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Unformatted text preview: ECN 100 (S07) – Lecture notes – Prof. TERZI Page 1 of 49 1. T HE ECONOMIC DIMENSION IN HUMAN LIFE There is an economic dimension of human life that can be recognized at two levels : AT THE INDIVIDUAL LEVEL , it is the activity aimed at the acquisition and the use of means (resources) aimed at personal goals (which can be exemplified by Robinson Crusoe on the island)— WHAT , HOW MUCH , AND HOW TO PRODUCE WITHIN SOCIAL RELATIONS , it is the activity of transferring acquired means (resources) to others, which entails some kind of “obligation” (a servant relation within a hierarchical system; a gift- giving-with-reciprocity relation within a cooperative system; a legal debt contract relation within a market system)—“ FOR WHOM ” TO PRODUCE In this latter sense, there exists an economic dimension of society . Economic activity of the individual . Within the sphere of the individual, the core of the economic dimension refers to those activities that involve the acquisition and use of material resources , such as food, dwellings, utilities, or other conveniences. In this respect, a question humans must deal with is what use of resources will result in the most desired outcomes. This is the problem of production: what materials can be turned into useful resources, what output shall be produced with available resources, and how best can inputs be used to attain a desired output. To approach this problem, humans use search, inspection, speculation, planning, and creativeness. The scope of these activities is constrained by the limit bound of time and, at any given point in time, by humans’ current knowledge of the surrounding environment, and their acquired abilities. Traditionally, economics has also included the amount of available resources as a constraint to production activity, but this statement should be rejected when one considers that a given material becomes a “resource” depending on knowledge and ability. Humans do not face the constraint of a fixed amount of available resources: over the time used for addressing the problems of how to use resources, environment is not given, and the offer of resources, as well as the definition of what a resource is, may change in quantity and quality. This means that the constant elapsing of time is a factor that modifies knowledge, and it is important that this element is captured, not obscured, by the economist’s eyeglasses. This basic question of the individual facing an economic problem can be exemplified by the classic example of the survivor on an island, the “Robinson Crusoe economy”. The survivor must “solve” an economic ECN 100 (S07) – Lecture notes – Prof. TERZI Page 2 of 49 problem, i.e., what , and how to produce , as well as how much . Although apparently simple in its logical configuration (elegantly captured by modern microeconomic theory), the problem is complex in a real world environment, where resources are not naturally labeled as such (and must be discovered and developed...
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This note was uploaded on 04/19/2008 for the course ECON Econ 100 taught by Professor Terzi during the Spring '07 term at Franklin CH.
- Spring '07
- The Land