Professor Bernard's picture

The First Diagram of the Economy

By Bernard

To begin, we seek the simplest relationships that may exist between the different economic agents, virtually ignoring these particular agents.

Let's start with the definition of our science:  Economics is a science that studies the production, the distribution and the consumption of goods and services.

Since the distribution is the link between production and consumption, this leaves us these two broad areas: production and consumption.  We know that every part of the production ends in consumption, and not vice versa.

Now, is all that production consumed by those who do it and do all what consume the producers done by them?  This double issue allows us to build the first diagram of the global economy.


The figure of the first diagram of the economy

Production that is not consumed by the producers themselves is sold to others in another territory;  it is an export.
Similarly, what is not produced by the producers themselves must be purchased from external agents; it is an import.
This is the first diagram of the global economy, composed solely from the elements of the definition of this science.
This first diagram is very primitive, almost simplistic.  It does not contain any network or circuit, that is to say, it is opened.  Zero interrelation are enrolled.  The next diagram bring us closer to the reality.