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article What is an Economy?

By Alex Zorach, April 13th, 2009

People talk about "the economy" frequently. "The economy" is always on the news; it's a political issue. It affects peoples' lives, making people gain in the stock market or lose their retirement savings, making businesses thrive, or making people lose their jobs. But few people know exactly what it is. Wrapped up in this mystery is a sense of powerlessness; when our livelihood depends on something that we don't understand, we feel that there is little we can do when we go through difficult times. Merit Exchange is based on the idea that raising awareness of what an economy is can empower us when "the economy" is not working for us.

The dictionary is a good place to start for the definition of an economy; two definitions are particularly relevant:

Economy (noun):

  • The system or range of economic activity in a country, region, or community: Effects of inflation were felt at every level of the economy.
  • A specific type of economic system: an industrial economy; a planned economy.

"economy." The American Heritage? Dictionary of the English Language, Fourth Edition. Houghton Mifflin Company, 2004. 11 Nov. 2008. See Dictionary.com.

These definitions are a bit circular as they do not explain what "economic" means. We turn to a definition of this word:

Economic (adj.):

  • Of or relating to the production, development, and management of material wealth, as of a country, household, or business enterprise.

An economy is thus a system of production, distribution, and consumption of material wealth in a country, region, or community. As of 11/11/2008, Wikipedia has a similar definition: "An economy is the realized social system of production, exchange, distribution, and consumption of goods and services of a country or other area."

Reflecting on this definition is empowering because it allows us to see what the economy is, instead of being dragged obliviously along with the economy's ups and downs. A failing economy is one that is not working for the majority of people; it is a failure of a social system to organize effectively the production, distribution, and use of resources. Even a strong economy may not work well for all people: certain regions such as remote rural areas and old industrial cities struggle with high unemployment and a lack of economic opportunity. If we realize that an economy is just a social system, we are then free to reinvent this system.

Merit Exchange is one step in this reinvention. Merit Exchange fits both dictionary definitions of an economy given above: it is a community of people and a system of economic activity in this community. It organizes people to produce, exchange, distribute, and use goods and services. Like the U.S. economy, Merit Exchange has a currency--merits (m). However, everything about merits and Merit Exchange is specifically designed to work for people and help them thrive even in regions and times where the national economy is failing.

The goal of Merit Exchange is to be an alternative to the U.S. economy, to be a new system that organizes people's labor and trade in fundamentally different ways. It is meant to be used alongside the regular economy. In addition to helping people when the national economy is weak, it can provide a better forum for activity that is not encouraged as strongly in the national economy. By finding things that they can provide for each other for free, members can save their dollars and pay off their debts, and they also might be able to enjoy luxuries that they might not be able to afford in dollars, in exchange for providing useful services that others might want but might not have the dollars to pay for.

Lastly, Merit Exchange is a place to explore innovative ideas about economics. Merit Exchange is designed to encourage and reward conservation over consumption, generosity over greed, and long-term planning over short-term thinking. The currency, merits, are designed to reflect merit, whereas money often reflects power. The whole system is set up to promote local entrepreneurship and face-to-face interactions based on personal trust, rather than the impersonal interactions of large retail stores, assembly-line production, and the faceless service economy. Merit Exchange moves into uncharted economic territory...but it is also helps people return to a simpler way of life, focusing on quality rather than quantity, based more on face-to-face interactions, and emphasizing the interconnectedness of all people in a community.

Cite this article:

Zorach, Alexander C. "What is an Economy?," Merit Exchange Newsletter, Vol. 1, No. 1 (2008). http://meritexchange.com/article.php?article_id=6

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