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The Economic Problem
The Economic Problem
All societies face the economic problem, which is the problem of how to make
the best use of limited, or scarce, resources. The economic problem exists
because, although the needs and wants of people are endless, the resources
available to satisfy needs and wants are limited.
Limited resources
Resources are limited in two essential ways:
What to produce?
Societies have to decide the best combination of goods and services to meet
their needs. For example, how many resources should be allocated to
consumer goods, and many resources to capital goods, or how many
resources should go to schools, and how many to defence, and so on.
How to produce?
Societies also have to decide the best combination of factors to create the
desired output of goods and services. For example, precisely how much land,
labour, and capital should be used produce consumer goods such as
computers and motor cars.
economic problem
Definition
A theory that scarcity exists in the sense that only finite and insufficient resources are
available to satisfy the needs and desires of all human beings.
The fundamental economic problem then faced by human society
and business operators is how to allocate scarce resources to the provision of
various goods and services within the economy.
There has been a long-standing connection between economics and history. Most major
historical events have an economic basis to them.
In looking at the major wars fought since the 1890s, economics has played a key role in the start
of the war. The United States wanted to become a world power in the 1890s. We were looking
for a war that would lead us to gain colonies. By having colonies, we could get stronger
economically. Our businesses would benefit. Thus, we went to war with Spain in 1898.
In World War I, Germany wanted more land. They wanted colonies for reasons very similar to
why we wanted colonies. They knew winning a war would be good for their businesses and
economy.
There is some evidence that suggests the United States joined World War I so our businesses
could benefit. The Nye Committee came to this conclusion after explaining why we joined the
war.
Business leaders have opposed laws that allow unions to form. Business leaders believe unions
will ask for more money and benefits. They believe this will hurt the company economically.
Thus, business leaders have supported laws that curtail collective bargaining, make it harder for
unions to exist or form, and that require people or business to reveal to whom a person or
business is making political contributions.
Slavery was based to a degree on economic factors. Southerners believed they would lose money
if slavery ended, and they had to pay the workers on the farms. Southerners argued that ending
slavery would be economically a disaster for the South. Economics has always been tied to
history.
I'm not sure as to the nature of your question. One could ask how economic activity influences the
practice of philosophy, i.e. the economic conditions for the practice of philosophy. One could also
ask about how philosophy informs the discourse of economics or about the philosophical
assumptions of economic discourse. One could also ask how the discourse of economics has
influenced philosophy.
In any case, Marxian philosophy has alot to say about the relationships between philosophy and
economic activity and thought. For example, in volume one ofCapital Marx gives an account of the
nature of commodities, exchange value, and money wherein these things are disclosed as
profoundly metaphysical. In other words, Marx suggests that something as "natural" as the exchange
of goods can enact a particular metaphysics. Moreover, Marx and Marxists after him have sought to
critique various philosophies on the grounds that they reflect historical-economic categories rather
than timeless or natural truths. For example, the vision of history according to Hegelian idealism for
which history is understood as the movement of geist (or spirit) and not the result of human behavior
is analyzed as true insofar as it reflects an actual economic development wherein the movement of
capital for its own sake determines the human condition, but false insofar as it takes this perverse
inversion to be a timeless truth.
I'm hesitant to recommend any texts not knowing where you are coming from... in any case, Robert
Paul Wolff has short, readable consideration of Marx's analysis of the metaphysics of capital
called Moneybags Must Be So Lucky: on the Literary Structure of Capital. Chapter one of Ferruccio
Rossi-Landi's Language as Work & Trade: a Semiotic Homology for Linguistics &
Economics suggests the relevance of Wittgenstein's late philosophy in relation to political economy
and semiotics, and vice versa. Max Horkheimer's essay Traditional and Critical Theory is an
important explication of Marxian philosophy's critique of traditional philosophy in relation to
economics. Jean Joseph Goux's Symbolic Economies: After Marx and Freud is a difficult but
provocative structural analysis of the relation between Marx's analysis of exchange and other
symbolic economies.
Sociology and Economics as social sciences have close relations. Relationship between the two is so
close that one is often treated as the branch of the other, because society is greatly influenced by
economic factors, and economic processes are largely determined by the environment of the society.
Economics deals with the economic activities of man. It deals with production, consumption and
distribution of wealth. The economic factors play a vital role in the very aspect of our social life. Total
development of individual depends very much on economic factors. Without economic conditions,
the study of society is quite impossible. All the social problems are directly connected with the
economic conditions of the people. That is why Marshall defines Economics as "on one side the study
of wealth and on the other and more important side a part of the study of man."
In the same way Economics is influenced by Sociology. Without the social background the study of
Economics is quite impossible. Sociologists have contributed to the study of different aspects of
economic organisation. Property system, division of labour, occupations etc. are provided by a
sociologist to an economist.
The area of co-operation between Sociology and Economics is widening. Economists are more and
more making use of the sociological concepts in the study of economic problems. Economists are
working with the sociologists in their study of the problems of economic development in
underdeveloped countries. Combined efforts of both the experts may be of great practical help in
meeting the challenges.
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Sedef Sen
(ssen@kastamonu.edu.tr)
(Kastamonu Üniversitesi)
Registered author(s):
Sedef Sen
Abstract
Economics is a science which is constantly progressing and interacting with other
sciences. Studies in the economics literature discuss how people display a behavior in
the economic decision- making progress. Psychology is a science which explains
behavior of people and it cannot be ignored that psychology has a profound effect on
economics. Human psychology and behaviors show complex structures, stereotyping
people as indicating homogeneous behavior is criticized by many academics and
researchers. In this study, it is examined how human psychology guides people when
they make economic decisions and the purpose of this research is to analyze how the
relationship between economics and psychology has progressed and to explain
behavioral economics in this framework.