Important Reasons Why You Need to be Economics Literate

Our ignorance is limitless. We, the souls are ignorant about the theory of Karma governing every soul, We the Soul living in the body do not know how our body works. Our body does economic activity most of the active life, but we do not know how the economics works.

“In our time, the curse is monetary illiteracy, just as inability to read plain print was the curse of earlier centuries.” Ezra Pound

Yes, knowing economics is very important for everyone. We as an individual, and our Government ruling us all the time take several economic decisions. Imagine the quality of these decisions if we do not know the principles of Economics. Imagines how the Govt would decide if the citizen is ignorant about the economic implication of the Govt decisions.

“Economics is really just seven billion people’s stories, experiences, and choices. It is about what we do, what we make, and what we need….”

Yes, Economics is about every one of us. Economics is not only about some complex theory or fancy model. It is a day to day affairs all of us are involved with.

In this post, we will see why is it important for us to become economically literature.

Here I go:

• How Money Works

Though Economics is not only about Money but monetary policies of the Govt is largely influenced by the state of the nation’s economy.

In India, RBI decides the monetary policy based on what is happening in the economy. If the economy needs money to boost growth, they reduce the rate of interest and also pumps more money in the system. If the economy is facing higher inflation, they curtail liquidity and may a higher rate of interest to cool down consumption.

These decisions of RBI do impact your pocket and important decisions. Whether to borrow, when to borrow, cost implication of higher rate of interest, the state of the economy, price rise, demand slump everything influences your pocket and quality of lifestyle.

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• How Your Business Works

Even your own business whether you own it or work for it works on the principles of economics.

Knowing the principles of demand and supply, how both curves operate, fixed, variable and marginal costs, breakeven point, utility theory, diminishing marginal utility, pricing, monopoly market, etc. everything is about economics.

How can you remain ignorant about the bases on which your business functions?

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• Understanding the Implications of Govt Decisions

This is crucial. If the citizens are ignorant about the Economic implication of Govt policies, Govt would take populist short term measures to woo voters, but which harm the economy in the long term.

On the other side, a progressive Govt would dare to take bold decisions if the citizens are in sync with the better implications of the hard Govt decisions.

There is news on many social platforms about Indian debt. It says India’s debt is highest since independence. If we view this news solitary this could be alarming. But an Economically literate would compare the debt figure with the GDP data. What the country is doing with the Debt is important.

If the Debt is supporting GDP growth, there is nothing wrong. No one data indicate anything meaningful. It has to be in relation to something which gives it a meaning. This is why ratios are important than absolute data.

Like an alert media and judiciary keep the Govt alert on social issues, economically literate citizens keep the Govt alert on Economic policies. Most of the time, economically illiterate citizens do not understand the Economic policies of the Govt and neither questions bad decisions nor support good decisions. In both the scenario the nation suffers.

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• Understanding Economic Implications of World Events

Understanding global trade data about the production, demand, supply, pricing, oil production by OPEC Countries, Fed rate, currency devaluation everything has an impact on the business.

Which data matters and what data affect your business are an important literacy.

Do you what are the implications of the present US, China trade war and its implication on the Indian market?

This can influence the Indian growth story, many businesses, and employment opportunity. This is one such event, there are several such economic events keeps happening throughout the world. Everything to some or more extent affect our Economy. Impact on our Economy means the impact on us.

We live in a connected Economy. Various Global events have repercussions on our pocket, job, and business.

• Voting Economically Sensible Leader

Like mentioned in plot 4 above, if the citizens are economically literate, a good leader can get support for hard economic decisions. For the Economy so thrive many times harsh decisions are necessary the Govt needs to educate the citizens about the reasons and implications of such decisions.

In India PM Modi took the bold decisions of Demonetisation, it was harsh for the common man but since the intention was communicated on a large scale, the people supported the decisions.

In this case, PM could convince the implication of the decision to the citizen successfully. In a way, the Govt created economic literacy for the common men. The citizens knew though they are suffering it is good for the long-term future of the nation.

This is how economic literacy supports good Govt. decisions.

• Helps the Govt in Better Economic Decisions

“Human rights are not only violated by terrorism, repression or assassination, but also by unfair economic structures that create huge inequalities.” Pope Francis

If the citizens are economically illiterate, the Govt can take bold decisions. Many Govt. survives on populist but bad economic decisions. Recent Delhi CM announced free ride for Women in Metro trains. This is nothing but the populist measure which has severe economic consequences for the Metro rail corporation.

Metro man Mr. E. Shredharan objected and asked the PM to intervene. There are several such free doles politician give to the voters. This is nothing but buying votes with the public money. Who will bear the cost for the free rides? Of course, citizen.

If the citizens are economically literate this kind of freebies won’t get votes for the politicians. If the citizens are economically literate, decisions like Demonetization did not impact the election outcomes.

This is the difference Economically literate citizens can do.

• You Can Better Control Your Destiny

Now if you understand how the Economic world around you works, would it not help you in better decision making? Your own financial, monetary, and career decisions improve with your economic literacy.

Better decision making will certainly make you happy or at least saves you from a miserable economic condition.

Better Govt decisions can also cause of happiness all around. You can make it possible with your economic literacy.

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“Destroying rainforest for economic gain is like burning a Renaissance painting to cook a meal.” E. O. Wilson

We are living in this time of Global Environmental Crisis. If we remain ignorant we will be ruled by poor Govt. policies.

If we are Economically literate, we won’t allow the Govt to burn renaissance painting to cook a meal. This will also help to keep the Globe livable for the next generation.

I am sure this post has kindled your interest in Economic literacy.

This was first published on Financial Literacy Blog