Scarcity and Choice
Scarcity means that people want more than is
available. Scarcity limits us both as individuals and as a
society. As individuals, limited income (and time and
ability) keep us from doing and having all that we might
like. As a society, limited resources (such as manpower,
machinery, and natural resources) fix a maximum on the
amount of goods and services that can be produced.
Scarcity requires choice. People must choose which
of their desires they will satisfy and which they will leave
unsatisfied. When we, either as individuals or as a society,
choose more of something, scarcity forces us to take less of
something else. Economics is sometimes called the study of
scarcity because economic activity would not exist if
scarcity did not force people to make choices.
When there is scarcity and choice, there are
costs. The cost of any choice is the option or
options that a person gives up. For example, if you gave up
the option of playing a computer game to read this text, the
cost of reading this text is the enjoyment you would have
received playing the game. Most of economics is based on the
simple idea that people make choices by comparing the
benefits of option A with the benefits of option
B (and all other options that are available) and
choosing the one with the highest benefit. Alternatively,
one can view the cost of choosing option A as the
sacrifice involved in rejecting option B, and then
say that one chooses option A when the benefits of
A outweigh the costs of choosing A (which are
the benefits one loses when one rejects option
B).
The widespread use of definitions emphasizing choice and
scarcity shows that economists believe that these
definitions focus on a central and basic part of the
subject. This emphasis on choice represents a relatively
recent insight into what economics is all about; the notion
of choice is not stressed in older definitions of economics.
Sometimes, this insight yields rather clever definitions, as
in James Buchanan's observation that an economist is one who
disagrees with the statement that whatever is worth doing is
worth doing well. What Buchanan is noting is that time is
scarce because it is limited and there are many things one
can do with one's time. If one wants to do all things well,
one must devote considerable time to each, and thus must
sacrifice other things one could do. Sometimes, it is wise
to choose to do some things poorly so that one has more time
for other things.
One way to see the importance of scarcity is to examine
how various people have constructed utopias.
Copyright
Robert Schenk
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