SOCIETY'S TECHNOLOGICAL POSSIBILITIES
"Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed."
-President Dwight D. Eisenhower
While I was wondering what possibilities I possess, I suddenly decided to ponder upon our Society's technological possibilities.
Society has a wide range of physical inputs available but what to do of them? Economists all around the world spend their lives creating formulae to manage "society" and its produce!
They ponder upon how much land will go into growing wheat? Or into housing the population? How many factories will produce computers? How many will make pizzas?
Being regularly faced with the undeniable fact that goods are scarce, relative to wants, an economy must decide how to cope with these limited resources that are available. It must choose among different goods (the what), select from different techniques of production (the how), and decide in the end who will consume the goods (the for whom).
INPUTS AND OUTPUTS
To answer the above three questions, every society must make choices about its economy's inputs and outputs.
Well, wondering what the term Inputs and outputs actually mean?
Inputs are nothing but commodities or services that are used to produce goods and services.
Wood is an input for the manufacture of furniture.
VEgetables, flour, sauces are all inputs for cooking lasagne.
Anything that is used to create/produce/manufacture any other product is called an "input" in economics.
And, an economy uses its existing technology to combine inputs to produce outputs. Outputs are the various useful goods or services that result from the production process and
are either consumed or employed in further production.
Consider the "production" of pizza. (i usually get my knowledge from the great economist William D. Nordhaus, hence I'll use one of his examples!)
We say that the eggs, flour, heat, pizza oven, and chef's skilled labour are the inputs. Then, the tasty pizza is the output. In education, the inputs are the time given by our teachers, the meticulous students' concentration, the laboratories and classrooms, the textbooks, and so on, while the outputs are informed, productive, and well-paid citizens of our nation.
Another term for inputs that we use in economics is "factors of production".
These can be classified into three broad categories:
Land, Labour, and Capital.
- Land or, more generally, natural resources represents the gift of nature to our societies. It consists of the land used for farming or for underpinning houses, factories, and roads; the energy resources that fuel our cars and heat our homes; and the nonenergy resources like copper and iron ore and sand. In today's congested world, we must broaden the scope of natural resources to include our environmental resources, such as clean air and drinkable water.
- Labour consists of the human time spent in production-working in automobile factories, writing software, teaching school, or baking pizzas. Thousands of occupations and tasks, at all skill levels, are performed by labour. It is at once no the most familiar and the most crucial input for an advanced industrial economy.
- Capital resources form the durable goods of an economy, produced to produce yet other goods. Capital goods include machines, roads, computers, software, trucks, steel mills, automobiles, washing machines, and buildings. As we will see later, the accumulation of specialized capital goods is essential to the task of economic development.
With given resources and technology, the production choices between two goods such as butter and guns can be summarized in the production-possibility frontier (PPF).
The PPF shows how the production of one good (such as guns) is traded off against the production of another good (such as butter). In a world of scarcity, choosing one thing means giving up something else. The value of the good or service forgone is its opportunity cost.
Productive efficiency occurs when the production of one good cannot be increased without curtailing production of another good. This is illustrated by the PPF.
When an economy is on its PPF, it can produce more of one good only by producing less of another good.
Production-possibility frontiers illustrate many basic economic processes: how economic growth pushes out the frontier, how a nation chooses relatively less food and other necessities as it develops, how a country chooses between private goods and public goods, and how societies choose between consumption goods and
capital goods that enhance future consumption.
Societies are Sometimes inside their production possibility frontier because of macroeconomic business cycles or microeconomic market failures. When credit conditions are tight or spending suddenly declines, a society moves inside its PPF in recessions; this occurs
because of macroeconomic rigidities, not because of technological forgetting
A society can also be inside its PPF if markets fail because prices do not reflect social priorities, such as with environmental degradation from air and water pollution
The PPF shows how the production of one good (such as guns) is traded off against the production of another good (such as butter). In a world of scarcity, choosing one thing means giving up something else. The value of the good or service forgone is its opportunity cost.
Productive efficiency occurs when the production of one good cannot be increased without curtailing production of another good. This is illustrated by the PPF.
When an economy is on its PPF, it can produce more of one good only by producing less of another good.
Production-possibility frontiers illustrate many basic economic processes: how economic growth pushes out the frontier, how a nation chooses relatively less food and other necessities as it develops, how a country chooses between private goods and public goods, and how societies choose between consumption goods and
capital goods that enhance future consumption.
Societies are Sometimes inside their production possibility frontier because of macroeconomic business cycles or microeconomic market failures. When credit conditions are tight or spending suddenly declines, a society moves inside its PPF in recessions; this occurs
because of macroeconomic rigidities, not because of technological forgetting
A society can also be inside its PPF if markets fail because prices do not reflect social priorities, such as with environmental degradation from air and water pollution
Happy Writing!
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