Economics is NOT about money

(Introduction to Economics, Lesson 2)

Before you can learn what Economics is, it is really going to help if you can first clear your mind of some of the common, but fundamentally misleading misconceptions about what Economics is actually about.

The biggest misconception about Economics concerns money. This would come as quite a surprise to most of the population, but Economics is NOT about money. Most people seem to think it is, but it isn’t!

Think of it like this: We use money to buy food, housing, books and thousands of other goods and services. The money goes one way (to the person or business we buy those goods from) and the food, housing and books go the other way (to us, the consumers of those goods) — but it’s the food, housing and books that are the really important things. If these important resources continued to be supplied, but no money changed hands, we’d be OK — we could carry on as before. On the other hand, if money moved, but no resources were supplied, we’d all starve to death. That’s the difference in importance between money and real resources!

Money is relatively unimportant. We can survive without money. This, after all, is exactly what the human race did for many thousands of years. Instead of using money, early man simply used a system of bartering — people would simply swap things they had…