aspects of what we know as economics.
One of the constructs that surprised me the most involved profit-making. My thoughts had been influenced by the ethical stance developed by Milton Friedman, called individualistic corporate ethics. Under Friedman’s theory, management’s ethical duty is to make money for shareholders (Salazar, 2014), and this is what I understood to be the goal of most businesses—profit motive. Upon further study, I have discovered that there are other, equally important, ethical principles involved in running a business. One is to follow laws, regulations, avoid conflicts of interest, and treat employees fairly and with dignity (Epstein, 2006). Another falls under the rubric of Corporate Social Responsibility (CSR) (Epstein, 2006), which involves giving back to the community, preventing waste, achieving sustainability, and being environmentally conscious. Both of these ethical duties may diminish corporate profits, but they are ethical duties of corporations and their managers.
Prior to taking this class, I believed that the free market controlled the economy. Now I am aware that there are many forces, in particular government interventions, which can skew free market results. For instance, taxes can be used to make policy. If the government wants to encourage home ownership, for example, it passes a tax deduction applicable for mortgage interest. If the government wants to discourage home ownership, the Federal Reserve raises interest rates so high that most buyers are unable to qualify. Taking the dollar off a specie standard caused its valuation to fluctuate internationally, which impacted prices in America. Certain tariffs and trade agreements have made foreign goods either more affordable or more expensive. Although the United States is a capitalist country, the government exerts considerable influence on economics well beyond that of the free market.
This class has increased my knowledge of economics by giving me a reality check. I now know that there are many influences on how much money people make, how much bang they get for their buck, and that economic choices are complex. In particular, I am now aware that if I want to make an impact on economics, I need to be aware of political stances of my elected officials and the governmental actions in many spheres that, at first glance, may not seem economics-oriented. Requiring safety equipment or health care for employees appears to fall under the category of protecting workers, yet it may result in higher costs to businesses, fewer jobs available, or higher prices. In some cases, the public is willing, even eager, to pay these costs given the benefits—but only an informed public can make such choices.
In the future, I intend to continue looking for economic implications in all aspects of living, not just prices and wages. In particular, I plan to learn more about government policies and regulations by reading proposed laws and regulations and even corresponding with officials if I have questions. Although government requirements can be very beneficial to communities and workers, they can have drawbacks. Only an informed citizen, who looks at every angle of a regulation or law, can be confident that the outcome is consistent with the intent, and that there are no unexpected or unwanted economic ramifications. I am thankful for the knowledge of how broad the sources of economic impacts can be, for I believe this will assist me in being a more productive citizen, aware of implications that I might have missed before taking this course.
- Acemoglu, et al. (2017). Microeconomics. 2nd ed. City: London: Pearson College Div.
- Epstein, E. (2006). The Good Company, Rhetoric or Reality? Corporate Social Responsibility and Business Ethics Redux. University of California at Berkeley. Retrieved from http://citeseerx.ist.psu.edu/viewdoc/download? doi=10.1.1.461.34andrep=rep1andtype=pdf
- Salazar, H. (2014). How Tesla Handled the Heat – Tesla’s Shocking Responce to Multiple Model S Fires. Business Ethics Case Analyses. Available at: http://businessethicscases.blogspot.com/2014/11/how-tesla-handled-heat-teslas-shocking.html