Tips to Secure Your Future Finances

• The most important thing is to plan for the future. It will not be possible to prepare for every eventuality but having a plan that you can adapt is a must if you want a secure financial future. If you don’t have an idea about where money is going to come from in the future then you really are taking a huge risk.  Don’t spend the rest of your life thinking about tomorrow but do make some provisions.
• Set goals for yourself in regard to your finances; these should be short-term and long-term. Having goals gives you something to aim for and achieving goals build your confidence and motivate you to meeting long-term goals. Make sure your goals are realistic but don’t be afraid to challenge yourself.
• Don’t allow yourself to become a casualty of the credit trap. Avoid credit as much as possible and don’t create problems that you will struggle to cope with later. Having nice things now is great, but not if they will lead to future misery.
• It is important that you do all you can to offer protection to your family in the event that something were to happen to you. Make a will and don’t be fooled into believing that you will live forever.
• Always aim to be saving about ten percent of your income. This is a reasonable amount and will act as a nice nest egg. Ten percent of your income shouldn’t make your current lifestyle change too drastically.

Securing your financial future offers great peace of mind; this becomes more important as people become older. The steps that people need to take to do this are not drastic but the consequences of not taking these steps could lead to all types of hardship.

An important interest, for those involved with the Austrian School, are those forces which cause a recession.  The actions of central banks have come under a lot of criticism because it is claimed that their manipulation of interest rates are often the cause of the downturn. It is this that is seen as causing a huge increase in credit growth which eventually leads to a credit burst which affects the whole economy.  This is another area where the Austrian economists believe that government intervention causes things in the economy to worsen.

The Austrian school believes that the entrepreneurial spirit and the right to own property are vital for the success of any economy. Their ideas find a lot of support around the world and are quite similar to the theories of the Chicago School. The Austrians don’t believe that economies can be simplified into mathematical models because they feel that a different set of tools is needed when dealing with this area of life. Instead of using the methods of the hard sciences the approach is instead focused on deduction.  These economists believe in the existence of axioms from which further deductions can be made about human economic behaviour.

Like all school of economic theory, the Austrian school has not been without its critics. The fact that they don’t use mathematical models is often viewed as being a negative and means that their ideas lack any real scientific rigor. This criticism is compounded by the fact that many critics claim that their arguments or often overstated or even based on faulty understandings about the other economic theories that they criticize. They also fail to take into account the many examples of how government intervention has helped in the market place.

What is Health Economics?

Health economics is devoted to the subject of how health care resources are allocated. These resources are viewed as scarce and health economics is interested in how a health care system can best function to get the most from these resources. Health economics is not only the concern of economists but also those involved in hospital management or any of the health care professionals. In fact the allocation of health care resources affects everyone and so everyone has a motive for wanting to know more about it.

Health economics looks at things from a macro and micro level. This means that not only is it interested in how a whole health care system functions but also in how things work at the treatment level. What goes on in a small community health facility can be just as interesting to the economist as how things function on a global level.

Health economics examines those things that affect our health that are not related to the actual treatments. These other factors can in fact be just as influential in our ability to escape sickness. Such things as the distance people live from a health care facility and how they pay for treatment is just as important as treatment itself. If the nearest hospital is over a hundred miles away or you can’t afford to pay for it then it does not really matter how good the medical treatment is going to be. Deciding on how much should people pay and how the health resources are spread within a society is what health economics is all about.

As you can see, health economics is a very important topic and it is likely to always be that way. So long as there is any type of scarcity there will need to be decisions about how resources are allocated. Understanding the different arguments as to what is best for society is useful for anyone interested in the topic. There are now many voices expressing ideas about this subject and most have very interesting things to say.

What is Pareto efficiency?

In order to explain what Pareto efficiency is, it might first be best to explain a Pareto improvement. A Pareto improvement occurs when there is a change in the allocation of resources which makes one person better off but doesn’t make anybody else worse off. For example if three people have 10 apples and one person gets one more apple it will be a Pareto improvement so long as the extra apple did not come at the expense of one of the other three individual’s apples. Pareto efficiency is said to exist when no other improvements can be made in the allocation of resources to one individual without it casing a loss to others.  A simple way of explaining Pareto efficiency would be to say that it refers to a situation where it is not possible to make one person better off without it necessitating other people being worse off.

The reason why Pareto efficiency is not the same as equity

The reason why Pareto efficiency is not related to equity is quite easy to understand. If one individual had a million apples and everybody else only had one apple then it would still be Pareto efficient so long as there is no way for the individual to get a million and one apples without it making everyone else poorer. If he could get a million and one apples without it making other people less well off then it could be described as Pareto efficient.

How is Pareto efficiency used?

The idea of Pareto efficiency is often used in the real world. It provides justification for increasing the resources given to one group if doing so does not lower the resources of other groups. All though Pareto efficiency is not concerned with equity there are many who would see it as fair.  When applying the concept to the real world there is often the idea of compensation; if a change causes a loss to one group they receive compensation so that there is no real loss.

What is the Business Cycle?

The business cycle is also sometimes referred to as the economic cycle. It is concerned with the fluctuations that occur in an economy over a period of time.  The economic cycle typically occurs over a few years and will involve a period of rapid economic growth after which things slow down and then growth declines. The term ‘business cycle’ would seem to suggest that this process is predictable and constant but this is not the case; in fact these business cycles can be very unpredictable.  One of the main ways that a country’s business cycle is tracked is through observing changes in GDP.

The business cycle is often said to go through four stages; expansion, peak, contraction, and trough. During expansion there is an increase in the amount of economic activity occurring in a country and this continues until the peak of activity is reached. After the peak the economy begins to go through a period of contraction and economic activity begins to slow down; this continues until the trough where the bottom of the cycle is reached and economic activity once again begins to expand. This business cycle is a fair representation of what occurs in economies but it is important to keep in mind that the real world is a lot more complicated and these cycles can really be unpredictable.

What Causes a Business Cycle?

There are complex reasons for why the business cycle occurs but it can be explained in quite a simple manner as well. As an economy expands it and there is rapid economic growth it almost always leads to inflation and things just become more expensive to buy. The rising costs cause industry to slow down their growth and this leads to the economic contraction. This is why governments often apply a lot of effort to controlling inflation because it is that that often precipitates and economic slowdown.

The business cycle is a useful theory and helps people understand what is occurring in economies around the world. It should be remembered though that when it comes to the real world that economies will not follow a predictable cycle.

What is so important about Economics?

Understanding economics can really help you understand the way the world works; this subject is not only concerned with theories about global economics but also focuses on the actions of the individual and small business. When you understand economics you will then be in a better position to understand the motivations of people, businesses, and government. Without economics there could not be any society and this is what makes the subject so important.

Economics is concerned with looking at the resources we have in the world and seeing how decisions are made about how these resources should be distributed.  These decisions affect every person on the planet and so it makes sense to understand the process. Learning about economics is not just about sounding smart; it is also about comprehending the forces that shape your life.  Every day all of us make economic decisions that will impact the rest of our lives as well as the lives of those around us; doesn’t sound important?

How Can an Economics Degree help you Find Work after Graduation?

There are a wide range of job opportunities for people with an economics degree; some of these are related to the actual subject while others are less related. Economics provides training in how to think like an economist; this is an important skill that can be useful in many areas of life. It will make you more able to think analytically and improve your ability to problem solve. Economics should provide you with a good grounding in communication and numerical skills. You should also develop the ability to do research and learn to work as part of a team. These are all skills that are very attractive to employers.

An economics degree is a good subject choice at college and will provide you with knowledge that will benefit you for the rest of your life. It will also allow you to develop skills that will be of interest to future employers.

The Process of Determining Currency Exchange Rates

A full understanding of how currency rates are determined is a complex issue that would be way beyond the scope of one small article on the subject. It is possible though, to provide a very basic introduction to the subject.

The simplest way of looking at exchange rates would be to discuss purchasing power parity. Imagine that a loaf of bread cost $2 in the United States and €1 in Europe. As far as purchasing power parity is concerned €1 is worth $2 and $1 is worth 50 European cents. This is a very simple explanation and the currency exchange rate involves much tougher calculation that this.

On a day to day basis the value of a currency is usually determined by the demand and supply of that currency.  If the demand is greater than what is supplied then the price of a currency will tend to rise. If many people are selling and nobody wants to buy then this would cause a fall in the value of the currency.

There are a number of reasons why the demand for a currency can go up or down.  One of these reasons is the need for a currency for transaction purposes. For example, if I live in Holland and you live in America I will need US dollars to buy your products. There are millions of transactions like this occurring around the world and the demand for different currencies will depend on how much is needed for transactions. Another reason why the demand for a currency can rise or fall is speculation; investors will buy or sell currency in the belief that the value of it will later rise or fall.  The reason why currency rates are constantly changing then is closely connected to supply and demand.

What is Short Selling?

The great thing about short selling is that it is a way for people to profit when the price of a stock is actually falling. In fact, those who make their money from short-selling depend on the price falling. When thinking about the stock market most people would view it as buyers purchasing stock and hoping that the price of this stock will rise over time – short selling is more or less the complete opposite of this.

With short selling an individual borrows and asset and then sells this on at the current market value. They then depend on the value of this asset falling so that when they pay back the lender they will be paying less money. These people involved in short selling make their money by pocketing the difference between the amount they sell a stock for and the amount they later have to pay for it.

If the individual involved in short selling buys a lot of stock and starts selling it they can then cause the price to fall by their actions. This is because of the idea that scarcity increases demand but the opposite is also true. The more of the stock the short-seller sells the lower will be the value of this stock. In some instances the fact that they are selling so much can make other holders of the stock panic and they too start to sell their stock thus further lowering its worth. This can all means that when the short-seller goes to pay for the stock they have used it will be at a greatly reduced price.

Ethics of Short Selling

There are many concerns about the practice of short selling because there may be a risk that it leads to market crashes. There is also the worry that it is not very ethical because short sellers go after companies that look like they are in trouble and make the situation worse by devaluing their stock further. In the past some countries, like the UK, have banned the short selling of certain stock. Short sellers would claim that they are actually doing well by showing the real worth of companies.

Karl Marx believed that economics was the driving force behind human society. He saw two important factors as determining how society functioned; the means of production and the relations of production. The means of production could be described as all those things that are necessary to produce goods such as labour, materials, and technology.  The relations of production refer to the way humans interact with these means of production; for example master and slave.  When combined together the relations of production and means of production are referred to as the mode of production.

Marx saw capitalism as the current mode of production but like other modes of production that had gone before it would not last. This was because it had an inherent flaw due to the fact that it required one group of people to exploit another group; the owners of industry exploit the worker. Those in power would be able to keep the lower classes in a state of false consciousness for a while, but eventually they would realize that they were being exploited and they would rise up and seize control of the means of production. After this everyone would have equal access to the means of production and there would be no need for any further conflict.

Marx believed that out of all the modes of production that had gone previously it was Capitalism that was the most exploitative. This was because it treated humans like just another part of the production process. He felt convinced that as industry grew it would lead to the workers feeling more and more alienated.

Although there have been many countries that claim to have made Marxism a reality there is much disagreement as to whether such a society has ever existed. Marx viewed his revolution occurring in a developed western country and this never really happened. His views have also been criticized for putting too much emphasis on class conflict and failing to take into account the effects of a growing middle class.

The full title of his most influential work is, ‘An Inquiry into the Nature and Causes of the Wealth of Nations’ and it was published in 1776.  He was creating his masterpiece at a time of great change in Europe; this was the dawning of the industrial revolution. The events that were occurring around him greatly inspired his thinking and he became convinced of the wonders of a free market; he felt sure that this type of economy would bring the most benefit to society.

The Wealth of Nations is actually made up of five different volumes that deal with different aspects of the economy. Smith examined how things could be improved and what the politician’s role should be in relation to wealth creation.  He also spends some time discussing taxation.

A very important idea for Adam Smith is the ‘invisible hand’.  He believed that by allowing business people to go after their own self-interests it would benefit society as a whole.  This invisible hand was a metaphor that Smith used to describe the way that the market forces are self-regulating and that they lead to the common good without any real effort on the human’s part. Smith was quite insistent that the market should not be interfered with because this would prevent it from perform correctly.  The forces that made sure the invisible hand works in the way it does are; supply and demand, competition, and self interest.

At the time of writing the Wealth of Nations, Smith could see a lot of interference in how the market was functioning. For example, the monarchy would often grant special privileges to certain business interests. Smith did not agree with this practice and always felt that the market worked best when there were no attempts at manipulation.

Many of the ideas that Smith discussed are still being argued today. His belief in the power of the free market can be heard echoed in the work of many modern day economists. There are also those who are fiercely critical of his ideas, and this has insured that his work continues to be remembered.