What makes an economy objectively “good”? People seem to complain about the economy being “bad” all the time but who/what determines if it’s truly “good” or “bad”?
In: Economics
Well, in general an economy has so many subsystems that we must talk about averages here. Just because the overall economy is doing bad doesn’t mean there can be certain fields of business that do really well.
In general good economy means companies are growing, hiring people, making profits and can pay taxes on it. If that’s the case then things get easier for everyone involved basically (company, employees, government).
A bad economy is the opposite. Companies can’t sell all their product, so they are forced to downsize, fire people, make losses and therefore can’t pay taxes on profits. That’s bad for everyone.
Both of these states *tend* to amplify itself. Because a company that does well can pay higher wages, wich allows people to spend more money on things wich leads to even more demand/profits and vice versa.
Now the difficult part: how to measure in wich part we are? Well, there actually is no single objective measure that covers everything. There are many actors, and you can’t directly compare how well they are doing with each other. So there are lots of cases where the economy is neither objectively good or objectively bad for everyone. This is also very political, so many people will say things in order to influence policy “we’re doing badly please give us tax cuts to stimulate business!”.
One thing to look at is economic growth (GDP). How much companies grow in revenue overall gives a measure. If it grows fast that’s a clear sign economy is doing fine. But there is no magic number from where it’s considered good/bad, it’s a spectrum. Another thing is employment percentage, or purchase power of consumers, or inflation rate. But each of these numbers has the problem of only evaluating one aspect of the overall economy, and there are no generally agreed upon numbers of what is good and what isn’t
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