What is the Economy?

Economic history can be viewed as nothing more than the struggle to structure buying and selling in a world of constant change.

Adam Smith saw "equilibrium" as an achievable state in which those activities were in balance...supply was available that equaled demand. On a small scale, in early industrializing England, that may have been true for a few years, at the birth of the industrial economy.

But since then, the "levers" have become many and their relationships tangled and complex. It is a struggle to describe how the economy works in such terms that a lay person (heck, that competing economists) can agree on. And the relative importance of those levers shifts as the underlying economy shifts.

But make no mistake -- the economy is a human creation. It is not a "thing" out there. George Soros calls the human element "reflexivity." In complex and often hard to parse prose, Soros lays a considerable amount of blame for booms and busts, not on impersonal economic forces, but on .... people.

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