The economic challenges and problems prevalent in today's world revolve around several dynamic aspects of society. The academia of economics, as well as its material behavior, is based around man, society and institutions. The theories that are used to solve economic and financial problems are usually true, but not always. The faster we grasp the fact that economics is an art that revolves around man, the sooner we will be able to have economic peace. Another truth that we need to accept is that hardships or challenges are always going to be present.
What is an Economic Problem?
In a broad sense, an economic problem can be defined as an abnormal and irrational or irrelevant behavior by socio-economic units and market components. An economic problem can be triggered by any case or causes or even another economic problem. Though there is no scale that measures the level of abnormal behavior, an economic problem is said to have arisen when the abnormal behavior by economic components tend to affect several institutions.
In this discussion, market components signifies 3 major constituents of the market, namely, demand, supply and price. Though the magnitude of all the three components is small, it plays a highly influential role at a macro level. The term institute defines individuals, organizations, companies, government, governing bodies and any unit which is capable of conducting an economic activity.
Meaning
There are several definitions that elaborate upon an economic problem. However, the simplest definition that is accepted world wide is that a problem is an abnormality in economic institutions or constituents that in the view of society at large has a negative influence on earning and spending. The real gist is thus that a 'problem' is a subjective view of the entire society. Rise in gas price by 1 cent is not an economic problem, but a rise by $10 is stated to be an economic problem.
Scarcity
Classical and neo-classical economists and also their school of though, have presented a very practical explanation of the challenges facing any economy, the human wants are unlimited. However, the volume of available resources that is used to fulfill them is very limited. Even the alternatives that are present limited. This combination of limited resources and unlimited wants results into problems. This approach is often termed as the scarcity approach. Thus, when you try to find the solution to any economic crisis, you will have to focus on unlimited wants and limited resources.
List of Economic Problems
Here is small list which is not totally complete and academic arguments to some elements in the list are welcome.
- Anti-competitive behavior, laws and practices
- Mass bankruptcy filings and insolvency
- Economic bubbles and mass business failure
- Child labor and improper child welfare development
- Commercial crimes and intentional or planned corporate offenses
- Corporate crime and planned economic turmoil
- Corporate scandals
- Corruption
- Uncontrolled debt
- Economic disasters
- Government or bureaucracy induced economic crisis
- Mass economic inequality
- Energy crises
- Ethically disputed business practices
- Financial crises (restricted to the financial sector)
- Uneven income distribution
- Inflation
- Market failure (component failure)
- Monetary hegemony
- Monopoly
- Offshoring and outsourcing
- Poverty
- Economic recessions
- Social inequality
- Stock market crashes
- Unemployment
- Mass public affluenza
- Abnormal (too long or too short) age stratification
- Agflation
- Asset price inflation
- Bank run
- Benefit shortfall
- Biflation
- GDP or market component contraction
- Credit crunch crisis
- Crony capitalism
- Currency crisis
- Cycle of poverty
- Deflation
- Deindustrialization
- Demographic trap
- High dependency ratio
- Dominant minority
- Dutch disease
- Economic collapse
- Economic mobility
- Economic stagnation
- Expenditure cascades
- Exploitation
- Financial contagion
- Flight-to-liquidity
- Flight-to-quality
- Free rider problem
- Glass ceilings
- Hahn's Problem
- Horizontal inequality
- Hyperinflation
- Income deficit
- Innovation butterfly
- Insider trading
- Kleptocracy
- Liquidity crisis
- Malthusian catastrophe and trap
- Market abuse
- Middle class squeeze
- Monetary inflation
- National bankruptcy
- Crude oil depletion
- Overcapitalisation
- Overpopulation
- Pandemic
- Panic selling
- Pensions crisis
- Plutocracy (the rule of wealthy, or rather a combination of wealth and power, sufficing reach other)
- Population decline
- Real estate bubble
- Rural flight
- Societal collapse
- Spending wave
- Stagflation
- State monopoly capitalism
- Staycation (a time period where a person or a family takes off a non festive, or a non sick leave from work to relax for a day or two)
- Stock market bubble
- Sunshine tax (a significantly lower wage rate in one region as a result of excessive tax)
- Urban decay
- Waithood (refers to the long time period between the date of completion of education and date of employment in the lives of many young people)
Inflation
One of the biggest problems ever seen in the developing nations, inflation, involves the rise in price levels of goods and services. The basic reason that can be pointed out is that the population rise is not proportional and is excessive, in comparison to the available resources. Hence the more number of people demand a limited number of goods which leads to price hike. In contrast to this commonly observed theory, inflation is also seen when currency in circulation is increased. Wars, natural disasters other calamities are also accused of inflation. Hyperinflation is very, very fast and disproportional inflation. South east Asian economies are of date suffering from this phenomenon.
Economic Bubble
An economic bubble is high trade and market values of commodities, goods and products, the intrinsic prices of which are very low. The same opposite situation can also arise. Real estate bubbles in United States were responsible for a great deal of reduction in economic activities.
Recession
The third prominent economic problem is recession, which was severely experienced in 2008. This economic cycle is a product of several causes, where in market values, GDP, rate of employment, economic growth stall or fall. This results into credit crunches, fall in rates of employment and overall economic activities. A very prolonged recession is known as a depression.
It must be noted that since economics is a science and art that deals with man, there are several economic challenges that overlap the scope of other social sciences. The reason being that, the focal point of all these issues and other social sciences is mankind.
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