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Goals and Benefits

Economists assume that people have goals and act to obtain those goals. Economists are vague about the goals people have, though they expect that material advancement (for self or family) is important for most, and they say nothing at all about the source of goals or their desirability. Nonetheless, the assumption that people strive to obtain their goals as best they can, given the limitations that the world imposes on them, forms the heart of virtually all economic theory.

Goals are complex and often a bit fuzzy. Often, it is hard to see exactly what goal a person has. For example, there are many people who smoke but say they want to quit. Such people are at war with themselves. One part pulls them one way and another part pulls them in an opposite direction. In addition, people often do not know what it is that they want, or if they do know what they want, they may not know how to obtain it. Most of us want to be happy, but many of us are unsure what that means in terms of how we should act. People spend time searching for goals, and there are institutions, most notably organized religion, that try to convince people that certain goals are more desirable than others.

In the early part of this century, Frank Knight emphasized the instability of goals. He wrote:

"Wants...not only are unstable, changeable in response to all sorts of influences, but it is their essential nature to change and grow; it is an inherent inner necessity in them. The chief thing which the common-sense individual actually wants is not satisfaction for the wants which he has, but more, and better wants." 1

Knight argued that "[e]conomic activity is at the same time a means of want-satisfaction, an agency for want- and character-formation, a field of creative self-expression, and a competitive sport."2

These problems of defining goals have played little role in the way economists have gone about their business, and critics of economics say it is poorer as a result. Milton Friedman, one of Knight's students, states the way most economists proceed:

"Despite these qualifications, economic theory proceeds largely to take wants as fixed. This is primarily a case of division of labor. The economist has little to say about the formation of wants; this is the province of the psychologist. The economist's task is to trace the consequences of any given set of wants. The legitimacy of and justification for this abstraction must rest ultimately, as with any other abstraction, on the light that is shed and the power to predict that is yielded by this abstraction."3

People will consider as a benefit anything that moves them closer to the goal they are seeking. A businessman running a business will consider revenue as a benefit if his goal is to make a profit. A person striving for material advancement will consider more belongings a benefit. A father who wants his family to be happy will consider the joy of his child from a gift a benefit.

But economists are not content to be this general. They want to discuss it in mathematical terms.

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1The Ethics of Competition (Univ. of Chicago Press: 1976). p. 22.

2 Ibid. p. 42.

3 Price Theory: A Provisional Text (Chicago: Aldine Publishing Co., 1962) p. 13.

Copyright Robert Schenk