Fundamentals and Basic Principles of Economics - Domestic and International Approach

Wherever we go, economics is everywhere all over the world and it can be located in all major continents around the globe. This begins in domestic up to global approach. In my own opinion, economics is a social science. There are several branches of economics to deal with and these are: Sociology that studies the society and culture, Physics that studies the useful in the production of goods and services that produces machines and electricity,Political Science because it will study the economic policies of each leaders across the globe because it influence from the government of economic activities,History that studies the past, present, and future events of economic developments, Religion because it will based on the studies of religious traditions and beliefs that can encourage or discourage of economic development.

Readers and Viewers must discover and know the content of economics. This article will be tackling fundamental and basic principles of economics. Fundamentals of economics is focus on banks or banking, business, business cycle, depression, economic freedom, income, inflation, investment, labor force, manufacturing, marketing, money, monopoly and competition, consumer price index, cost of living, physiocrats, price, production, profit, property or dealing with real estate business, recession, rent, standard of living, supply and demand, trust, unemployment, value added tax in which I believed that this term will be understand by the viewers. The meaning of economics is very simple. According to Fajardo, the author of his book titled "Economics" third edition, The meaning of economics is the social science that deals with proper allocation and efficient use of available resources for the maximum satisfaction of human needs and wants.

Here in economics, there is also an economic system and theories to be learned by the readers and viewers. They must know the information of capitalism, communism, economic determinism, Facism, laissez faire theory, Theories of business cycle, Manioralism, Mercantilism, Socialism, and Syndicalism. They must take note that economic system is a set of an economic institutions that dominates a given economy. There is also a history in Economics from past to present times, even in the future. According to Fusfeld, who has a knowledge of John Meynard Keynes or known as "Baron Keynes of Tilton" that has a famous books which is very popular until now titled "Keynes General Theory of Employment, Interest and Money" which was written in the year 1936 which ranks among the most important books on economics. Aside from this, among his other works are A Tract on Monetary Reform written in year 1923, The End of Laissez Faire Theory written in year 1926, and also A Treatise on Money written in year 1930. There are also future in economics and these are called "ethico-economics in which I will discover it on my next article and next is economic crisis that cannot predict when will it happen so it belongs to the future.

After mentioning the introductory part and historical background of Economics, this time I will proceed to domestic approach. The writer of this article will focus on the Philippine Financial System in order to share ideas, thoughts, and opinions from other nations. This article is a big help for those who will take Master's and Doctoral Degree in Economics. In Philippines, the most common financial institutions are based on banking, pawnshops, insurance companies,lending, financial or lending companies. The Banngko Sentral ng Pilipinas or known as BSP (former Central Bank of the Philippines) is the central monetary authority and their purpose is to maintain monetary stability, and to promote a balance and sustainable economic growth.

The last part content will be international approach because it deals with global economy. In our planet Earth, seven continents around the globe gather to participate in International Trade. To those who are interested in this part of my article, they can find or search it in tariff, trade, International Monetary Fund or known as IMF, Asian Development Bank or known as ADB, Exports and Import, Common Market, Exchange Rate, World Bank.

To understand the meaning of international trade, according to James B. Calderwood, "International trade is the exchange of goods and services between countries and it is sometimes called "world trade" or "foreign trade". to explain this meaning, it enables a nation to produce the goods it can make the most cheaply and exchange them for goods it finds more costly to produce from one country to another countries. That is how the international trade means to the economics. The good example that practice International Trade is Japan because they can compete with other countries.

The World Bank, International Monetary Fund, and Asian Development Bank are the major lenders to our country. Their development funds have been focus on economic development such as agriculture.

After mentioning my content of economics from domestic up to global approach, they must take note that we are in the concerns of social responsibility this is not referring to the rich or poor people.

A. Books

Calderwood, James B. "International Trade" Vol. 10, The World Book Encyclopedia. Chicago, World Book, Inc.,1985.

Fajardo, Feliciano R. "Economics" 3rd Ed. Sta. Mesa Heights,Quezon City:Rex Printing Company, Inc. May,1996.

Fusfeld, Daniel R. "Keynes, John Maynard" Vol. 11, The World Book Encyclopedia. Chicago, World Book Inc.,1984.

The History and Principles of Insurance

Insurance as we know it today could be traced to the Great Fire of London, that in 1666 devoured 13,200 houses. After this disaster Nicholas Barbon opened an office to insure buildings. In 1680 he established England's 1st fire insurance company, "The Fire Office", to insure brick and frame homes. The first insurance firm in the United States provided fire insurance was formed in Charles Town (modern day Charleston), South Carolina, in 1732.

In 1752, Benjamin Franklin founded the Philadelphia Aid for the Insurance of Houses from Loss by Fire. It refused to insure some buildings in which the risk of fire was too great, like 100% wooden buildings.

The Principles of Insurance:

The exact time or occurrence of the loss need to be uncertain. The value of losses ought to be relatively unsurprising. In order to determine premiums or in other words to calculate price levels, insurers must be able to estimate them. Insurers require to know the price it would be called upon to pay once the insured event occurs. Most types of insurance have maximal levels of payouts, with several exceptions such as health insurance.

The loss should be significant: The legal principle of De minimis (From Latin:about minimal things) dictates that negligible matters are not covered.The payment paid by the insured to the insurer for assuming the risk is known as the 'premium'.

Potential causes of chance that may give rise to insurance claims are named "perils". Examples of perils might be fire, theft, earthquake, hurricane and numbers of additional possible risks. An insurance policy will set out in details which perils are covered by the policy and which are not. The damage must not be a catastrophic in scale, If the insurer is insolvent, it will be unable to pay the insured. In the United States, there are Guaranty Funds to reimburse insured victims whose insurance companies are bankrupt. This program is managed by the National Association of Insurance Commissioners (NAIC).

Indemnification (compensation)

Anyone wishing to transport risk (an individual, corporation, or organization of any type) becomes the 'insured' party once risk is assumed by an 'insurer', the insuring party, by means of a contract, defined as an insurance 'policy'. This legal agreement sets out terms specifying the total of coverage (reimbursement) to be rendered to the insured, by the insurer upon assumption of risk, in the event of a loss, and 100% the specific perils covered against (indemnified), for the duration of the contract.

When insured parties experience a loss, for a specified peril, the coverage allows the policyholder to produce a 'claim' against the insurer for the amount of damage when specified by the policy contract.

Financial viability of insurance companies

Financial stability and posture of the insurance company need to be a major factor When purchasing an insurance contract. An insurance premium paid currently provides coverage for damges which can arise few years in the future. Due to that, the financial strength of the insurance carrier is most significant. In the past few years, a few of insurance companies became unable to pay, neglecting their policyholders with out coverage (or coverage merely from a government backed insurance pool with less the Priciples and History of InsuranceS-favorable payouts for losses). A number of independent rating agencies, like Best's, provide facts and rate the financial strength of insurance firms.

Risks Assessment

The insurer uses actuarial science to quantify the risk they are prepared to consider. Information is gathered to approximate future insurance claims, ordinarily with reasonable accuracy. Actuarial science employs statistics and probability to analyze the risks associated with the range of perils covered, and these scientific principles are utilized by insurers, in combination with other factors, to decide rate composition.

The Gambling Analogy

Certain people erroneously assume insurance a type of wager (particularly as associated with moral hazard) which executes over the policy period of time. The insurance company bets that you or your property will not suffer a damage while you put money on the opposite outcome. Virtually all house owner's insurance does not cover floods. Using insurance, you are managing risk that you may not otherwise prevent, and that does not lend itself the chance of benefit (pure risk). In other words, gambling isn't an insurable risk.

The "insurance" of Social Solidarity

A few of religious groups among them the Amish and Muslims refrain from insurance and instead depend on support provided by their society when disasters strike. This could be thought of as "social insurance", as the risk of any given person is assumed collectively by the community who will completely bear the cost of reconstruction. In closed, mutual help communities in which other people might actually step in to rebuild total lost property, this arrangement could function. The majority of societies could not effectively support this type of models and it will not function for catastrophic risks.

(Source: http://en.wikipedia.org/wiki/Insurance).

MBA - International Trade & Finance - Heriot-Watt University. Bsc. Computers and Information Systems - Long Island University - C.W Post Campus. Hobby: Photography. Married with two Children.

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