Saturday, July 12, 2008

The economic problem (amv)

Allan G. B. Fisher:

In popular discussions of the depression to-day, it is commonly alleged that because " the problem of production has been solved," -we live in a world of potential plenty,-the fault must lie in the processes of distribution. The convincing answer to this theory is that it confuses technical and economic problems of production. Technical problems of production (or at least many of them) have no doubt been " solved " in the sense that we can easily make as many hats, or as much butter, or as many books as we like. No technical difficulties bar the way to a rapid extension of production along any one of these lines taken by itself, but the economic problem of production arises because it is not possible at the same time to have as many hats and as much butter and as many books and as much of an almost infinite variety of other goods and services as we like. It is necessary somehow to choose between the wide variety of alternative types of production which is open to us, and to allot the limited supplies of the elementary factors of production in accordance with our choice. "Economics is the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses."*

*This is L. Robbins' scarcity-definition of economics (1931, p. 15).

Title: Capital and the Growth of Knowledge
Author(s): Allan G. B. Fisher
Source: The Economic Journal, Vol. 43, No. 171 (Sep., 1933), pp. 379-389
Publisher(s): Blackwell Publishing for the Royal Economic Society
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