- This topic has 4 replies, 4 voices, and was last updated 10 years, 1 month ago by jmherbener.
February 14, 2013 at 6:55 pm #17624bnhinchmanMember
Professor Herbener, thank you for your earlier responses. They have helped immensely! I have another question:
What is the definition of Economics? I once read Thomas Sowell said, “The first lesson of economics is scarcity: there is never enough of anything to satisfy all those who want it.” I believe Mises spoke of this at the beginning of Human Action as well. Taking my old high school definition of economics, I would say it is the study of supply and demand in a world of scarce goods.
In considering the basis to the Law of Association, where there are more resources than people and thus every person has the ability to be an individual producer of some specialized labor for the goal of a certain (or possibly many) products, is it accurate of me to make a distinction between resources and goods?
I’m thinking of goods as commodities–either producer goods or consumer goods, which could not have come about without manipulating the resources in a certain way via labor. So when I hear that economics involves scarcity, am I right to assume it means scarce commodities or goods while contrarily our resources vastly outnumber the human population on the planet, which acts as a catalyst for the Law of Association?February 15, 2013 at 5:42 am #17625rtMember
Starting at minute 23 somewhere Joe Salerno speaks about goods, means and the preconditions for a good to be called a good.
Maybe this helps a little bitFebruary 15, 2013 at 7:54 am #17626bnhinchmanMember
Thanks Sons of Liberty. How far into the AE course are you? I love it so far. I’m on Prices.February 15, 2013 at 1:35 pm #17627swalsh81Member
I think you need to make a distinction between what economics means by scarcity and the common definition of scarcity. When economics talks about scarcity, it is not necessarily talking about something that there is a small amount of (the standard definition of scarce). In economics, scarcity refers to something that is not a general condition of human existence. Something that cannot be infinitely replicated. Something that, when you want it, it doesnt fall into your lap. Some things that, practically, come close to that are also not considered scarce: like air. And, of course, these would be things that you want as opposed to things you do not.
But lets take, for instance, as you suggested, something where “there are more resources than people and thus every person has the ability to be an individual producer of some specialized labor for the goal of a certain (or possibly many) products,” Lets say that the only means of production of this item (something that is to be consumer as opposed to research to develop new knowledge) is some non scarce resource and human labor. Even when this is produced, the product is still scarce because it requires something scarce (human labor) as a means of production. Labor must be economized and therefore all goods that are produced using human labor are scarce and must be economized.
Of course this is all not talking about the development of “recipes” which is the plan or method by which something is produced. A recipe is never consumed, never worn out and is used every time something is produced
I dont remember where I read this example but it fits here. I mentioned that air is not considered scarce, it is taken as a general condition of human existence on earth, But air conditioned air (heated or cooled depending on the season) is scarce as it requires other means that are scarce in order to produce it.February 15, 2013 at 4:15 pm #17628jmherbenerParticipant
Here is the classification system of goods in economics:
Circumstances of Action
1. General Conditions
2. Means (Goods)
**a. Directly Serviceable – Consumer Goods
**b. Indirectly Serviceable
****1. Producer Goods
********1. Land (Natural Resources)
********2. Labor (Human Effort)
******b. Produced – Capital Goods
****2. Media of Exchange
(After posting this I can see that it won’t indent. So I inserted the asterisks.)
All means are scarce. The law of association refers to the fact that surface area of the earth is (at least currently) greater than the human population has brought into use. In other words, there is idle land. If the human population grew past the point that every possible area on the surface of the earth was occupied with human activity, then there would be idle people. (Maybe future technology would allow human activity underground and underwater as well. In which case, human population would have to grow to surpass that limit as well.)
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