The many utopias designed by reformers, dreamers, and idealists have two things in common: they have no room for economics and they do not work in the real world.
The reason utopias do not need economics is they assume away the problem of scarcity. (Economists will tell you that it is also the reason they do not work in the real world.) Some of them take the "Star-Trek" approach and eliminate scarcity by assuming abundance. This approach envisions a technological society that is so advanced that all material needs and wants will be met. In the Star-Trek future this is done with the replicator and the holodeck. If one wants a cup of coffee or anything else, one merely goes up to the replicator, orders it, and it magically appears. The holodeck allows one to have any experience one wants. Because everything is abundantly available, there would be no need to buy or sell or work.1 The most important example of the abundance approach to utopia is Marxism. Despite the denials of many of his followers, Karl Marx was utopian and did assume abundance.2
The alternative way to eliminate scarcity is the way of Buddha, which is to eliminate want. If a society could produce citizens who wanted only the bare necessities and who joyfully labored for a few hours each day, it could produce enough to meet all the wants and needs of its citizens. Thus there would be no need for buying or selling; people would just take what they needed. Examples of utopias based on this way of eliminating scarcity are those of Thomas More and B. F. Skinner.
Few economists worry about the abolition of scarcity and their resulting unemployment. There is so much poverty in the world today that visions of abundance seem far-fetched. In addition, people may be genetically wired to care about items that by their very nature can never be abundant, such as status. Not everyone can have high status, just as not everyone can be above average in height or intelligence. The mathematics of averages says that if some are above average, others must be below.
Next time you see a utopian vision of the future or you read a utopian novel, try to figure out which method was used to eliminate the problem of scarcity.
This section and the previous two sections have given you the standard introduction to economics. Another way of beginning the course is to follow the lead of Steven Landsburg, who began
his book Armchair Economist: Economics & Everyday Life with the statement:
Most of economics can be summarized in four words: "People respond to incentives." The rest is commentary.
Landsburg's opening may be easier for economic novices to understand, but it seems very different than the standard scarcity-choice introduction of most textbooks. However, if we examine it closely, we see that it is based on the insights of the scarcity-choice definition.
To an economist the statement that people respond to incentives is the same as the statement that people respond to costs and benefits. Economists assume that people do not act aimlessly; they act with purpose. People have goals and they pursue those goals as best they can with what they have. An activity or good has benefit if it moves a person closer to achieving a goal. When the benefit of something rises, rational people use or do more of it.
What about costs? The cost of anything is what you have to give up to get it. Often this is measured in money. When we say that something costs $5.00, we mean that when you spend $5.00 to get the item, you cannot use that $5.00 to purchase some other item. Cost may also include time. If to get an item one must pay $5.00 plus wait fifteen minutes, the cost of the item includes both money and time. When the cost of something rises, rational people use or do less of it.
Why is there any cost at all? Costs exist only when we have to give up one thing to get another. Without these tradeoffs due to scarcity, there would be no need to make choices. A world without choice would neither have nor need incentives. It would also be a world without economics.
Most economists believe that economics is a science. Next, we see what that means.
1 Of course people still have jobs in the Star Trek series, but this is only because the writers are inconsistent. They do other weird things, such interbreed alien species, which realistically would have less DNA in common than a human and a mosquitoif indeed an alien would even have DNA.
2 This position is argued convincingly by Alec Nove in The Economics of Feasible Socialism Revisited, 2nd Ed. (HarperCollinsAcademic, 1991).
Copyright Robert Schenk