Ever wonder why so many teachers regard economics with
varying degrees of fear and trepidation? Here's part
of the reason: P = f(L,C,F) = A(1 - e-.405L)(1
- e-.105C)(1 - e-.693F). Or
maybe the answer lies in titles such as this one from
a journal of economic research: The Identification
of Structural Vector Autoregressions.
The specialized language of economics may make it easier for economists to communicate with one another, but like all other professional patois, it can intimidate nonprofessionals. An enigmatic equation or a jargon-packed sentence is sometimes all it takes to dissuade an already overburdened teacher from introducing economics to the classroom.
And that's unfortunate because mastering the basics need not be intimidating. The greatest challenges a teacher will face are identifying the major concepts and finding enough time in the day to cover them.
The National Council for Economic Education had these concerns in mind when it developed A Framework for Teaching Basic Economic Concepts. Although it might not solve teachers' chronic time shortage, the Framework goes a long way towards helping teachers focus on the economic fundamentals their students need in order to better understand the business of everyday life.
The team of educators and teachers that wrote the Framework developed the following set of fundamental economic concepts for use at the high school level. The concepts were later incorporated into the Voluntary National Content Standards in Economics.
Most people who grow up in a market economy seem to have an intuitive sense of what the concepts mean. Any kid who has ever thought of opening a lemonade stand probably has a gut-level understanding of the concept behind "opportunity cost and trade-offs," but even many adults may not be familiar with the actual terms. In an effort to help remedy the situation, each upcoming issue of The Ledger will carry a short piece on one of the concepts from A Framework for Teaching Basic Economic Concepts. This issue looks at Concept 1, Scarcity.
"Scarcity" is a simple concept. In fact it's so simple that there's a tendency to forget how central it is to the canon of economic thought.
Leonard Silk, author of Economics in Plain English, gets to the heart of the matter with an admirable economy of words. "[T]he economist sees scarcity around him everywhere, every day, in little things as well as big - in the strain on family budgets, in people's conflicting wants for more income and less work," writes Silk. "Scarcity is really what economics is all about. Scarcity and choice."
Here is the basic problem: We live in a world of limited resources. There's a gap between what people want and the level of resources available to satisfy those wants.
That's all there is to it. Yet such a simple concept is at the heart of many complex economic questions. What is the best way to allocate a scarce resource? By price? By seniority? By lottery? By need?
Is there only one method of allocation suited to every possible scarce resource? For example, tickets to a hit show are scarce. The accepted way of allocating them is by price. If you are willing to pay $70 or $100 or even more, you can get your hands on one of the scarce tickets. The choice is yours. You can buy the tickets or not.
But what if we are talking about medicine? Suppose there's a new medicine on the market that will arrest the progress of a killer disease, but a six-month supply costs more than most people earn in a year. Is it "right" to allocate the medicine by price, so that only the wealthy will have access to it? Where's the choice in that? It's not the same as choosing to do without expensive theater tickets.
These questions, and so many others, stem from the concept of scarcity.