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The un-utopian issue

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The un-utopian issue By: Maximiliano Velasco Class: 12C (RNo) Subject: High Economics (Mr. Watts) Foreword What is economics? Why do we humans spend countless hours, studying, evaluating and observing the market and all its aspects? Is it to earn profit? To obtain power? To control scarcity? Now, here is an interesting issue: scarcity. Most economists and sources would agree that the sole purpose of economics is to allocate the available resources so that they may be turned into secondary or tertiary products for the consuming of the general public. However, is all economics perfect? Until now, the answer to that seems to be "no", and a major issue in economics is scarcity management. Scarcity can be defined as: "when the supply of a particular good or service can't meet with the expectations of rising demand, thus resulting in the good or service to be 'scarce', hence the term scarcity". Now, ALL economies suffer scarcity the whole time; there will always be a good or service too heavily demanded that only a limited amount can be supplied. This leads us to the question: what do the different economic systems try to do to cope with this key problem? That's what we'll review in this essay, while noting the challenges the different economics theories face when trying to develop a solution. Part 1 How do free, planned, traditional and mixed economic systems address the problem of scarcity? 1.a) Traditional Economy: Let us begin with the most basic of economies. Traditional economy has been part of human culture for countless years, and it heavily depends on the old practice of bartering, which means 'to exchange a good or service in return for another particular good or service'. As traditional economies would generally fall into the term of microeconomics, due to its relatively small scale, the absence of proper commerce and that people will hardly overproduce something, scarcity is very likely to appear. ...read more.


It is very difficult to exactly predict what measures a government/market will take, for they tend to adopt the seemingly best appropriate method from either the free or planned economies at a particular moment. In doing so they are becoming each time more flexible and more able to correct any of the mistakes that they make. However, the most general method used by a mixed market is government subsidies. Since the government has still considerable power (unlike in the free market) areas which are crucial to prevent scarcity are well looked after; hence, the government only needs to sometimes give the so much needed boost to these other firms, so that they can innovate in technology and create a capital for research. An interesting mixed economy method used to help reduce (but not eliminate) possibilities of scarcity is by setting a minimum-maximum price barrier. This should be backed-up by legislation from the government and usually states that the price of a particular good or service MUST not go beyond or below the two given prices. Hence, scarcity is prevented as retailers don't sell below the minimum price limit; therefore, there is no excess consuming of the product which would tend to leave it in the scarce list. Another variation linked to this, is that the government can slightly raise the minimum price if there is simply TOO much consumption of that particular good. However, for this to work, it needs the intervention of the government in also another possible aspect. The government must be prepared to help pay for the producers' cost by either buying their products or other means. This would prevent desperate producers from illegally selling a good below its given minimum price limit, which leads to much feared black markets. Finally, a quite popular measure used by governments for the last 2 decades is to sell all the unneeded State companies or factories and allow them to privatize, this helping deregulate an area which can greatly aid with the diminishing of scarcity. ...read more.


The one major issue with this is that the general public obtains no direct profits from it but only receives the services. Since it is government controlled, and not put in the share market, people invest to it through taxes, yet receive no profits in return. Another main issue is that, as far as the mixed economy tries to find 'solutions' for their problems, they are creating new flaws by simply being a mixed system. The mixed economy tries to deregulate itself from closed to planned and then to open free market. This means that the mixed economy is always moving its degree level. Therefore, is commonplace that policies or 'solutions' adopted tend to quickly become obsolete or incomplete, and new ones have to be put in place. So, in a mixed economy, the problem with finding the best solution for the country is that a new 'solution' or idea must be made every time. Another major problem with mixed economies is that the government usually clash with the powerful firms when dealing with a solution against scarcity. Since the government is not in absolute power anymore, there is no guarantee that the chosen policy will be easily executed as it needs to. This makes mixed economies a very difficult system to deal with. Conclusion Economies have played a major role in mankind, especially when trying to solve the issue of scarcity. If there was no scarcity, the world would be closer to utopia than 10,000 years ago. Scarcity is the enemy of perfection and simplicity. As long as we humans evolve and further understand the concepts of economics, new problems and solutions may arise and possibly new market theories or government systems could be invented. And, perhaps we may get closer to a world of no scarcity, were we could all be supplied to cope with our never ending demands. - - - - - - 000 - - - - - - - R.B.Maximiliano Velasco B. 09 September 2004 Class: 12C (RNo) Subject: Scarcity issue, High Economics (Mr. Watts) 1 ...read more.

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