B. THE THREE PROBLEMS OF
Every human society-whether it is an advanced industrial nation, a centrally planned economy, or an isolated tribal nation-must confront and resolve . three fundamental economic problems. Every society have a way of-determining what commode-ties are produced, how these goods are made and whom they are produced.
Indeed, these three fundamental questions at economic organization-what, how, and for whom are as crucial today as they were-at the dawn of human civilization.Let’s look more closely at them:
• What commodities are produced and in what quantities? A society must determine how much of each of the many possible goods and services it- will make and when they will be produced.will we produce pizzas or shirts today? A few
high-quality shirts or many _cheap shirts? Will we use scarce resources to produce man}’ consumption goods (like pizzas)? Or will we produce fewer consumption goods and more investment goods (like pizza-making machines), which will boost production and consumption tomorrow, .
• How are goods produced? A society must determine who will do the production, with what resources, and what production techniques they will use. -Who farms and who teaches? Is electricity generated from oil, from coal, or from the sun? Will factories be run by people or robots?
• For whom are goods produced? 110 gets to eat the fruit of economic activity? Is the distribution of income and wealth fair and equitable? How is the national product divided among different households? Are many people poor and a few rich? Do high incomes go to teachers or athletes autoworkers or Internet entrepreneurs- Will society provide minimal consumption to the poor, or must people work if they. are to cat?
Positive economics versus normative economics
In think”, about economic questions. we must distinguish questions of fact from questions of fairness. Positive economics describes the facts of an economy, while normative economics involves value judgments.
Positive economics deals with questions such as:Why do doctors earn more than janitors! Does free trade raise or lower_the wages of most Americans! What. IS the impact of computers on productivity! Although these are difficult questions to answer, they can ail be resoled by reference to analysis and empirical evidence. That puts them In die realm of positive economics.
Normative economics involves ethical precepts and norms of fairness. Should poor people be required to work If they are to get government assistance Should unemployment be raised to ensure chat price Adonis does not become too rappel Should the Clinicians..Ina up Microsoft because it has violated die Criticizer laws There are no right wrong answers to these questioned because they involve ethics and values rather then facts .They can be resolved only by political debate and decision, not by economic analysis alone.
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