1. The final test for Economics 98 is at 3:00 on the last Friday before vacation starts. Barb Bright suggests to Professor Smith that because it does not matter to him when the test is held, it would be economically efficient for the class to pay him $20.00 and he could reschedule the test for Wednesday evening. The entire class agrees with Barb that this would be a good idea.
a) Is Ms. Bright right that this move would increase economic efficiency?
b) If she is correct that such a transaction would improve economic efficiency, why would this transaction violate the rules of virtually all colleges?
2. The concept of economic efficiency assumes that consumer sovereignty is a good thing, that an economic system performs well when it is producing the goods and services that consumers want. If there is a different mix of goods and services that people would value more highly, than the economy is not performing as well as it could.
But the belief that consumer sovereignty is desirable depends largely on how we see wants. Economists do not have any theory of want formation, but despite this lack of theory, they tend to view whatever wants people have as legitimate. Those who dislike the economic way of viewing the world have suggested that wants may be easily manipulated and that many wants are "artificial." If wants are transitory and easily changed, the argument that fulfilling consumers' wants is desirable becomes much weaker. In particular, some have argued that the incessant bombardment of advertising leaves consumers with the belief that the way to happiness is through material possessions. We hear that having the right car, the right clothes, and the right lawn tractor will make us happy. We may not believe any one of these ads, but the constant message that happiness comes from spending money on things may gradually affect us.
What do you think? Can happiness be bought? Does advertising create artificial wants? Does it lead people to believe that happiness can be bought? Should the satisfaction of consumer wants be a primary goal of the economic system? And if satisfaction consumer wants should not be the primary goal of an economy, what should be?