Monday, September 21, 2009

Economics is the Science of Allocating Scarce Resources

This OP ED in the NY Times by Greg Mankiw is well worth the read (link).

In short Mankiw provides a thought exercise. What if there was a pill if you would take it everyday you would be 100% healthy, but it cost $150,000 a year to make. Even if the US or world spent everything it could not provide the pill to everyone.

So the hypothetical pill like health care is a scarce resource. As Mankiw says in his Principles textbook, resources are scarce. How we allocate them between people the best is economics at its core. You just have to decide what you mean by best?

Also the comments from Friday are well worth the read. My Beloit friends appear to know about the textbook industry. It appears that some online schools are already forming their own cartel. From the second comment, profs in small town want to help the book store, because profs like book stores.

Both responses provide more evidence that professor are sensitive the price of their students books.

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