Saturday, February 23, 2013

Economics is the study of the distribution of scarce resources.  When you hear, or read, "scarce resource" you might think of gold, silver, and other rare metals but the concept is more general than that.  From Scarce Resource the definition is a resource whose availability is less than its desired use.  The concept can be apply to potable water, clay, and even hours in the day.

In the United States we use market capitalism to distribute some scarce resources, goods, and services.  The idea is deciding how to distribute scarce goods and services is too complex to calculate but the markets closely approximates the best distribution by allowing people to make their own choices about which items they would rather have.  We hold the individuals feel themselves better off after a trade in a free market than they were before the trade.  Why would people trade things they think more valuable to themselves for things they think are less valuable?

Not all scarcity can be resolved through markets.  For instance there are only so many nice summer days in a year.  I know I would like more but I'm not going to get more than there are no matter how much I would be willing to spend for them.  Sure, I can schedule my vacations at times when it is more likely to be a nice summer day so I can fully experience them but I can't produce them on demand.

So there are the economic concepts of  public goods and private goods.  The main distinction is private goods are excludable however public goods are also non-rivalrous.   We focus on excludability because we are using market capitalism to distribute goods and there's no way to make a market when goods are not excludable.  I want to focus on non-rivalrous goods.

While some websites require subscription for access most of the websites we reference every day are basically free for us.  As long as the sufficient bandwidth we can think of them as non-rivalrous because my consumption doesn't (significantly) reduce your ability to consume them.

One of the major problems with market capitalism is the monitization of demand.  Even though all of us have some shared basic needs such as food, clothing, shelter, etc.  The monitization of demand means the desires of the wealth can overshadow the needs of the poor in the markets.  The markets are signaled by the effective demand produced by money.

If we want to create a better life for all we need to increase the market signals for goods and services needed by people and focus our production and consumption of goods and services beyond our needs on non-rivalrous goods.  We can still consume rivalrous goods but we should try to consume the least scarce of them for private gain and use the most scarce in producing the greatest good for the most.

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