What is Economics? : Do You Need to Know?

The Dismal Science

A Sorry Picture

It was Thomas Carlyle who answered the question "What is economics?" as long ago as 1849. He was said to have referred to it as "the dismal science". Although this origin and its authorship are both probably apocryphal the science of economics has borne this description ever since. It is even disputed whether or not it can be considered a science. Science is based on agreed and accepted definitions. Read any book on economics and you will come across terms such as "demand pull", "supply push" "monetary theory", "laissez faire", Austrian economics" "Keynesian economics" and many others all as meaningless to the uninitiated. Few can agree on a definition for most of these things. Indeed as a profession any number of economists if asked their opinion on any topic will produce just that number of different comments plus a group view. The question is do you as a retiree need to know what is economics? The answer is perhaps just a little but in very general terms only.

Governments and Economics

Fingers in Every Pie

It is the government that is in overall control of economic policy. That will cover the financial system, tax matters, employment and overseas trade. How revenue is raise and what the spending priorities of the administration are will reveal what kind of economy you are living with. It could be a command economy or a capitalist regime. As a non-voting resident retiree it will not matter a lot to you so long as the country is happy and stable. Fidel Castro ruled Cuba for almost fifty years. That is stability. Italy has had some 67 changes of government since 1944 but it is accepted as a stable democracy. It is the nature of both Cubans and Italians to be happy people but few would pick Cuba as a retirement haven. Castro had total control over the Cuban economy so far as overseas conditions permitted. It is still a command economy. Italy has stayed with the capitalist laissez faire system to a greater or lesser extent over the same period. For each of these countries the question "What is economics" would be answered very differently.  Most countries to which you may choose to go will be somewhere between these extremes.

Now and Then

Your major concerns will be your income, the integrity of the banking system, exchange controls, taxation and general social conditions. In determining stability, on which all of these matters ultimately depend, it is important to consider not just the current government but also its political opponents. If there is a vast difference between the stance of the current regime and any likely alternative administration then you should keep a weather eye on current affairs. Changes of governments by coups d'etat are less common now in South and Central America and in Asia but the possibility of a sudden change is always there.

Watch it! Often

You may well enjoy some financial and social concessions as a resident retiree from overseas. Were such benefits introduced by the current or a former government? Do you have good reason to believe that the present or any future regime would continue to support such benefits for foreigners? Do you enjoy a tax free status for your pension and any income earned abroad and is this likely to continue? If you had to move could you take your money with you? Will a change in government be peacefully accepted by the population or is civil unrest a possibility? Keeping abreast of current affairs plus a little acquaintance with history should enable you to make sound judgements on these matters.

What is Economics?

No Options

All and any of the above things are subject to the economic policy of the government. Do you need to be able to answer the question "what is economics"? Yes, but only to the extent that current affairs make sense to you. If your bank manager sits down in the deck chair next to you on the sandy beach before an azure calm sea under fluffy white clouds and tells you that he is there because the government has nationalized and closed all the banks then you have let yourself get out of touch. A glance behind at a line of well armed soldiers on the esplanade will confirm your worst fears. Now you know it is probably too late for a graceful recovery.

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