"So what exactly is this economy business anyhow?" Pt. I

So we've been hearing an awful lot about the economy in the last year or so. Like a child at a family reunion it goes largely unnoticed until it starts doing bad things. We hear about it everyday now, usually accompanied by tales of gloom and woe. It's our modern Ragnarok, the giants of poverty will rise up and strike the good people of the world down. But despite hearing about the economy, there's still a lot of head-scratching by the general public as to what all the noise is about. So before I go on long-winded diatribes about the fun stuff, let's get the basics down first so we're clear from the get-go.

Economics is the study of choices in the environment of scarcity. Notice there is absolutely nothing about money in that definition. Economics isn't the study of money, so get that out of your mind right here and now. No, seriously, just shoo it right out of the cerebral door along with last week's grocery list and what you heard Rush Limbaugh wheezing about yesterday.

Yes, money is involved in the economy and in the study of economics but that's only one facet of the greater whole; economies existed long before money ever existed. Ever since Ub-Ub the Caveman figured out how to turn a pile of dry tinder into something more useful, we've had economies.

But the key words are "choices" and "scarcity" in what we're talking about. Let's start with the last one first. Scarcity is the idea that resources--those things we use to produce goods and services--are limited, while human wants are unlimited. Yes, even you, who lives in a spartan apartment decrying the evils of materialism and consumerism has unlimited wants, even if your want is to simply distribute all the resources of the world evenly to mankind.

The second key word in the definition is "choices". The economy exists because of scarcity; when we want lots of things (like food, shelter, or patchouli oil) but don't have enough things to go around. Economics is the study of the choices we make in this scenario of trade-offs.

So let's consider a few examples:

--You have a limited amount of time. If you work a job at the salt mines, for every hour you are toiling away to make salt barons rich, that's an hour you lose that you could be spending playing euchre or reading a Noam Chomsky book.

--There is a limited amount of land. For every acre of land you make into a nature reserve, that's one acre of land we can't build a widget factory on. And take it from me, people like widgets.

--You have a limited amount of income. Conversely, every hour you spend reading World Orders Old and New is an hour you aren't in the salt mine generating income for yourself. And if you spend $20 this year buying that sweet new Coldplay album, that's $20 less you have to spend on sushi or put into a savings account.

So with limited resources we have to decide how we're going to use them. This brings us to the Holy Trinity of Economics Questions: What, How and Who?

-What products do we produce? Here are the trade-offs: if Bono is in the studio making the next brilliant life-altering sonic masterpiece that will change the world, that's less time he's spending helping to put together the next Live Aid or raising money for Amnesty International.

-How do we produce the products? There is often more than one way to skin a cat (I won't go into the gruesome details) but to use another example, we can create energy from coal, natural gas, wind, smashing atoms or a million hamster wheels. How do we decide which way to produce the goods?

-Who gets to consume the product? Now we have to decide how those goods are distributed. If someone makes more money than someone else, should that person be allowed to consume more? Or should the government take that money from him and give it someone else? Or (even more likely) should the government take the goods from everyone and keep most of them for themselves (governing is hard work, folks!) and give the leftovers back to who hasn't starved yet?

These three questions will essentially be the large bulk of what I'll address throughout this blog, but consider those questions for yourselves. They're important!