Let there be no confusion on this point. Occasionally in our society we are confronted by so-called surpluses of particular products (the "butter surplus," the "potato surplus," for example, or the "surplus of used-automobiles"). These represent supplies of particular goods in excess of the amounts which buyers with purchasing power at a particular time and place are willing to buy at prevailing prices. In an economic sense they represent particular over-production in relation to effective demand for particular goods—mis-production or mal-production, or a use or allocation of society's resources of which society, by its market calculus, indicates it does not approve. In the world as we know it, "too many" potatoes means "too few" of other things; it can never mean "too much of everything." And even in the case of a particular surplus at a particular time and place, it does not necessarily follow that human desires for the particular goods are not going unsatisfied somewhere else in society at the very same time. Breakdowns in society's institutional arrangements for bringing goods and desires together are not to be interpreted as evidence of society's power to produce without limit. By the same token, we must not be misled by terms and phrases which suggest contradictions where none exist. Specifically, there is no contradiction between an "economy of scarcity" and an "economy of plenty," where "scarcity" is understood as a condition of economizing, and "plenty" is understood as its goal.
It behooves us, thus, to take care in the use we make of our resources —to be concerned about their use, to manage them, to "economize" them. The reason we bother to manage or "economize" our resources is simply that, since they are limited in supply relative to the uses to which we would like to put them—that is, since in an economic sense they are "scarce"—it makes a difference to us how they are used. The degree and manner and direction of their use and the disposition of the product resulting from their use have, of sheer necessity, been a primary, basic concern of all societies through the ages. This is what the study of "economizing," or economics as a social science is about—it is all that economics is about.
Presumably any society will want its scarce resources to be "fully" employed (particularly its labor resources), and so used that their power to produce is great and expanding, and that the "right" goods are produced in the "right" amounts and, in each case, by using the "best" combinations of resources. Any society will be concerned, too, that the goods which are produced from its scarce resources are divided fairly among its members.
But the use of such terms as "fully," "right," "best," "fairly," etc., in defining the disposition to be made of resources suggests that alternative uses are possible and that society is faced with the never-ending problem of making millions of continuous and simultaneous decisions in the management or "economizing" of its resources. Surely we want our resources to be used fully and in the right and best way, but how "full" is "fully"? Exactly which ways are "right" and "best" and "fair"? We must remember, too, that society's answers to some of the questions may condition and set limits on its answers to other questions: a decision to promote technological advance may make employment less stable, a decision to divide the aggregate product more evenly among everyone may have an adverse effect upon the total amount produced, and public policies designed to bring about full employment may also promote productive inefficiency and aggravated inequities as an undesired consequence. None
theless, answers must be provided by society to The Economic Problem faced by men who want to live in harmony and well-being in a world where not everyone can have all he wants of the goods and services that make up his material living, and where, hence, the use made of our limited, valuable economic resources is a matter of concern to every living person.
Thus it is that all societies of men who make their living together must inevitably establish and maintain (or acquiesce in) an economic system or economy—a set of man-made arrangements to provide answers to the all-important economic questions which make up the over-all economic problem: a. How fully shall our limited resources be used? b. How shall our resources be organized and combined? c. Who shall produce how much of what? d. To whom and in what amounts shall the resulting product be divided among the members of society? It is the job of the economic system (any economic system) to make the decisions and turn out the answers that society wants, whatever they maybe, to these questions; and economics as a discipline is a study of The Economic Problem in all its parts, and of the institutional arrangements which men have devised to grind out the necessary answers to the questions which it poses.
The data and materials, the concepts and the "principles" with which the study of economics is concerned and the problems to which it attends all stem from and bear on this central problem—how do. we and how might we dispose of the resources upon which the level and quality of our material life depend? This is The Economic Problem; all other economic problems and issues—for example, the farm problem, the labor-management problem, the problem of taxation, the inflation problem, the problem of full employment, the anti-trust problem—are simply partial manifestations of it in particular quarters and under particular conditions, and can be dealt with effectively only in conscious relation to the central problem—the core of economics. This should be the starting point of our economics teaching, and its destination. Between the starting point and the terminus, students should become familiar with the significant features of our own mid-twentieth century economy with its ever-changing combinations of individual-markets and collective-governmental economic activities and processes. They should become aware of its rationale and of how it has come to be what it now is, and of how it contrasts with earlier and other economic systems. They need to know something of the structure and operations of our major economic institutions, and the mechanics of income determination, resource guidance and income distribution. They should experience the centering of issues and the marshalling and weighing of considerations involved in the determination of policy in one or two areas of public economic policy. But all of thissystems, processes, institutions, mechanics, policy problems—I repeat, a11 of this should be tied constantly to the core of economics—The Economic Problem—and related at every turn to the purposes for which men build economic systems because that problem exists.