Scarcity and its implications

Scarcity defines the economic way of thinking

Scarcity is a simple idea, yet it has major implications.

If, as individuals or as a society, we have multiple objectives, and if our desires for these goals exceed the time and resources that can be used to attain them, then given that these resources can be used in different ways it matters how we allocate them. It matters because our goals differ in their significance.

Robbins
Lionel Robbins, who taught at the London School of Economics, defined economics as “the science which studies human behaviour as a relationship between ends and scarce means which have alternative use” in a book published in 1935.

We have to choose, we have to recognize the terms of the trade-offs between the choices available to us, and we have to do this in a way that gets us as much as we possibly can from the scarce resources available to us.

The economic way of thinking gives us guideposts for making these choices, most notably that we should pursue an objective up to the point that the additional benefit we get from taking an extra step toward it just equals the additional cost in all the things we have to give up in making that step.

Economics certainly should not inform all public policy discussions.

But when it should and doesn’t, the decisions made are usually done from an overly short-term perspective, are not mutually consistent, generally have hidden or unintended consequences, and are not sustainable in the long-term.

In the next two lectures of our course Economics for Everyone we detail the logic of scarcity, the rules it implies for maximizing our social benefit, and the pitfalls that sometimes confound policy makers. Scarcity also takes us toward a discussion of an important policy, “Free Trade,” and our discussion also helps us highlight some of the blind spots of simplistic economic reasoning.

Download the presentation for Lectures 2 and 3, but if you want to prepare in an entertaining way listen to Billy Bragg sing out his thoughts on Free Trade, a 2010 song from Britain foreshadowing many of the debates that have motivated recent American policies.

Here are the lyrics, but I’ve added a quote from another famous economist, David Ricardo, who has a very different view. Our goal is to understand these two competing perspectives on the benefits and costs of Free Trade.

UNICEF gives Canada a passing grade, child poverty actually fell during the recession … or did it?

UNICEF Children of the Recession Innocenti Report Card 12 CoverLet’s see if we can make sense of this.

UNICEF has just given Canada a passing grade, mind you barely a pass, when it comes to the fight against child poverty. In a report released today it claims that 21% of Canadian children live in poverty, nothing to brag about, but at least this is lower than the 23% who were poor just before the recession started in 2008.

Interestingly, Statistics Canada also says child poverty is down, but that only 8.5% of kids are poor. However, at the same time it says child poverty is up, reaching almost 14%. And finally, if this is not confusing enough, it says that, yes, 14% of kids are poor, but this is down since 2008.

Up or down? One-in-five kids poor, or one-in-seven, or maybe even as few as only one-in-eleven?

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UNICEF reports that child poverty in the US was held in check during the Great Recession

UNICEF Children of the Recession Innocenti Report Card 12 CoverIt is an understatement to say that the US welfare reforms of the 1990s were intended to give a little spring to the social safety net.

The intention was much more radical, involving a major make-over of income support, and turning what was imagined as a net ensnarling many Americans behind a welfare wall, into a trampoline, a springboard that would incentivize work and allow them to ride a wave of prosperity to higher incomes that would lift their children out of poverty.

But this is hardly what is needed when times turn bad.

The only virtue of a trampoline when employment falls by more than 8 million, when the unemployment rate more than doubles, and when median incomes drop by over $10,000, is that it catches you on the way down.

American families needed a safety net during the Great Recession, and a report released by UNICEF on child poverty suggests, surprisingly enough, that is exactly what they got.

The rate of child poverty, in spite of all the macroeconomic turbulence of the last six years, has hardly budged. This is in large measure because of discretionary policy changes on the part of the Federal government that quickly turned the clock back to the welfare system of the 1980s.

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America’s children are the silent victims of the Great Recession

Children at risk a red and green water colour

The Great Recession has disrupted the lives of families and their children in an unprecedented way.

It has changed everyday life in some ways that can be measured by money, but in others that cannot, and at the extreme it has even led to a six-fold increase in the risk children will be physically abused.

Lost jobs, falling incomes, and foreclosures will likely compromise the capacity of children to become all that they can be, with the effects of the recession echoing not just across years, but also across generations.

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Citizenship as a privilege or as a right: should children be given the vote?

Article 12

At the TEDxWaterloo 2013 Event called chasingHOME I extended an invitation to participate in a conversation about a “crazy” idea: children should be given the vote. Here is the text of my presentation.

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The right way to think about social and economic rights

The Universal Declaration on Human Rights, which we celebrate every December 10th, offers both a powerful and beautiful statement of what it means to be human and the goals we should pursue as a society. But the Declaration is an incomplete guide to designing the programs to meet these goals: it offers inspiration to advocates, but not a guidebook for pragmatists.

Pragmatists and policy makers need to read the Universal Declaration through the lens of economists, rather than don the robes of lawyers.

Human Rights Day 2012, click to enlarge

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