Laws of Economics
The laws of economics are better considered as guidelines or assumptions upon which the field is based. When it comes to economics, it's these guidelines that most people do not understand or are not aware of.
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Identification
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There are seven guidelines in economics:
1. Only individuals choose.
2. All individuals make rational choices, in that they are choosing to get the most out of their limited resources.
3. Individuals have unlimited wants, needs and desires.
4. Individuals make decisions on the margin, or the difference between the cost of a product or service and its benefit(s).
5. Individuals make decisions based on incomplete information.
6. Economic actions have direct and indirect effects.
7. The value of a good or service is always subjective.
History
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Economic theory developed from the time of Aristotle until 1871--when the theories of modern economics were first founded. Adam Smith (1723-1790) is considered the father of economic science, and wrote the book "An Inquiry Into The Nature and Causes of the Wealth of Nations," better known by the shorter form "The Wealth of Nations."
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Misconceptions
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With the first guideline that only individuals choose, many bring up groups and the possibility that groups can choose. But groups do not make choices, because groups are made up of individuals. Though there is the possibility of a group consensus, a consensus is comprised of individual choices. Some choose to voice their opinion, to try and convince others to go along. All of these though are ultimately individual choices.
Considerations
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Economics recognizes that people can and do value goods differently. Value is not inherent in a specific object. Value comes from the minds of individuals, and is simply perceived. This is why values differ, and why any economy can change. The economy is based upon the millions and millions of choices of individuals. And their choices are based upon what they value at any given time. In economics, values are seen as a number of preferences, and not as the normative moral question that's often associated with the word "morals."
Potential
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There are actual laws in economics (see Resources). But understanding these laws is much easier with an understanding of the guidelines. Economists tend to think along these lines, and the laws will make more sense when the guidelines are known.
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