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THE WORLD'S LIMITED RESOURCES

 

If there were enough of everything we wanted we should not need to bother how each of us gets a share, we don't for instance, count the number of times we breathe, because there is enough air for everybody. But most of the things we want are not free for us as air and we have to find some way of deciding how much each of us can have.

Scarcity is a permanent characteristic of all human society and is the basis of the problem that faces, and always has faced, the human race whatever its form of organization. It springs from the fact that material resources of the world are limited and that our ability to make use of these resources is even more limited by our ignorance. Everything that we need to satisfy our wants has to be derived finally from two sources — the natural resources that are available and the human ability to make use of them. As our knowledge grows and we increase our skill, we can exploit more and more of opportunities that nature offers to us. The increase in communications, for example, has brought within our reach the resources of vast areas that were closed for us before; the development in scientific knowl­edge has made accessible many valuable minerals from depths below the earth's surface that could not be reached by earlier generations. But whatever the rate of development may be there is, at any one time, a limit to the total of what can be produced.

Very early in our childhood we are taught that you can't have your cake and eat it, and this is only put­ting in another way the fact that you can't use the same resources to produce two separate things at the same time. If you want to grow cabbages on a bit of land you cannot also use it for a tennis court; if you spend a couple of hours in a cinema yon can't also use them for digging the garden or painting a picture. You have to choose which of the many possible uses to which you could put the same materials or the same time is the one you prefer, in the knowledge that the price you pay consists of all the other alterna­tives you have thereby given up. This inescapable fact has nothing to do with any particular form of eco­nomic and social organization; it is part of human experience. As far as we can judge, there is no limit to wants; in fact, the growth of civilization is largely the development of new wants or new kinds and, vari­eties of old wants — physical, intellectual, emotional, esthetic, spiritual.

 

Text 3

 

1. Read the text for general comprehension.

 

METHODOLOGY

 

What do economists do? What are their goals? What procedures do they employ? Economists derive economic principles which are useful in the formulation of policies designed to solve economic problems. The procedure employed by the economist is summarized in Figure 1-1. The economist must first ascertain and gather the facts which are relevant to consideration of a specific economic problem. This task is sometimes called descriptive economics. The economist then puts this collection of facts in order and summarizes them by "distilling out" a principle, that is, by generalizing about the way indi­viduals and institutions actually behave. Deriving principles from facts is called economic theory or "economic analysis." Finally, the general knowledge of economic behavior which economic principles provide can then be used in formulating policies, that is, remedies or solutions, for correcting or avoid­ing the problem under scrutiny. This final aspect of the field is sometimes called "applied economics" or policy economics.

 

POLICIES Policy economics is concerned with controlling or Influencing economic behavior or its consequence.

 

 

PRINCIPLES OR THEORIES Theoretical economics involves generalizing about economics behavior.

 

 

FACTS Descriptive economics is concerned with gathering The facts relevant to a specific problem or aspect of the economy.

 

FIGURE 1-1

 

The relationship between facts, principles, and policies in economics. In studying any problem or segment of the economy, the economist must first gather the relevant facts. These facts must then be systematically arranged, interpreted, and generalized upon. These generalizations are useful not only in explaining econom­ic behavior, but also in predicting and therefore controlling future events.Continuing to use Figure 1-1 as a point of reference, let us now examine this three-step proce­dure in more detail.


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