Basic Economics: A Citizen's Guide to the Economy

By Thomas Sowell | Go to book overview
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Chapter I
What Is Economics?

To know what economics is, we must first know what an economy is. Perhaps most of us think of an economy as a system for [the production and distribution of the goods and services we use in everyday life. That is true as far as it goes, but it does not go far enough. The Garden of Eden was a system for the production and distribution of goods and services, but it was not an economy, because everything was available in unlimited abundance. Without scarcity, there is no need to economize -- and therefore no economics. A distinguished British economist named Lionel Robbins gave the classic definition of economics:

Economics is the study of the use of scarce resources which have alternative uses.

What does "scarce" mean? It means that people want more than there is. This may seem like a simple thing, but its implications are often grossly misunderstood, even by highly educated people. For example, a feature article in the New York Times of August 1, 1999 laid out the economic woes and worries of middleclass Americans -- one of the most affluent groups of human beings ever to inhabit this planet. Although the story includes a picture of a middle-class family in their own swimming pool, the main headline says: "The American Middle, Just Getting By." Other headings in the article include:

Wishes Deferred and Plans Unmet Goals That Remain Just Out of Sight Dogged Saving and Some Luxuries

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