Changes

The meaning of "goods and services" extends beyond our basic needs.  We do not '''''need''''' to go to a restaurant or a Yankees baseball game, or see a movie.  We do not '''''need''''' to buy ice cream in order to survive.  Sometimes people buy things like fancy clothes or cars in order to impress others.  These are things that people '''''want''''' beyond what they '''''need'''''.  And people work harder to obtain what they want for themselves, their children, and even to give to charity.

The meaning of "goods and services" extends beyond our basic needs.  We do not '''''need''''' to go to a restaurant or a Yankees baseball game, or see a movie.  We do not '''''need''''' to buy ice cream in order to survive.  Sometimes people buy things like fancy clothes or cars in order to impress others.  These are things that people '''''want''''' beyond what they '''''need'''''.  And people work harder to obtain what they want for themselves, their children, and even to give to charity.

So the meaning of "goods and services" goes far beyond what people need, and includes anything '''''they want and are willing to pay for'''''.  Note that not everything people want or need is something they are willing to pay for.  We all want air in order to breathe, but we are not willing to pay for air.  "Air" is not a "good or service."  We all want friendship too, but that's not something that can be purchased.  We all want the Yankees to win the World Series (well, not all of us do!), but we cannot directly buy that either.  At most we can buy tickets in exchange for watching the Yankees' play a game at their stadium.  That "service" by the Yankees is a form of entertainment, like a music rock concert or a movie.

So the meaning of "goods and services" goes far beyond what people need, and includes anything '''''they want and are willing to pay for'''''.  Note that not everything people want or need is something they are willing to pay for.  We all want air in order to breathe, but we are not willing to pay for air.  "Air" is not a "good or service."  We all want friendship too, but that's not something that can be purchased.  We all want the Yankees to win the World Series (well, not all of us do!), but we cannot directly buy that either.  At most we can buy tickets in exchange for watching the Yankees play a game at their stadium.  That "service" by the Yankees is a form of entertainment, like a music rock concert or a movie.

Now we are ready to define economics.  We do not have to use the vague term "social science" as Merriam Webster's dictionary did.  Our definition can simply be this:

Now we are ready to define economics.  We do not have to use the vague term "social science" as Merriam Webster's dictionary did.  Our definition can simply be this:

Money solves this inefficiency.  You accumulate dollars by doing work for someone who wants or needs it, and then use those dollars to buy the goods and services that you desire.  The person or company who receives your dollars can then spend it in yet another way.

Money solves this inefficiency.  You accumulate dollars by doing work for someone who wants or needs it, and then use those dollars to buy the goods and services that you desire.  The person or company who receives your dollars can then spend it in yet another way.

Money is sometimes a form of communication.  Donating money to a political candidate or a charity makes a statement.  Buying expensive clothes, a luxury car, or a showy house is like a form of speech too.  One of the wealthiest men in history, [[Andrew Carnegie]], wrote a book called the “Gospel of Wealth,” and then gave it all away before he died.  Carnegie Hall, the first 39 branches of the [[New York Public Library]], and Carnegie-Mellon University were just a few of his gifts.

Money is sometimes a form of communication.  Donating money to a political candidate or a charity makes a statement.  Buying expensive clothes, a luxury car, or a showy house is like a form of speech too.  One of the wealthiest men in history, [[Andrew Carnegie]], wrote a book called the “Gospel of Wealth,” and then gave away his entire massive fortune before he died.  Carnegie Hall, the first 39 branches of the [[New York Public Library]], and Carnegie-Mellon University were just a few of his gifts.

When asked how much more money people want, many say they would be happy with 20% more money than they have.  Remarkably, this answer is the same from the poorest to the wealthiest persons.  

When asked how much more money people want, many say they would be happy with 20% more money than they have.  Remarkably, this answer is the same from the poorest to the wealthiest persons.  

==Scarcity==

==Scarcity==

The term “scarcity” in economics refers to anything that is not free.  If a good or service costs something, even if only a penny, then it is "scarce" in economic terminology.  Almost every good or service you can think of is "scarce" for the purposes of economics.  There is a scarcity of gasoline, for example.  Gas costs money because its supply (in refined form) is limited, and the high demand for the limited supply drives up its price.  Drinking water is scarce also in some areas of the world, such as western states like Arizona and California.  It is difficult to think of goods or services that are not "scarce" in economics.  Air is an example of something that is not scarce.  It does not cost money, not even a penny, to benefit from air.  Its supply far exceeds the demand.

The term “scarcity” in economics refers to anything that is not free.  If a good or service costs something, even if only a penny, then it is "scarce" in economic terminology.  Almost every good or service you can think of is "scarce" for the purposes of economics.  There is a scarcity of gasoline, for example.  Gas costs money because its supply (in refined form) is limited, and the high demand for the limited supply drives up its price.  Drinking water is scarce too, because it does cost some money to obtain it.  It is difficult to think of goods or services that are not "scarce" in economics.  Here is a rare example of good that is not scarce: air.  It does not cost money, not even a penny, to benefit from air.  Its supply is almost infinitely greater than the demand for it.

Economics is about "scarce" goods and services, which is almost everything.  Economists would say that television shows are scarce, while most of us would not ordinarily say that.  Economists would say that junk food is scarce, while most of us would say there is too much it.  Economists would say that fatty foods are scarce, even though that sounds odd.  All these things cost money, and are not free (in the case of television, the "cost" to viewers includes the time they have to waste watching advertisements).

Economics is about "scarce" goods and services, which is almost everything.  Economists would say that television shows are scarce, while most of us would not ordinarily say that.  Economists would say that junk food is scarce, while most of us would say there is too much it.  Economists would say that fatty foods are scarce, even though that sounds odd.  All these things cost money, and are not free (in the case of television, the "cost" to viewers includes the time they have to waste watching advertisements).

The reason for the broad definition of scarcity in economics is to include any good or service that can be bought and sold.  If an item is so plentiful that everyone’s needs are fully satisfied, then there is no market to buy or sell it (e.g., air).  Once a price can be put on a scarce good or service, then some are not willing to pay for it.  Some people are not willing to pay the cost of a good or service that they would want for free.  They may be better off without it (e.g., fatty desserts at restaurants), but economists don’t care how scarcity may make people better off.

The reason for the broad definition of scarcity in economics is to include any good or service that can be bought and sold.  If an item is so plentiful that everyone’s needs are fully satisfied, then there is no market to buy or sell it (e.g., ordinary air).  Only those "non-scarce" goods are outside of the study of economics.

Goods that no one wants (i.e., there is no demand for them) are not scarce.  For example, a new deodorant that smells like a skunk would not be a scarce good.  You could charge nothing for it and your supply would still far exceed demand.  Toothpaste that turns your teeth yellow would not be scarce either.  How about hairspray that makes your hair fall out?  If the price of the good is always and truly free, then it is not scarce.   

Goods that no one wants (i.e., there is no demand for them) are not scarce.  For example, a new deodorant that smells like a skunk would not be a scarce good.  You could charge nothing for it and your supply would still far exceed demand.  Toothpaste that turns your teeth yellow would not be scarce either.  How about hairspray that makes your hair fall out?  If the price of a good is always and truly free, then it is not scarce.   

Based on the above, can you define “scarcity” now in just four words?  Here we go: scarcity consists of “wants greater than means.”  If the "means" (availability) is greater than the "wants" (demand), then the good is free and it is not scarce.  No one would pay anything, not even a penny, for it.

Based on the above, can you define “scarcity” now in just four words?  Here we go: scarcity consists of “wants greater than means.”  If the "means" (availability) is greater than the "wants" (demand), then the good is free and it is not scarce.  No one would pay anything, not even a penny, for it.

Based on our understanding of scarcity, we can now refine our definition of “economics”.  “Economics” is the study of ''scarcity''.  If there is no scarcity, then everyone has what they want.  There is no scarcity of air, so economics does not study the everyday uses of air.  But there is a scarcity of land and oil, so we do study how they are bought and sold.

Based on our understanding of scarcity, we can now refine our definition of “economics”.  '''“Economics” is the study of ''scarcity'''''.  If there is no scarcity, then everyone has what they want.  There is no scarcity of air, so economics does not study the everyday uses of air.  But there is a scarcity of land and oil, so we do study how they are bought and sold.

=== A Famous Dispute about Scarcity ===

=== A Famous Dispute about Scarcity ===