Bill Polley has two very interesting posts on scarcity, specifically its usefullness in defining what "economics" is all about. From his first post:
In a slightly different vein is this little title hoisted from a syllabus from one of my grad school courses back in the day. From memory (I'll hunt around for the actual copy to make sure I got it right), it was something like this:
Macroeconomics: A study of allocative (in?)efficiency
I've always liked that one. Then there is the definition that I have used for quite a number of years in teaching macro and micro principles. To my knowledge it is not in use anywhere else in precisely these words. I first put it on paper as a grad student and have used it ever since, maybe changing a word or two over the years. I was inspired to write this while trying to put the familiar "circular flow" into words.
I'm not sure that would pass my smell test because the obvious question is "what is being allocated and why?"
Economics is the study of choices made by individuals, how markets coordinate those choices, and how governments influence those choices.
See how it reflects the circular flow that is part of nearly every textbook description of economics? Like Heyne, Boettke, and Prychitko, I give individual choice top billing in my definition. I dislike definitions that put it in terms of how "society chooses". Society doesn't choose. People choose. How those decisions are aggregated matters immensely.
This point about individuals is one I make at various times in Micro Principles: people make decisions among alternatives. What we observe as what "society" has done is little more than what has emerged from individual choice. But more to the point of this post, Bill writes in his second post:
Michael Mandel responds with a comment on his blog that reveals the point he really wants to make.
But I'm just wondering whether "constrained optimization" or scarcity is really the most useful or interesting angle to approach economics with. Right now I have access to far more information, at a zero marginal money price, than I can ever consume (trust me...we in the MSM are living with the flip side of this right now). I could in theory set this up as a constrained optimization problem--time spent online versus time spent working. But solving the constrained optimization problem never would have shown me that blogging, say, or wikipedia, would be useful ways of organizing the flood of information.
Granted, information and knowledge do not seem to be subject to diminishing returns over time, but information is not the only thing that people make choices over. Time use, the means of production, whether to sign this player or that player, whether to eat out or cook at home, whether or not to drink tonight and have a hangover tomorrow etc. all are, inherently, decisions that involve making choices over alternatives: i.e. under conditions of scarcity of some sort. The fact that people face choices over scarce things underscores that people respond to incentives - an important point that should be pointed out in Principles courses. If I choose this then I can't have that: the basis of opportunity cost.
So the key points that I try to get across to my students when defining the term "economics" are twofold:
Economics is a social science: economists study human behavior (why people - individuals - do the things they do)...
Because this isn't sufficient (it also describes sociology, psychology, anthropology, political science, etc.) I add:
under conditions of scarcity from the individual's point of view
to a. diffferentiate it from other social sciences and to b. point out an important part of what we study in one way, shape, or form. This doesn't mean that we can't get across points on topics like voluntary trade, the role of private property (and the role of respect for), what capitalism is, and how all these things lead to higher standards of living. That all fits in well with what Stephen Karlson referred to as "standard issue economics."