We have to deal with a whole range of economic problem. You may have seen TV programmes about the misery of unemployment and poverty; you may have read about the difficulties caused by inflation or heard politicians discuss exchange rate crises on the breaking news. Despite this extensive range of issues, which economist are trained to consider, they often talk about the economic problem. This is the fundamental problem from which all others arise. This is the fact that we have scarce resources to satisfy our limited wants. As a result of this problem, which is sometimes called the problem of scarcity, we have to make choices, and it is the task of the economist to explain and analyze the nature of choice facing economic agents, such as consumers, producers and governments.
The economic problem is scarce resources in relation to unlimited wants. Because the basic economic problem exist, societies need to confront three interrelated questions. These are:
1. What to produce?
Because we cannot produce everything, we need to decide what to produce and in what quantities. We have to choose, for example, whether to produce lots of goods and services, such as food, clothing and vehicles, to improve our standard of living, or whether we need to produce lots of military hardware to improve our defences.
2. How to produce?
This question arises from the basic economic problem that, since resources are scarce in relation to unlimited wants, we need to consider how resources are used so that the best outcome arises. We need to consider how we can get the maximum use out of the resources available to us. It should be considered when deciding how to produce. It may be true, for example, that through slavery or forced labour we could produce more goods and services in an economy, but there is a moral objection to such arrangements. Similarly, crop yields could well be increased through the introduction of genetically modified plants but this may lead to damage to the ecosystem. The decision to maximize output and satisfy more wants would need to consider the full impact on the environment and any potential long-term health risks.
3. For whom to produce?
Because we cannot satisfy all the wants of all the population, decisions have to be taken concerning how many of each person's wants are to be satisfied. On a broad level we need to decide whether everyone is going to have more or less an equal share of what is produced or whether some will have more than others. In some economies there are delibrate attempts to create a more egalitarian society through policies that re-distribute wealth and income from the rich to the poor. This could be through the adoption of progressive taxation systems. In other economies there are no such policies and inequalities of wealth and income, usually based upon inheritance, remain extreme. In answering this question, moral aspects of decision making again become important.
Source:
Colin Bamford, Keith Brunskill, Gordon Cain, Sue Grant, Stephen Munday, Stephen Walton, Economics As Level and A Level, Cambridge University Press, 2002
No comments:
Post a Comment