Humans are Social Animals
Before we can understand anything about "the economy", we have to understand human beings. The most important thing about human beings?
We're social animals.
Our most "human" ability is our expansive capacity for language. Our brains are designed to maintain about 150 relationships. We have dedicated machinery in our heads to recognize faces. From start to finish, everything that we do, we've evolved to do in groups.
Take hunting: A lone human trying to bring down a rabbit for dinner? Better be pretty damned skilled. A group of humans bringing down an antelope? You can just take turns chasing it till it collapses.
Want to develop new technologies? Turns out that the complexity of your society's technology is proportional to the number of people you can communicate with! A population of about 4,000 lived in isolation on the island of Tasmania for 10,000 years, after being cutoff from mainland Australia by rising sea levels. While these people’s ancestors had brought fishhooks, awls, and other bone tools with them, Tasmanians lost these technologies around 1,500 BC (after retaining them for 6,500 years). The small size of the population just could not maintain the levels of specialization and knowledge needed to maintain that level of technology. Three smaller islands—Flinders, Kangaroo, and King—in the area originally had populations of 200-400, but the people here died out completely.
The archeological record is filled with examples of groups thriving as they become bigger and struggling to survive when they become too small. This puts group dynamics at the center of human survival.
While human beings do face a certain degree of natural selection at the individual level, our primary mode of competition is the group. Being an outcast from the group has generally meant death—but worse, being part of a small, powerless group has usually resulted in the same fate.
In this light, "economics" is actually the study of how human groups organize themselves, make decisions about what to produce, who gets to consume what's produced--i.e., how the group will survive and thrive.
Of course, the "group" does this through the collective decisions of its members, but there's a a feedback loop between people that shapes the individual's decisions--and this feedback loop is where "economics" takes place.
It's like a group of people is a brain. Even though brains are made up of neurons, studying neurons in isolation doesn't tell you much about how the brain works. To really understand brains, you have to study the connections between neurons (synapses) and structures that consist of neurons (cortexes). Of course, all that requires studying neurons in detail too.
Economics has traditionally been the study of neurons and EEGs, but it should be the study of brains. That's our first principle for economic philosophy: to understand the economy, we have to study group structures and group-level interactions (not just individual decision making in isolation).
Next in Economic Philosophy: Competition Among Groups