The First Law of Natural Economics

Natural Laws of Economics

    Traditionally, economists like to talk about the economy in terms of money and statistics.  Actually, money contributes to their overall tendency to do this because it’s the way we tend to think about our interactions in the economy.  We earn money and we spend money.  Sometimes we save and invest money.

The problem with this approach is that it lends itself to obscure sounding theories that most of us have no desire to know about.

A more practical and effective understanding can be achieved by thinking about the personal transactions you make in the economy.

When you take a job, you are entering into a contract to trade your labor for some compensation.  You typically get paid with money which you can then trade for other things.  Ultimately you are trading your labor to buy something you want or need.

The government would like you to believe that it is the spending part that causes the economy to grow.  But, the truth is that you would not have anything to trade with if you did not first trade your labor.

With this perspective you can begin to understand that nothing can happen in the economy unless and until people expend their labor.

Every economic event depends upon this first action.

Next you can realize that everything you do has an economic consequence in your life.  You only have your labor.  If you trade it for something you have an asset to trade with.  If you do nothing, your labor potential just evaporates with the passage of time.

Think about it.  If people were not using their labor, would there be any economy at all?

It doesn’t matter what political system you consider.  It’s the same for Capitalism, Communism, Marxism, etc.  Those political systems only govern how the products of people’s labor will be distributed through their respective societies.  The ultimate question is who does the work and who benefits.

Those decisions don’t change the basic economic truth that nothing can happen, nothing is produced or consumed, without the expenditure of human labor.

I call these basic economic truths the Natural Laws of Economics.  The statement immediately above is The First Law of Natural Economics.

I will post additional Laws as I talk about them.

You can read more about the Natural Laws of Economics and eventually see all of the Natural Laws of Economics as they are posted on the associated pages on this website.