Economic Growth Does Not Eliminate Scarcity

by Don Boudreaux on June 26, 2011

in Complexity & Emergence, Economics, Energy, Growth, Myths and Fallacies, Reality Is Not Optional

The understandable question arises: if resources are not necessarily finite in economic terms, are resources therefore not scarce?

No.  Resources will always be scarce.  A thing is not scarce if and only if that thing is instantly and fully available without requiring of each and every consumer of that thing any choices or conscious actions directed at acquiring that thing.  Some of the non-scarce things that are useful to human beings are breathable air and gravity.

Salt was once a precious commodity – so precious that salaries in ancient times were sometimes paid in salt.  Today salt is much more abundant than it was in ancient times; the economic supplies of salt are today much greater than they were in the past.  But salt remains scarce today, just as it was scarce in ancient times.  Even today, salt is not immediately and costlessly available to each and every person who wants it in whatever quantities each and every person would want it if each and every person were freed from the necessity of expending any effort or resources to acquire salt.

One helpful economic heuristic devise is the production-possibilities curve.  (You’ll find several images of this curve here.)  The production-possibilities curve (or “frontier”) shows that, for an economy operating on the curve, to get more of good X in a given period of time requires producing fewer units of good Y – for producing more of X requires that more resources be devoted to the production of X, resources that, in the framework of the production-possibilities curve, must be removed from the production of good Y. To produce more guns today means producing less butter today.

Guns and butter are scarce because to get more of one means giving up some of the other.

But over time the production-possibilities curve can (and, especially over the past 200 years in the capitalist world, does) shift outward.  Combinations of quanties of X and Y that were earlier impossible to produce become possible to produce.

A well-recognized cause for a ‘shifting-out’ of the production-possibilities curve is an increase in the supply of resources.  The brilliant scientist in my earlier post who figures out a low-cost way to quadruple the amount of energy extracted from each ounce of petroleum makes possible an increase in the quantities produced of both X and Y.  Yet goods X and Y both remain scarce – to get more of one requires sacrificing some of the other.  And petroleum, too, remains scarce: acquiring more of it requires sacrificing the production (and consumption) of other goods and services that could have been produced were not resources used instead to bring more petroleum to market.

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DG Lesvic June 26, 2011 at 1:39 pm

This is the first time I’ve seen you use the anti-economics device of curves.

I hope it will be the last.

Don Boudreaux June 26, 2011 at 1:43 pm

Give me a break. Graphs – even mathematics – are means both of organizing our thoughts and of communicating. Just as words are. It’s ludicrous to arbitrarily declare that only words – or only mathematics, or only graphs, or only watercolor portraits, or only any other single means of human expression – are “the” appropriate way to do science and other species of human inquiry.

DG Lesvic June 26, 2011 at 2:53 pm

We need a Scientific as well as Public Choice Theory, an understanding that scientists, like public officials, have their own agendas apt to conflict with the public or scientific affairs in their care.

We must understand that the professional economist is a businessman, and like any other, wants a monopoly of his business or trade, a cartel or trade union, with barriers to entry and licenses to practice the trade.

And we don’t have to wonder what they are. Just look at the differences between the methods of the founders and pioneers of the science and of the profession today.

Menger and the rest got along without your mathematical devices, but they were essential to Keynes.

You may like the results Keynes got out of them, but I prefer those of Hayek and Mises.

DG Lesvic June 26, 2011 at 2:55 pm

I meant to say, those of Hayek and Mises without them.

noiselull June 26, 2011 at 4:05 pm

Mises, Hayek, and Boudreaux do/did not use mathematics or graphs to obtain new economic knowledge. Graphs and mathematics, however, can be used to illustrate economic law in a more useful manner than verbal reasoning sometimes. This is very different than the Keynesian method of using math to derive economic law. (See Hazlitt on this in Failure of the New Economics)

vikingvista June 26, 2011 at 4:34 pm

You are wasting your time. On this issue, his brain is broken.

DG Lesvic June 26, 2011 at 4:58 pm

A few observations, randomly selected From A Declaration of Economics and The Austrian School of Geometry at http://econotrashtalk.org/#A_Declaration_of_Economics and http://econotrashtalk.org/#The_Austrian_School_of_Geometry

Confusion is complicated, economics simple. If it isn’t simple, it isn’t economics, and, if not economic, not economics. It gets to the point by the shortest distance, not a curved but a straight line, not circular but straightforward thinking.

In pictures or in words, a curve by itself has no meaning in economics. It must still be explained in other terms. With the other terms, why do you need the curve? If demand goes down as price goes up, why not just say so, why that “the demand curve slopes downward?” Why translate from straightforward language into a circular maze, and meaning into non-meaning?

All of the talk of mathematics in economics confuses the passing data of econometrics with the eternal truths of economics. Since there is none of the passing data in the eternal truths, there are no quantities and no mathematics. It is irrelevant to economics, and, its only effect, to obscure it.

The empirical economists could never explain how you observed the Invisible Hand, and if you couldn’t observe it measure, count, or calculate it. Since statistical measurements are always of past events, never exactly repeating themselves, they are irrelevant to the eternal and immutable laws of economics, always exactly repeating themselves.

“Economics…adopts for the organized presentation of its results a form in which aprioristic theory and the interpretation of historical phenomena are intertwined.”
Mises

But the empirical is always secondary to the theoretical, window dressing for the theory. You cannot refute it by attacking the window dressing only. You must attack the reasoning underpinning the theory, not just the statistics embellishing it.

You cannot construct an economic theory upon the shifting sands of statistics, nor, without the statistics, have anything to calculate. There is no mathematical because there is no empirical economics, and, without mathematization and mystification, no professionalization. Economics is still the simple, wide-open science of its amateur founders and pioneers, and too important to be left to “economists.”

Confusion is complicated, economics simple. To understand it, we just need teachers who make sense, not throwing curves, but giving it to us straight.

Why, if mathematics is a better form of communication than English, are you telling us in English rather than mathematics.

Why don’t you show us just how you would do it in mathematics.

indianajim June 26, 2011 at 2:09 pm

How about we use a means-ends framework. If the end is perfect predictions, no theoretical means is worth considering. So what? All theories are abstractions that “abstract” away from certain aspects of reality as a means to achieving the end of being able to better anticipate some aspects of the unfolding uncertain future. Don’s allusions to production possibilities frontiers are a means to facilitate understanding of growth and scarcity. Indeed, as Don says, Give me a break!

Greg Webb June 26, 2011 at 1:43 pm

An important distinction to make, which you have explained clearly and concisely.

Don Boudreaux June 26, 2011 at 1:47 pm

Thanks. Much appreciated.

DG Lesvic June 26, 2011 at 2:59 pm

While you need all the help you can get, you’re not going to get any from Jim, any more than Murgeo, just ignoring everything the other fellow has to say, and then knocking down his straw man.

indianajim June 26, 2011 at 6:13 pm

And I thought I was going to be able to reason with you; but your resort to ad hominem, comparing ME to Muirgeo of all people, and your resort to the non sequitur of screaming “straw man” when there is none, has me thinking that I was too optimistic. :)

DG Lesvic June 26, 2011 at 7:04 pm

You mean you thought you were going to be able to pull the wool over my eyes.

DG Lesvic June 26, 2011 at 7:07 pm

By the way, I got a “your comment is awaiting moderation” notices. What is that all about?

indianajim June 26, 2011 at 7:29 pm

The “awaiting moderation” is something I can only guess about; I posted all the links together in a batch a few days ago and got that message. So I then posted them individually and they posted. My conjecture is that maybe putting too many links in one post causes a problem?

BTW, I’m not in the business of pulling wool over people’s eyes; quite the contrary, my business is persuading people to remove the blinders that they unknowingly wear. But as with horses, so with humans: They can be led to water, but the really stubborn ones won’t drink.

DG Lesvic June 26, 2011 at 7:42 pm

You know, fellas, a curve in economics is like a curve in baseball. The object is deception. When you know that you can overpower the opponent, you don’t bother with the cute stuff. So when I see curves instead of the old high hard ones straight down the pike, I know that the pitcher isn’t giving it to me straight, and, is not a teacher but just an opponent.

indianajim June 26, 2011 at 10:07 pm

Sad when you don’t know who your friends ARE.

DG Lesvic June 27, 2011 at 2:46 am

A curve is an admission that you can’t win with the straight stuff, and, in economics, that can only strike out the pitcher.

joe June 26, 2011 at 2:27 pm

Yeah, I think it would have been too confusing to put these two ideas into one post. Thanks for posting the natural follow-up though (this also gives me more opportunities for future research).

muirgeo June 26, 2011 at 3:52 pm

“A well-recognized cause for a ‘shifting-out’ of the production-possibilities curve is an increase in the supply of resources”

But what about demand. If you have a population of serfs or slaves their will be little demand for more things… and indeed less likely improvements of productivity. If you have a population of well waged educated middle class people buying up things THEN it seems the production-possibilities curve shifts out to meet demand… and has the ability to shift out because of innovation of this educated dedicated working class.

What we have done these past 30 years is to cut wages and increase productivity by mechanization and labor arbitrage but now our native population has no money to spend and the corporations sit on their trillions of dollars funneled up to them via “free trade” with no buyers in sight. So the curve just sits their or even contracts in spite of its potential to expand if demand would only show up.

Methinks1776 June 26, 2011 at 4:09 pm

That entire post can be summed up thusly: “I’m an idiot and I want the whole world to know”.

indianajim June 26, 2011 at 6:14 pm

LIKED

muirgeo June 26, 2011 at 8:06 pm

Grow up piss ant and fend for yourself.

indianajim June 26, 2011 at 10:47 pm

If were a “piss ant” , that would, judging by the silly tripe you write here, make you an ameba.

muirgeo June 26, 2011 at 8:05 pm

And yours could be summed up thusly; I am a woman child stuck on the fifth grade playground of my youth.

Why don’t you deconstruct my position and lay me bare for all to see. Do you really think so little of your peanut gallery that you assume they can be so easily entertained as Indianajim below.

Explain to your groupies how wages have nothing to do with demand or whatever it is you propose. I don’t think you can.

And again. I asked a reasonable question that should have a reasonable reply. It was not me who lead into the 5th grade silliness. I mean that’s really all you have to offer.

I do believe if we were forced to a real and moderated debate I would kick the shit out of you on most of these general topics because there name calling would score against you and there would be level minded independent thinkers judging our responses.

? June 26, 2011 at 8:55 pm

Muirgeo,

June 26, 2011 8:05pm:
“I do believe if we were forced to a real and moderated debate I would kick the shit out of you on most of these general topics because there name calling would score against you and there would be level minded independent thinkers judging our responses.”

June 26, 2011 8:06pm:
“Grow up piss ant and fend for yourself.”

Now, please explain the reply at 8:06pm right after you claim the name calling would score against us at 8:05pm.

indianajim June 26, 2011 at 10:49 pm

:)

? June 28, 2011 at 3:50 am

Oh Muirgeo, I guess it is easier to duck and hide instead of answer the question.

Scott June 27, 2011 at 6:02 am

“What we have done these past 30 years is to cut wages and increase productivity”

“the corporations sit on their trillions of dollars funneled up to them via “free trade” with no buyers in sight”

This would be like the wealthy plotting their own demise. Capitalism results in greater productivity and overall reduced costs so that they can encourage more demand. The focus on wages is misguided. If wages stay the same and productivity goes up, costs go down, and more product is sold, improving cost of and standard of living. Wages, however, must eventually go down if productivity goes down (or the gov’t can inject money into the system to fool the worker and make everyone think the economy is growing). Productivity can be affected by too much of the wrong sort of regulation, environmental requirements, and can cause uncertainty in rates of return because of changing government policy. Uncertainty=too much risk=no investment. We should not be working at increasing wages, we should work at increasing productivity, increased wages will follow. Just ask a model-T factory worker at Henry Ford’s Rouge plant.

I believe that wages in the united states over the last decade went up without an increase in manufacturing capacity and productivity. This can only be short lived and eventually wages must fall to an equilibrium point. That is why I believe that manufacturing and not service jobs are so vital to an economy. No emerging economy ever said, we need to begin building our economy, so let’s start by building a bunch of hotels and banks or consulting firms or fast food joints. They usually say let’s build a steel mill or other sort of heavy industry. You create the wealth first, then the other things come.

cmprostreet June 27, 2011 at 12:06 am

Muirgeo wrote:
“What we have done these past 30 years is to cut wages and increase productivity by mechanization and labor arbitrage but now our native population has no money to spend and the corporations sit on their trillions of dollars funneled up to them via “free trade” with no buyers in sight. So the curve just sits their or even contracts in spite of its potential to expand if demand would only show up.”

I’ve seen you post several statements similar to this, and I’m no longer content to simply ignore them.

You assert that there is a demand problem- regular people don’t want enough stuff, because they have no money. You further claim that this is because the corporations have all of the money.

If the corporations used their money to buy things, or saved it in a bank or portfolio, that would boost demand and put money in the hands of ordinary people, so you must also assume that corporations store all of their cash in a vault to let their CEOs swim in it like Scrooge McDuck.

However, if this is the case, then the only resource the corporations are consuming is little green pieces of paper with no inherent value. The greedy corporations you constantly rail against consume exactly NOTHING in terms of actual goods or resources, by your own argument that they sit on their cash and depress demand. In fact, sitting on mountains of cash would simply cause whatever cash consumers do have to be worth more in terms of actual goods, services, and resources- thereby doing the “middle class” a favor.

If corporations for some reason value money itself beyond it’s value as a fungible good (which is what you are repeatedly arguing), and the economy would improve if ordinary people had more money (also something you are repeatedly arguing), then you should be chomping at the bit for the Fed to start printing more money, even faster.

This is because when dollars become a good in and of themselves, printing more of them makes the world richer. Furthermore, since the companies have to give up their bonds to get those dollars, most of the new wealth flows to the taxpayers who are now off the hook for some of their future taxes. This makes the middle class better off by more than it makes the wealthy better off, by your own oft-repeated argument that it’s the middle class who keep getting stuck with the bill while the wealthy avoid paying their fair share.

Thus, since you in fact do NOT argue for the Fed to print more money, but instead have actually argued the exact opposite*, you must either
1) Have absolutely no idea what you’re talking about, despite having it explained to you repeatedly for years.
2) Have not thought through the logical implications of your arguments in relation to each other despite berating others for that same mistake.
or,
3) Not actually believe what you are writing, instead coming here to kick the hornet’s nest in search of attention.

Based on the sum total of your writings here, I’m going to say it’s a combination of all three. Note however, that at a minimum at least one MUST be true. Unless, of course, you change your story and argue for the Fed to print more and more money to boost demand and make the world a wealthier place until eventually scarcity has been slain and in an effort to boost demand even further, you finally go out and buy a clue.

*While simultaneously blaming the good folks here at Cafe Hayek of wanting the printing press turned on, when in fact many of us would like to see it dismantled.

muirgeo June 27, 2011 at 12:54 am

Sorry fella but your argument went off the rails very quickly for me. I have no idea what you are taking about and I’m not too sure you do.

You start here to deconstruct my position…”If the corporations used their money to buy things, or saved it in a bank or portfolio, that would boost demand…”

That is silly. That cash at the top can not stimulate demand if they are not spending or investing it. They spend plenty and invest some but the big engine of the economy is the consumer demand. THEY have no money or are stretched too thin…. until they get some money and start spending the economy will be stuck.

As long as the big money on top can make better returns buying treasuries and bonds and investing overseas rather then investing in our economy because there are no sales demand will continue to stall and the economy will bump along the bottom.

Considering they are making plenty of money doing what they are doing and are only getting politically stronger and better at rent seeking and maintaining the status quo it could be a very very long time before things improve.

? June 27, 2011 at 1:23 am

Muirgeo,

Do feel the same way about not for profits as you do with for profit corporations. Because with not for profits, any money donated to permanent funds or for the foundation, that money can never be spent by law unless the donor decides to change the qualification of the donation. And seeing that you complain about investments overseas, how do you do that the foundation is not separated into various investments in other countries. Or do you not realize that hospitals, colleges and other not for profits pay for operating costs and other various costs through the investments earned from the permanent funds and the foundation, which guarantees some income for the following year.

? June 27, 2011 at 1:26 am

Forget about “do” and put in, “know” in “how do you know that the foundation”.

cmprostreet June 27, 2011 at 1:52 am

“That cash at the top can not stimulate demand if they are not spending or investing it.”

So when a corporation puts say $100M in a bank, what happens? The bank then lends it to people who actually want to spend it on something, thereby providing the boost to demand you seek.

Your rebuttal of my argument actually included an instance of you further supporting it by again asserting that corporations aren’t spending a significant portion of their money.

muirgeo June 27, 2011 at 10:00 am

NOPE the bank does NOT lend it. Again no one is investing because sales (demand) is low because wages have been low.

So… one more time… all that money in the top is sitting idle and is NOT being invested. Just because banks have money doesn’t mean they have lenders here in America. If they are supposedly lending it… where is the growth.

Slappy McFee June 27, 2011 at 11:08 am

Yet another concept passes you by. If the rich will forever hoard their money, and the banks will never lend theirs, what was the purpose of accumulating it in the first place?

cmprostreet June 27, 2011 at 12:24 pm

That just further illustrates my point, Muirgeo.

If you truly believe the money is just sitting at the top and not being spent, then the only resource the people at the top are consuming is little green pieces of paper. That slightly boosts the value of everyone else’s (middle class) pieces of paper, while simultaneously leaving more resources available to those people.

If we were to forcibly take those pieces of paper and redistribute them to others, that wouldn’t suddenly make more goods, services, or resources more available (the world would not become richer). If we tax that money and spend it on actual resources of any kind, the only thing the people “at the top” give up is little green pieces of paper.

Thus, whatever resources that money is used to buy must instead come from someone else (unless you thing the mere act of taxing or printing money is enough to create genuine wealth). That someone else is the taxpayer, and according to you the people “at the top” don’t pay as much in taxes as the middle class, so once again you are arguing against something that is making the middle class better off as compared to the state of affairs you would prefer.

muirgeo June 27, 2011 at 12:55 pm

OH … ok then. Thanks for explaining why the middle class is so much better. I feel better now and it all makes sense. I will et the middle class know what you said. Anyway I was wrong and you were right. Thanks again for straitening this all out.

Rugby1 June 27, 2011 at 1:05 pm

Muirego:

“So… one more time… all that money in the top is sitting idle and is NOT being invested. Just because banks have money doesn’t mean they have lenders here in America.”

Actually you unwittingly do make a good point. Banks are sitting on a fair amount of capital and are not lending it out to the retail markets….. Because government policies have interfered with normal markets and banks are responding to their new incentives.

During the financial crisis poorly run, highly leveraged banking institutions should have been blown apart and gone into BK, but instead they were given oceans of cash to protect against a “systemic crisis.” Ostensibly this was done in order to spur continued lending and keep the credit markets liquid.

Instead banks have been taking money at roughly zero percent and then lending that money back to the government at up to 3% interest. This is a risk free way to shore up depleted balance sheets and it happened because government geniuses did not see the unintended consequences of their actions.

So you have still highly leveraged banks (saved by government fiat), shoring up their depleted balance sheets and the retail lending markets are still incredibly tight as banks are still risk averse. This situation has been created due to ill thought out policies generated by government bureaucrats. What you are railing against has been caused by the people you assume will provide the solution, how do you not see this most obvious of points? It is policies generated by people who think like yourself (with I believe the best of intentions) that got us into our current mess and will continue to make it worse.

Look markets are messy, but they are much better than the alternative.

Martin Brock June 27, 2011 at 10:13 am

The problem you propose here is possible, but you ignore the possible causes. Rents can channel much entitlement to consume away from common producer/consumers to less common, more parasitic consumers, so much that production for common consumption declines for want of demand.

But who are the less common, more parasitic consumers entitled to ever more consumption? They’re title holders in the corporative state, but the corporative state is hardly limited to what you call “the corporations” or the private, profit seeking sector.

The rentier class is part and parcel of the state, and state employees sit at the heart of it. Many corporate officers in the “private sector”, policing the adherence of “private corporations” to statutory regulation, are barely distinguishable from officers employed by the state directly.

Jameson June 26, 2011 at 3:52 pm

Personally, I think Thomas Sowell’s way of putting it was much clearer from the beginning, as Mark Perry quoted: “The cavemen had the same natural resources at their disposal as we have today, and the difference between their standard of living and ours is a difference between the knowledge they could bring to bear on those resources and the knowledge used today.” That’s the way most of us use the phrase “natural resources,” and it expresses rather concisely both the fact of scarcity and the idea of economic progress.

RC June 26, 2011 at 5:09 pm

Excellent posts Don (this and the previous one). Important economic lessons explained in a very accessible way that even a complete novice should grasp. I definitely will be bringing them up when a need to explain basic economics to somebody will arise, and that happens very often:)

Don Boudreaux June 26, 2011 at 5:16 pm

Many thanks, RC.

Daniel Shapiro June 26, 2011 at 6:39 pm

This was a very helpful post! Thanks, Don.

Don Boudreaux June 26, 2011 at 6:42 pm

Thank YOU, Danny! (Did you get the e-mail that I sent to you a couple of days ago?)

vidyohs June 26, 2011 at 8:56 pm

“One helpful economic heuristic devise is the production-possibilities curve. (You’ll find several images of this curve here.) The production-possibilities curve (or “frontier”) shows that, for an economy operating on the curve, to get more of good X in a given period of time requires producing fewer units of good Y – for producing more of X requires that more resources be devoted to the production of X, resources that, in the framework of the production-possibilities curve, must be removed from the production of good Y. To produce more guns today means producing less butter today.

Guns and butter are scarce because to get more of one means giving up some of the other.”

I am curious as to how anyone could be certain of that in the post mechanization and assembly line world? I can see it as a possibility in the world of hand made individual items, but not in the world of mass production.

A select few skilled people using modern technology and the mechanization it brings, can produce vast numbers of of individual items, such as guns, and pound bricks of butter without drawing prohibitive numbers from the common labor pool as to preclude lone or the other from accessing the labor it needs.

vidyohs June 26, 2011 at 8:57 pm

preclude one or the other…….

need edit function.

indianajim June 26, 2011 at 10:08 pm

I always think of “guns” as representing military pdn and “butter” as civilian pdn.

vidyohs June 27, 2011 at 6:15 am

Yes. But, even so?

With modern automation, no butter makers are needed to make guns, and no gun makers are needed to make butter. Both could be produced at such surpluses we could be up to our armpits in both, and we would still have an excess of available labor that the welfare programs wouldn’t even be diminished.

Right now there are millions of guns sitting on merchant’s shelves, brand new and waiting to be bought, yet I see no lack of butter in the cooler cases at the supermarkets.

I sometimes get the feeling that though the thought is good, much of it is cemented in a past of individual labor producing one unit at a time, and the thought has not caught up with reality of mechanization, assembly lines, automation, and robot performed labor.

I will readily admit that I am an economic dummy debating economic experts; but, at the street level where I live, the above assertion does not make sense to me in the world in which I live.

John Dewey June 27, 2011 at 9:10 am

“I always think of “guns” as representing military pdn and “butter” as civilian pdn.”

Jim, by production you are referring to not just manufacturing but also to production of services, right? As I understand it, “guns vs butter” was originally an analogy for explaining choices between military and household spending. Doesn’t “guns” now refer to spending for most public spending other than transfers to households? For example, government demand for labor and material for public works might drive up prices up labor and material that could otherwise be used for constructing patios and commercial office buildings. Is that correct?

indianajim June 29, 2011 at 12:36 am

Diminishing marginal returns argues that public spending currently crowds out more private sector activity because the Government has G R O W N so much since when the guns/butter analogy first was forwarded. (Does anyone seriously think it unlikely that the marginal returns to more government spending is now negative?)

DG Lesvic June 27, 2011 at 6:29 am

As I’ve said, I never read economics expressed as curves, because I know at the outset that the author is confused. But out of the special respect that I have along with everyone else here for Don, I read his, just to see what his confusion was. Are you ready for this.

He wrote, in English,

“Guns and butter are scarce because to get more of one means giving up some of the other.”

But that wasn’t enough for him. He felt compelled to link us to a page of squiggles called graphs, as though as soon as we saw those we would all say, oh now I see the light. What light? That guns and butter are scarce.

If you couldn’t grasp that without the squiggles, you weren’t going to be able to do so with them. And for anyone who could not grasp it, there was nothing you could do. Scarcity is an axiom of economics, and you can never prove an axiom. They are the starting points from which you prove the theorems. But there is nothing logically antecedent to them from which you could proceed to them. For they are, by definition, the first principles.

People either get them or they don’t. And, if they don’t, there is nothing you can do about it.

Don’s graphs were just his way of covering over his frustration.

And that was his confusion. For you cannot give sight to the blind, and, if not with words, even less so with pictures.

vidyohs June 27, 2011 at 8:30 am

As I said above, ” I can see it as a possibility in the world of hand made individual items, but not in the world of mass production.” That meant that I get the concept, but I think it is rooted in a time past.

To get a thousand guns per week, no longer takes a thousand workers producing by individual manual labor one gun from raw materials.

To get 10 Lbs of butter a day no longer takes 30 milk maids and a farm staff of 10 or 20.

To make a hundred thousand cartridges for a gun no longer takes hundreds of workers handloading to produce those rounds.

To make thousands of wool blankets no longer takes hundreds of individual weavers using hand looms to make one blanket at a time.

Our world can produce millions of rounds with only one or two workers overseeing the automated process, and machines can weave a wool blanket in the time it would take one individual weaver to set up a loom.

We can have both in abundance without one’s labor needs intruding on the labor supply of the other.

I am sorry but I still say the concept is understandable in a world of individual hand made items, but not in the modern world.

John Dewey June 27, 2011 at 9:12 am

I don’t understand your point, vidyohs. Are you implying there is an unlimited supply of resources for producing goods and services?

vidyohs June 27, 2011 at 10:41 am

My point is wrapped up in this sentence: “We can have both in abundance without one’s (gun production Vs butter production) labor needs intruding on the labor supply of the other.”

I am not questioning the abundance or limitation of raw materials or resources.

If we recognize that the individual by his innovation or inventiveness has expanded the possible labor effectiveness of that individual as a resource, then we must recognize that we have innnovated (mechanized, automated, and organized) ourselves beyond the point where to have one we must (emphasis on the must placed by Don not me) do without or experience diminished expectations in the other.

yet another Dave June 27, 2011 at 11:49 am

DG Lessthink,

I never read economics expressed as curves, because I know at the outset that the author is confused.

Translation: “I don’t even look at anything even slightly mathematical because I just don’t understand it and I’m too lazy to learn anything about it. But I can’t admit that, so I’ll just believe anything I don’t understand can’t be any good for anything. So I can just assume my own conclusion and work my way around the word-circle to “prove” I’m right. That way I can delude myself into thinking I have some great insight and not have to deal with the fact that I’m ignorant and lazy.”

Of course, I’m being kind assuming it’s just laziness.

The production-possibilities curve is a very useful way to illustrate Don’s point (the point you appear to have missed), at least to those who are not as illiterate of mathematics as you. If you are not capable of understanding that, fine. But you embarrass yourself and undermine any credibility you might hope to have by continually spouting ridiculous nonsense about things you don’t understand.

Now I await your reply that has nothing to do with what I’ve said.

DG Lesvic June 27, 2011 at 12:39 pm

I liked that DG LessThink.

John Dewey June 27, 2011 at 11:00 am

vidyohs: “we must recognize that we have innnovated (mechanized, automated, and organized) ourselves beyond the point …”

This is the part I don’t understand. As Don pointed out:

” over time the production-possibilities curve can (and, especially over the past 200 years in the capitalist world, does) shift outward.”

But shifting the curve outward does not, to me, imply that there are no trade-offs between use of resources for government programs and use of resources for civilian (non-government) goods and services.

Don Boudreaux June 27, 2011 at 11:05 am

Yep.

vidyohs June 27, 2011 at 2:31 pm

So now we bring government into the discussion and the whole complexion changes. Typically I do not think of government manufacturing or producing guns or ammo, so how now do we get government involved? All business and economic sense goes out the window when you bring government into the discussion, so I am not going there, plus it has no place in this discussion.

Let’s talk autos instead of guns and wheat instead of butter.

If the people of this nation suddenly developed a need for triple output of autos over the current output, and triple output of wheat over the current levels; knowing the modern methods in both fields, I can not believe for a moment that to achieve the desired numbers of autos, wheat production would have to suffer from lack of workers.

In the first place the two fields are two different specialties so a wheat farmer would be a poor worker in a modern auto plant, and a modern auto worker would be lost on a wheat farm; furthermore on top of that there are sufficient unemployed or underemployed auto workers to staff modern auto plants many times over. And, there is still enough skilled farmers to increase wheat production.

Another furthermore is; guns and autos, wheat and butter, do not even use the same raw materials, so in this modern world that makes it even less likely that increased auto or gun production would mean less wheat and butter production.

I think my point has been stated clearly and reasonably; but, I will repeat, not all theory and doctrine formulated in the days of hand manufactured or produced goods, translates well into this modern mechanized, automated, and organized assembly world. This is especially so when it involves the concept of the individual being the ultimate resource.

One ambitious and willing individual can just do so much more with their available time because of all the tools and machines we have now. Thanks to my large truck with its grappler arm to shake the trees and extendable snipping tool to get the stubborn nuts, I can harvest all the coconuts on my plantation in half a day, and still go out in my small trawler and net enough fish to feed my family in the afternoon. Hell, I’ll be through in time to take my boy to his Little League game and stay to watch, and not worry for a moment about my neighbor who is still out in his dugout canoe trying to spear a fish.

I won’t think about or worry about tradeoffs or comparative advantage because I can do it all, do it well, and I love doing it.

vidyohs June 27, 2011 at 2:46 pm

Let me add to this. I am being told that it will that it will that it will; but no one is presenting a convincing argument regarding a lack of resources, resources being individuals who will, and can, work. I am having theory, doctrine, and dogma thrust at me as proof.

Some one please prove up a shortage of labor and skills, a shortage of machinery, and a neglect of properly organized production which would make the trade off between having more gun/autos and maintaining current levels of, or increasing levels of, wheat/butter and absolute mandatory must result reality

Actually it seems strange to argue in one post that raw materials are finite, but resources are infinite; and then go on to define resource as individuals who will innovate and produce increasing quantities of goods from less and less raw materials. Then turn around and make the claim that in order to have more guns one must expect to have less butter. I see it as contradictory.

John Dewey June 27, 2011 at 4:01 pm

Vidyohs,

As I understand the guns vs butter analogy, it is a gross simplification of the idea that an economy cannot produce an infinite amount of every good. Resources must somehow be allocated – either through central planning or through the collective decisions of suppliers and consumers.

There is a production possibilities curve – though it cannot be represented graphically for the millions of goods and services which are supplied. Reducing that curve down to just two goods – guns and butter – allows an educator to show the relationship between resources and goods.

You seem to be arguing that if two goods do not use exactly the same resources, then the guns and butter analogy fails. I disagree with that view.

I think I was incorrect in trying to equate “guns” with only government projects. However, I have seen the guns vs butter analogy used to represent public programs and private consumption.

Don Boudreaux June 27, 2011 at 4:03 pm

John,

Right you are. Thanks.

Don

vidyohs June 27, 2011 at 4:34 pm

Okay, neither of you want to point out the shortages of resources in our modern world that would make a trade off necessary.

I’ll make it easier for you. Considering only normal routine economic or business activity, no emergencies that require vast numbers of people to go out and dig titanium ore with spoons, just normal life as we experience today – name two goods or even two genres of goods that would come into such conflict over available resources that one would have to suffer in favor of the other, favor me with some explanation for why that would be.

BTW John, I believe in my last post I closed with a little comment about the fail of comparative advantage in the modern world and why it could likely fail in general. Not one word of my objection has been about two goods in conflict, all my comments have been about a conflict in labor (resources) in this modern mechanical automated, and organized world that would automatically mandatory must absolutely make one lose out to the other in the resource pool.

vidyohs June 28, 2011 at 6:07 am

12 hours and waiting for an answer.

Scott June 28, 2011 at 6:31 am

vid, from a very large perspective, it would seem that there would need to be a trade-off because there is only so much manpower as well as energy to make it all happen.

Let me explain my position. Even in your scenario in which limited manpower is needed as the goods being created are all through automation, eventually, the electricity, the energy required to produce those good regardless of what sector and no matter how unrelated they may seem, must create circumstances in which one must be chosen over another.

rhhardin June 27, 2011 at 3:52 pm

It was fashionable in the 60s to keep a drawer full of purloined salt shakers in your dorm room to show to anybody with a communist theory.

DG Lesvic June 27, 2011 at 8:08 pm

Perhaps I’m doing you all an injustice. I have avoided reading the arguments here because I assumed they were about an axiom, scarcity. And that could only be an exercise in futility, since axioms cannot be argued about, just from.

If I’m wrong, if this is about something other than the axiom of scarcity, please tell me, and I will join the argument and, as usual, tell you all where you are wrong.

River June 27, 2011 at 9:24 pm

Not a scientist or economist, just a lowly engineer but I see it as the old adadge ” a picture is worth a 1000 words”. I have made 100s of presentations on complex topics and the graphs helped make the point. Simple I know but the graphs Don noted helped a novice like need understand the concept in less time.

DG Lesvic June 27, 2011 at 10:04 pm

River,

As Judge Judy says, I don’t believe you because what you’re saying doesn’t make any sense.

You’re saying that there are two kinds of human minds, the kind that understands words and the kind that understands squiggles. If our minds were that different, we couldn’t communicate and coexist at all as fellow human beings. The fact that we can communicate and not just collide but co-exist and cooperate is proof of the logical heterogeneity of our minds. So by knowing my own, I know yours. I know that for yours as for mine, in pictures or in words, a curve by itself has no meaning in economics. It must still be explained in other terms. With the other terms, why do you need the curve? If demand goes down as price goes up, why not just say so, why that “the demand curve slopes downward and to the left or the right? Why translate from straightforward language into a circular maze and from meaning into non-meaning?

Confusion is complicated, economics simple. To understand it, we just need teachers who make sense, not throwing curves but giving it to us straight.

A curve is an admission that you can’t win with the straight stuff, and, in economics, can only strike out the pitcher.

When Don has straightforward arguments, you don’t get any curves from him. You got it from him this time because he himself was befuddled, and could only combat befuddlement with more of it.

He was trying to prove an axiom. That can’t be done. Since axioms are, by definition, first principles, you can argue from them but not to them. They are “given.” And if somebody doesn’t get what is “given,” you can’t give it to him.

His is the mind that is so different from yours that you cannot coexist but only collide or part company with him.

And that’s the argument for the free market.

We either fight in the state of live and let live in the free market.

DG Lesvic June 27, 2011 at 10:07 pm

typo

I meant to say we either fight in the state or (not of) live and let live in the free market.

yet another Dave June 28, 2011 at 11:44 am

…a curve by itself has no meaning in economics. It must still be explained in other terms.

You mean like the labels on the axes?

Why translate from straightforward language into a circular maze and from meaning into non-meaning?

I suspect you’re incapable of comprehending this, but for many (probably most other than yourself) people the graph is for some things more straightforward, more clear, more elegant, more succinct and more meaningful. Why would you use so many words to say less clearly what a simple graph shows instantly and more clearly? Why would you translate the clear, elegant and precise graph into a wordy and less meaningful sentence? Why do you have such disdain for those who grasp the meaning better and more quickly from the graph than from your wordy description? Why do you project your own weakness and lack of comprehension on others? Why do you want to obfuscate their understanding?

John Dewey June 28, 2011 at 12:14 pm

** Like **

DG Lesvic June 29, 2011 at 1:14 pm

If you can understand a graph without any words of explanation, you must have superhuman powers of comprehension.

So, from now on, yet another Dave is yet another Superman.

DG Lesvic June 28, 2011 at 4:36 am

Just read Vid’s comments on guns and butter.

Since human wants are insatiable and endless, even if productive capacity too were endless, demand would always outrun it, for it would always be easier to want things than to satisfy the wants.

And if you can’t understand that I’m sure Don can draw some squiggles that will make it all clear to you.

vidyohs June 28, 2011 at 6:59 am

Hey DG, if you read my posts, I don’t know how the subject of supply and demand came across to you. But, by-the-by on that, perhaps you can answer my questions regarding why in the modern mechanized, automated, and organized world of the USA this, is still appropriate as a mandatory, must, and absolute rule

“Guns and butter are scarce because to get more of one means giving up some of the other.”

(I understand the concept and can see it as a possibility in a horrifying dire emergency of a presently unknowable sort, and I can see why it would be so in a world of individually produced hand made items. But, we don’t live in that world anymore.)

I explained my disagreements clearly above, and I believe all my objections are valid; but, no one has addressed those objections, all I have received is repetitive versions of the dogma.

DG Lesvic June 28, 2011 at 8:54 am

Vid,

Supply and demand are like love and marriage in the old song.

Love and marriage, love and marriage, go together like a horse and carriage….oh, you can’t have one without the otherrrrrrrr.

I’m not so sure about love and marriage but supply and demand are inseparable in economics.

Congress has sure tried hard enough to repeal the Law of Supply and Demand, but I can’t see that they’ve had much luck with it, and can’t see how you’re going to do any better.

For, as I said,

since human wants will always outrun the capacity for satisfying them, there will always be scarcity, the need to economize, to choose one thing and set aside another, one thing over another, at the cost of the other.

Or, in your words, “to get more of one means giving up some of the other.”

vidyohs June 28, 2011 at 5:07 pm

Those are not my words, they are Don’s words, direct quote from the post.

I am sorry but your reply concerning supply and demand is non-responsive to my question. But, hey thanks for taking a shot.

DG Lesvic June 28, 2011 at 7:34 pm

The answer to your question is that, no matter how modern mechanized, automated, and organized the world has become, wants will always outpace the means of satisfying them.

And, for this reason.

It is always easier to want something than to provide it.

If wants are greater than the means of satisfying them, there is scarcity, and, if there is scarcity, to get more of one thing you must give up something of another.

Any more questions?

vidyohs June 28, 2011 at 9:13 pm

“wants will always outpace the means of satisfying them.”

Was never the topic of discussion nor of my question.

““One helpful economic heuristic devise is the production-possibilities curve. (You’ll find several images of this curve here.) The production-possibilities curve (or “frontier”) shows that, for an economy operating on the curve, to get more of good X in a given period of time requires producing fewer units of good Y – for producing more of X requires that more resources be devoted to the production of X, resources that, in the framework of the production-possibilities curve, must be removed from the production of good Y. To produce more guns today means producing less butter today.

Guns and butter are scarce because to get more of one means giving up some of the other.”

More times than I can count, Don has chastised people who comment publicly on the scarcity of, or diminishing, resources and calling raw materials resources. He slaps them upside the face with the information that oil, ore, plants, etc. et. al. are raw materials and the resource is the man who is ingenuous and innovation enough to use them in producing goods of value. Am I not right about this? Yes, by damn I am.

So I am fairly confident that Don nor anyone else would want to be inconsistent, right? Well look above to the quote I put in italics, and the emphasis on the words more resources.

With that in mind, I interpret what Don said as, that in order to get more guns there would have to be a diversion of resources (people/labor/workers) away from the production of butter.

There is my bone of contention. As I have explained above I do not for one minute believe in this world of mechanization, automation, and organization that there is any field of endeavor, which expansion of, would require such a shift or diversion of people/labor/workers from one field to another in order to obtain what we need or want. I make this disagreement with the caveat that I can see a possibility of a future need being so urgent and so desperate that all of humanity diverts its attention and efforts to producing what is needed. Outside of such an emergency I don’t buy it.

The evidence is all around us that there are no shortages in anything and we have surplus labor spilling out of our ears. We have a huge unemployed, and an even larger underemployed, yet I see plenty of butter, wheat, wool blankets, autos, stereos, computers, nail guns, etc. et al. And, I can not see a possibility that in our world of business as usual that in order to have more X boxes, we would have to take workers away from making toasters, packing meat, driving limos, tightening bolts on an assembly line, cooking in a restaurant, or any other field of endeavor.

Raw materials are finite, resources are infinite cuz we just keep popping ‘em out with amazing regularity, some 311,000,000 of us resources now in this nation, and everyday we get more from less raw material and with fewer resources (people) involved.

It is not the world of “everything is made by hand” by individuals, which is when I suspect that concept (Guns and butter are scarce because to get more of one means giving up some of the other.) was formulated. Time to rethink and move on.

DG Lesvic June 28, 2011 at 9:27 pm

I think Don gave you a good answer to your question and I did too and that the only reason they don’t satisfy you is because you don’t really want a good answer, you just want to stump us. And finding out that you couldn’t is not what you wanted.

Since stumping us is the only thing that will satisfy you, and you will never be able to do that, you will never be satisfied.

Any more questions?

vidyohs June 29, 2011 at 6:19 am

You have spoken, and the word was mantra, dogma.

I won’t be satisfied until some one answers the questions I have asked for the reasons I asked them. No one (Don never addressed me), not you, not John Dewey seems to have even read what I asked and noted the reasons for asking.

That’s okay, often times people are uncomfortable when their dogma is challenged.

yet another Dave June 29, 2011 at 10:10 am

vid, I’ll take a shot (but I’ll confess I haven’t read everything you wrote – I’ve been killer-busy – so forgive me if this is a bad answer).

The key point in Don’s post to address your question is “for an economy operating on the curve”

In your question, what you describe is an economy operating inside the curve, so the tradeoffs are not required. The production-possibilities curve defines the threshold where such tradeoffs would be required.

DG Lesvic June 29, 2011 at 1:06 pm

Oh, no, not another curve from yet another Dave.

John Dewey June 29, 2011 at 10:43 am

Yet another dave,

Are you suggesting that the U.S. economy in general has sufficient slack resources such that tradeoffs are not required? If so, then I disagree. I think the U.S. economy is quite often operating on the production possibilities curve.

U.S. producers transform resources into a million or more products (goods AND services). The true U.S. production possibilities curve thus has a million or more dimensions. So it cannot be exactly represented in a form such that students can easily understand it. That’s why educators use a simplified two-dimensional Guns vs Butter analogy to illustrate tradeoffs in allocation of resources.

It is likely impossible to provide two products which can exactly be represented by a two-dimension producttion possibilities curve. But that doesn’t mean such a model – a guns vs butter model – is worthless.

If one argues that the two-dimension guns vs butter model does not exactly represent reality, he would be correct. The model was never intended to exactly represent reality. But that model does illustrate how producers are forced to make tradeoffs in allocation of resources. And so it is a valid model.

yet another Dave June 29, 2011 at 11:12 am

No – that is not my suggestion. In vidyoh’s question example, what he described was inside the boundary, and thus not subject to the tradeoff (if I understood his question correctly).

I do agree with your description of the ppc as a model – we could probably think up dozens of 2-dimension examples where the tradeoff wouldn’t exist, with vid’s example being one. I don’t see how that refutes the existence of a ppc boundary.

I also agree that many areas of the US economy are at the boundary. I would suggest those areas include the most competitive parts of the economy (since competition maximizes resource allocation), as well as areas requiring scarce skill-sets, though I doubt those are the only ones. For example, the military-industrial complex consumes enormous amounts of engineering talent that is not available for other efforts as a result. If that talent was available, no doubt more non-military high-tech gadgets would be produced, since the demand is clearly there for them.

John Dewey June 29, 2011 at 11:31 am

Yet another Dave: “For example, the military-industrial complex consumes enormous amounts of engineering talent that is not available for other efforts as a result. If that talent was available, no doubt more non-military high-tech gadgets would be produced, since the demand is clearly there for them.”

I think that’s a good example.

As I understand the production-possibilities curve concept, the training of additional engineers, or the importation of engineering talent, would shift the PPC out. So the PPC is really a state – a capacity constraint – at any one point in time. Does that make sense?

If we expanded the PPC concept to represent global resources/capacity, we (humans) would still have constraints on production. Yes, we can develop new sources of energy. We can increase our investment in education, We can devise even more efficient means of production. All of those changes would push out the production possibilities curve. I think that’s what Don meant when he wrote:

“But over time the production-possibilities curve can (and, especially over the past 200 years in the capitalist world, does) shift outward. “

Vidyohs seems to be arguing that the shifting of the PPC can happen so quickly that the concept of a PPC is no longer valid. If so, I disagree.

yet another Dave June 29, 2011 at 12:00 pm

Well said – I think capacity constraint is a proper description. I agree with your analysis of moving the curve out, and took the same meaning from Don’s statement you quoted. If your understanding is incorrect, then mine is also (but I think we’re right).

I’m not certain about vidyoh’s objection, but I might have missed his point by not reading all of his comments. I scrolled up and found this that I hadn’t read earlier:

I do not for one minute believe in this world of mechanization, automation, and organization that there is any field of endeavor, which expansion of, would require such a shift or diversion of people/labor/workers from one field to another in order to obtain what we need or want.

I don’t understand that position at all – resource limitations (largely people with the right skills) prevent or delay all kinds of developments all the time. Clearly in such cases, expanding the new area necessarily takes resources away from their present uses.

vidyohs June 29, 2011 at 5:32 pm

YADave,

Well at least you’ve made an attempt to understand my simple question, thank you. Everyone else has answered without bothering to even read what I wrote, they all looked at the words and put their own meanings and interpretations on them. You at least admit you haven’t read what I said, but you still come closer to understanding.

“I don’t understand that position at all – resource limitations (largely people with the right skills) prevent or delay all kinds of developments all the time. Clearly in such cases, expanding the new area necessarily takes resources away from their present uses.”

Keep in mind that above I stated emphatically that I understood the concept of the PPC, and my problem was not with that per se, it was with this part:
“for producing more of X requires that more resources be devoted to the production of X, resources that, in the framework of the production-possibilities curve, must be removed from the production of good Y. To produce more guns today means producing less butter today.

Using Don’s own repeated commitment to the idea that it is people who are resources, not raw materials, I made my objection to that and asked for someone to show me how that would be in the USA.

I remind you and everyone I limited the place (USA), I limited the time (present), and acknowledged that I could see it happening in the pre-industrial world where things where individually made by hand.

I then pointed out that the USA has a large unemployed and an even larger underemployed body of potential.

I can think of nothing, not item or genre of items, that would under the limitations I placed, require shifting of so much resources (people) from one field to another, that one would suffer shortages. In that body of unemployed and underemployed are many highly trained and skillful people, highly trainable people who could move into a new career in good speed with minimum disruption.

What is funny is that I was trying to think of one new product that has come to the market in my time of awareness that the production of which caused a labor shortage that stole resources from one field so as to serve the new. I couldn’t think of a one that came to market using retrograde production methods, equipments, and planning.

“During the Korean war there were no shortages of consumer goods, ditto for the Vietnam war, none since either. Even a disaster like Katrina didn’t create shortages as efforts shifted to help the people recover. One could still find a roofer and a handyman in Houston if one wanted.

So, you say I am inside the curve, okay, I’ll go with that because that seems more accurate to my position and question.

Thanks.

yet another Dave June 29, 2011 at 5:52 pm

vid, I think I understand your position better, but diverting resources from one use to another does not necesarily create shortages of consumer goods. It doesn’t necessarily eliminate new products either, but the result could easily be development delays for some new products from months to decades or more. In that case, the forgone production would be unseen.

vidyohs June 30, 2011 at 9:50 am

YADave,

Believe me sir, I understand qualification of words as well as anyone, so very few things “necessarily” or “could easily” make things mandatory.

Re: consumer goods, that is the way the topic was framed so I framed my reply in the same vein.

Along with what I replied to you, if one reads what I wrote above, the other part of my question was to challenge the unqualified manner in which Don puts forth these mantra, dogma, or doctrine. I have asked the question before, and got the same kind of replies from the same people…..that being “it is,” because 3 hundred years ago some guy said it “would be”. I object to accepting the idea that a resource shift “is mandatory”, “a must”, “a certainty”; because it may very will not happen, and particularly so when the world has changed so dramatically in production methods and being able to extract so much more from less raw materials from the time the manta, dogma, or doctrine was formulated.

So many things obvious to Thomas Paine (for instance) as rock hard truth, are no longer true. For instance if Paine wanted to go from Madrid, Spain to New York City, it was his truth that the trip would take weeks. Today it is a matter of a few hours.

Extrapolate all the ways in which Paine’s truths have altered to become your truths, and “imagine” that he might have to say some things differently today if he had time to understand the difference between his world and ours.

I am not saying Paine would change a thing, I just grabbed his name out of the air. If it makes my point easier to understand make up a name for 18th century figure or any traveler of his era and substitute that name.

yet another Dave June 30, 2011 at 1:22 pm

vid,

IMO, what you are describing is the expansion of the ppc since Paine’s time – I completely agree. I’d even argue you don’t need to go nearly that far back to see the same thing – the limits are clearly much further out than even 30 years ago. But that doesn’t mean there’s not a limit, however far out, where resource shifts would be required to produce some new thing. I don’t see a world of such abundance that there is no limit to what can be produced, and that’s exactly what no ppc limit means.

Even as your example is correct that no conceivable real world increased demand for butter could be enough to prevent the manufacture of guns, I think you misrepresent the ppc concept by focusing only on consumer goods. The guns vs. butter example is just that – an example to illustrate a concept that includes all resources and all production. If you visualize a ppc that includes everything and add a third axis for time you’d see the curve moving out with time just as you describe. I suspect the movement would be exponential, so as a practical matter it may look as if there is no boundary. However, I have seen projects delayed or scrapped due to inadequate resources (usually people with the right skills in my experience, sometimes technology limitations), so the ppc concept seems correct to me.

Some consumer goods do not exist today because of resource limitations. Some goods that do exist came to market later than they would have if not for resource limitations. These delays and missed opportunities fall into the unseen, but exemplify the ppc in action. Earlier I used the example of defense contractors using huge amounts or engineering resources. Those engineers are not available to work on other things, so at least some of those other things just don’t happen.

You are correct that some un(der)-employed people could learn engineering and fill the void, but that doesn’t invalidate the ppc. Rather it’s a mechanism of expanding the ppc boundary. In fact I think that follows from Don’s point – in a free market economy the incentives line up to drive the expansion of the ppc boundary.

vidyohs June 30, 2011 at 4:39 pm

Okay let me try again. Remember I have stated that I can see situations or circumstances of dire emergency that make the shifting of resources so burdensome to one field that we would get less of what that field produces, because of shifting their resources (people) to handle the emergency.

My objection to Don’s post had two connected points, and are addressing current modern day USA.

Don regularly makes such pronouncements of what I see as mantra. I see different possibilities.

#1 Resources (people) would have to be shifted from one thing A to another thing B in order to have more of A.

#2 that said shifting is will always be mandatory, a must, a certainty.

I still am not convinced that either of the two points fit the present situation in the USA. I am also convinced that the future will make it even less likely as long as no emergency rears its ugly head. So much more can be done today over 30 years ago by fewer numbers of involved people (resources). I do not see that reversing as long as we are free to innovate and invent.

“However, I have seen projects delayed or scrapped due to inadequate resources (usually people with the right skills in my experience, sometimes technology limitations), so the ppc concept seems correct to me.”

Okay, let’s look at that. Taking you at your word, why didn’t the mandatory shift in resources occur and the proper resources (people) found in other fields ripe for resource raiding? I don;t see a delay or death of a project as falling within our discussion, it creates another dimension of argument. The point of Don’s PPC claim seems to me to be regarding existing production, the ramping up of which, one would raid the other’s resources (people).

Even so, among the unemployed or underemployed I am confident that adequate advertising would draw out enough to fill the needed position to take a project off the delayed shelf.

By the way, when I say underemployed, I am talking about those people in a full time job who are not working to full capacity, frequently less than half capacity, the losing of whom could be absorbed by the other workers around him/her without a drop in production. I know they exist in abundance in the USA work force. Just think of all the engineers in the USA in full time jobs and producing part-time output. Under utilized.

I know that I come across as a stubborn shit; However, I believe I have valid points/objections to the post Don made, and for all the reasons I have voiced.

I agree that in general it is good to know the “possibilities” of the PPC regarding a scarcity of raw materials; but, that the PPC even in that regard is not necessarily a mandatory universal dictate. Even just knowing the possibilities regarding the scarcity of raw materials, I submit, would (should) be enough for intelligent people to allow it to be avoided.

Again IMO as time goes by and advances are made in every facet of production by we resources, I do not believe it is good to just accept dogma as the operating principle, even if the dogma may still be appropriately applied in other times and places.

yet another Dave June 30, 2011 at 5:57 pm

I know that I come across as a stubborn shit

Haha – I like that! I have no problem with stubbornness (it’s something I’ve been accused of at least a few gazillion times). This discussion has been interesting because it seemed we were talking past each other. I’ve not found fault with your examples, but we were still disagreeing. I think this statement you made reveals the critical difference in our perceptions that’s causing the disagreement:

The point of Don’s PPC claim seems to me to be regarding existing production

I interpret the ppc as describing, at a given point in time, the maximum limit of possible production, whether existing or potential.

What do you think? Your objections make sense using your interpretation – do you think Don’s point makes sense using my interpretation? If so, we may have just resolved the difference. If not, we’ll need to dig deeper.

vidyohs June 30, 2011 at 9:32 pm

You’re obviously better educated in formal economic theory than I am. And, before I made that last reply I did go out and grab some more information on the formal theory of the PPF to see just how badly I might have been screwing up. After reading and considering, I still have a problem with that neat little capsule dogma that “in order to have more guns you must expect less butter”.

I originally put that in the context that to have the more guns resources (people) would have to be shifted from butter production to gun production. I see no reason to take it out of that context, because it is the context Don used.

I have nothing against the PPF curve, some of my best friends are believers in it, I’ll even associate with it at work and in leisure time; but, I can’t accept the shifting of resources, so that one looses some of one thing in order to get more of another, as an inevitability in every place and time, especially when the two things are totally unrelated as to raw materials needed, knowledge required, and skills needed.

“– for producing more of X requires that more resources be devoted to the production of X, resources that, in the framework of the production-possibilities curve, must be removed from the production of good Y. To produce more guns today means producing less butter today.”

I just do not believe that the dogma contained in that quote pertains to the modern USA. Even in WWII we did not have shortages in things rationed because resources were shifted to work in the industries building for defense and away from agriculture, we had the shortages and rationing because the natural labor force (resources) were in uniform and fighting overseas, in other words for the purposes of debating production and resources, they were no longer part of that equation.

Well to be honest I guess I would have to admit that in order to get more killing today, we have to expect less butter today. But, would killing be production or deduction?

vidyohs June 30, 2011 at 9:54 pm

YADave,

I am sorry, I didn’t answer your question regarding our difference of interpretations, but yes I think you’re correct in that.

However consider what I said to John Dewey below.

Those who responded to me, other than you, dismissed my argument with the talk about the expanding PPF, and the expanding PPF somehow shows I am wrong about a particular place and time. Okay, I think there is a weakness there, and that is at what point does the expanding PPF make it so that all of our life we will never see the PPF theory effect us because it has expanded so much? If it is possible for the PPF to experience that kind of expansion then why reject that it may have already happened in the modern USA?

If the PPF can’t expand that much, why not? If it can’t then why use an expanding PPF as an argument to refute someone like me who challenges the theory with the idea that in particular places and times like modern USA only a dire unknown emergency might call the theory into play and resources need to be shifted from one thing to favor another.

DG Lesvic June 29, 2011 at 1:08 pm

Dave and John,

Vid cannot see it but how about you?

Cannot you see, without any curves, that human wants will always outrun the human capacity to satisfy them?

DG Lesvic June 29, 2011 at 2:12 pm

Yet another Superman, or may I just call you Super?

A curve in economics serves the same purpose as a curve in baseball, deception. And while that’s a part of the game, it’s no part of economics.

What has distinguished Don Boudreaux’s writing was that he got right to the point, by the shortest distance, which was not a curved but a straight line, not circular but straightforward thinking.

Is it just coincidence that, at one of the few times he himself was confused, he resorted to a devise of confusion, deception, and befuddlement?

DG Lesvic June 29, 2011 at 2:13 pm

And if the curve was such a superior means of expression, why has Boudreaux so rarely resorted to it?

DG Lesvic June 29, 2011 at 2:17 pm

Let me rephrase that.

Why has the man we all regard as our greatest writer so rarely used it?

John Dewey June 30, 2011 at 6:45 pm

Vidyohs,

The Production Possibilities Curve (Fronteir) is the standard method for teaching opportunity costs and economic tradeoffs. You certainly have a right to disagree with basic economic theory. All I can ask is that you be certain you understand the theory. Please consider reading this very short excerpt from “Foundations of Economics”

I am not an economics professor, and so I think I am unqualified to try and help you understand why the PPC makes sense. If you want to believe that I am unwilling to consider your arguments and that I am a slave to dogma, go ahead and believe that. But please know that you are attempting to challenge a very basic principle of economic theory, and maybe, just maybe, you might not understand that principle fully.

vidyohs June 30, 2011 at 9:45 pm

“challenge a very basic principle of economic theory,”

Theories are made to be challenged, that is why they are called theories and not fact or truth.

There once was a theory that man could not fly, could not build a flying machine. Some stubborn shits like me didn’t accept that.

I put my arguments out there in detail, my arguments are consistent. Everyone that has replied to me has ignored what I have said, except YADave who has made an attempt to understand me and does in the caveat he placed, and everyone has beat on me with the word possibility(ies), and then used unqualified words and concepts as if they were talking irrefutable fact and truth that would remain constant under any condition. You see by your and Don’s on admission, talking about expanding the PPF out does not alter your theory as theory, it just expands it. Not once have you or Don said that at such and such a point the PPF would expand to the point where it would no longer apply. So, I take that as you are locked in to the theory no matter what and under all conditions.

Why not just refer to it as the PPF fact and drop the word theory?

I am pointing out that under certain conditions regarding time and place the PPF may not mean anything more than a slogan on the wall and never apply to production in any field in that time and place.

I am not so stubborn as to be unwilling to change my mind if some one would read what I wrote above in my many comments and show me two things, two genres of things, that would come into such conflict for resources that one would lose out to the other.

No hard feelings John D., but I just don’t believe you read a word of my argument and just focused on showing me I was wrong while ignoring the why and how of your claim.

John Dewey July 1, 2011 at 5:43 am

vidyohs,

I read everything you wrote and responded to the parts I wished to respond to.

When you argue that the production possibilities curve:

“is understandable in a world of individual hand made items, but not in the modern world.”

I do not believe you are going to convince very many people who have taken classes in basic economics. If you want to believe that we are all so brainwashed that we no longer have the capacity to understand your logic, please go ahead and believe that.

If you want to believe that some of us read what you have written and have chosen to ignore it, then I think you are correct.

vidyohs July 1, 2011 at 9:54 am

Again John no hard feelings and no disrespect, but if you have really read my comments you’d recognize and acknowledge some salient points.

#1. I made it clear that I did not think the principle was wrong, or that the PPF was a false doctrine.

#2. My point of it not applying to the modern, automated, and organized USA, I am better able to express now, in that the PPF point has moved beyond the USA and IMO will not effect us except in the most dire or extreme emergency.

#3. I specifically limited my disagreement to place and time.

#4. I asked anyone to respond with two things or two genres of things in the USA that the increased production of one would cause a resource (people) shortage available to the other.

#5. No one responded to that challenge.

#6. “I read everything you wrote and responded to the parts I wished to respond to.” And, that is my point here, you chose not to respond to the meat.

Like you I am not a trained and educated economist and my ability to express thoughts in the economic field that meet the criteria of Professors is obviously crude, but my brain still functions very well, and I saw nothing but dogma, mantra in the replies to me. No one but YADave understood that I am not an economist but seemed to have a point, even if it was poorly expressed, and actually made the effort to see what that point was.

So, I’ll express it better. IMO the PPF point has expanded beyond the point where the modern USA will be effected by the principles contained in the PPF, except in the remote possibility of a dire extreme emergency.

Which is what I have been saying all along but in unpolished terms.

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