Fascinating economy. Larissa Zaplatinskaia
have seen that economics is about producing goods and services for people to consume. You have also seen that production requires resources, as well as decisions about the allocation of these resources. Finally, you saw that goods and resources need to be distributed from where they are produced to where they are used. If you put all of this together, you should have a good idea of what the game of economics is about.
Goals are a big part of economics. They help us avoid uncertainty. Goals also help us make crucial decisions.
Imagine you are playing softball. You know the rules, but you still have many decisions to make. Should you pitch a curveball or a fastball? Should you swing at a ball, or wait for a better pitch? Should you steal second base, or wait on first? Without a goal, it would be hard to answer these questions.
If you have a goal, the answers are obvious. If your goal is to win the game, you know what to do – throw your best pitch, try hard to hit the ball, and steal as many bases as you can without getting thrown out. These are the things that players need to do to win.
Economic Goals
In the game of economics, you need goals to avoid confusion and to know what to do with yourself. Different people have different goals, however. You may think the only goal in economics is to make money, but there are many different goals in economics.
Different economic goals affect how people approach making decisions in the game of economics. If your goal is efficiency, it is likely that you are going to allocate resources for the production and distribution of goods and services differently than a person whose goal is security or freedom.
Read through the list to see the different economic goals that people pursue. Each will be defined in the coming pages.
Goals for Playing the Game of Economics
1. Efficiency
2. Growth
3. Security
4. Equity
5. Freedom
Efficiency, Growth, and Security
The first three economic goals – efficiency, growth, and security – are goals that make a lot of sense. But that does not mean that everyone agrees these are the proper goals to pursue when deciding how to allocate resources.
• Efficiency refers to the use of resources in a manner that gets as much out of them as possible. Efficiency is a goal producer have, to provide more goods and services for society without using more resources.
• Growth means increasing the size, number, or output of goods or services. It makes sense to want growth, because in the economy, growth means more goods, more jobs, and more money.
• Security is protection against risk or danger. Because life is uncertain and bad things can happen, the economic goal of security encourages us to lessen the dangers we face.
It is Not Fair
Another economic goal is equity. Equity means fairness; It is the notion that everyone should be treated equally. If a game is not played fairly, then the outcome will be unfair. When a game is fair, it has equity.
Still, equity can be a tricky concept. Different people might have different ideas about what is fair. Also, it is not always clear what is fair in a particular situation. Is it fair that one person has a lot while someone else has nothing?
Questions of fairness are not always easy to answer. Maybe the person with less does not deserve more. Consider the fable of the ant and the grasshopper.
The Ant and the Grasshopper
The ant worked hard all summer, building a house, and stocking up on supplies for the winter. The grasshopper danced and played the summer away. When the winter came, the ant had plenty of food to survive. The grasshopper had no food and died of starvation.
What is Fair?
Competing ideas about what is fair is a common problem when pursuing the goal of equity. This makes equity a problematic goal for economics. Although equity is a good thing to pursue, it is rarely obvious how to achieve it.
At the end of the story on the previous page, the grasshopper had nothing, and the ant had plenty. Is that fair? It depends on your perspective.
View the Ant and the Grasshopper to hear each side of the story, from the ant’s industriousness to the grasshopper’s cluelessness.
I’m sad that the grasshopper did not know what to do to prepare for winter, but I do not think it is fair to take food from me to help keep him alive. That would be rewarding the grasshopper for his lack of foresight and punishing me for my industriousness. It is not fair to punish someone for doing the right thing.
I do not think it is fair that I should have to starve. I have never seen the winter before, so I did not know what would happen. No one told me I would have to build a house and gather supplies. Do I deserve to die in the cold because I did not know about the harsh conditions I would have to face? Since I did not know, it is not fair to let me die. Would not it be fair to take some of the ant’s food to help me out?
Let Freedom Ring
Another important economic goal is freedom. Just like equity, however, freedom is a tricky concept. It can mean different things to different people.
Freedom in economics is defined as the absence of an obstacle or constraint. But what is the obstacle or constraint, and how can it be removed? Different obstacles and constraints present themselves to different people in innumerable situations.
The Statue of Liberty represents freedom, but not everyone defines freedom the same way.
The Two Faces of Freedom
It is normal for people to have different ideas about freedom. Freedom is the absence of an obstacle, but the obstacles people face are not always the same, so their ideas about freedom can be very different.
For a teenager, one obstacle might be rules set by one’s parents. For a parent, an obstacle to freedom might be his or her struggle to earn money for the family.
In the game of economics, different ideas about freedom lead to different ways of looking at the allocation of resources. If you think of freedom in terms of people making their own choices, you might believe that producers should get to decide how goods and services are produced without any constraints. But if you think of freedom as the absence of economic struggle and need, you might believe the government should tell the producers what to make and how much to charge so that everyone’s basic needs can be met. These different views of economic freedom lead to different ideas about how an economy should function.
Conflict Over Goals
With goals that are sometimes incompatible, economics can lead to conflict. Do you want efficiency, growth, security, equity, freedom, or some combination? You need to have some goals, but someone else will inevitably have different goals. No matter what you want, there are bound to be other people who want something else. This can create conflict.
This means that there is more to economics than the allocation of resources for the production and distribution of goods and services. Economics is also about setting goals that affect how these allocation decisions are made.
We All Need Goals
You cannot play a game without goals. How else can you make important decisions? But people often disagree about the goals they have