CHAPTER 21
Introduction to Economic Theory
Economics is generally considered to be the study of man in
relationship to his material needs. Alfred Marshall, who made a
significant contribution to the study of economics, broadly
defined the subject as “...a study of mankind in the ordinary
business of life; it examines the part of individual and social
action which is most closely connected with the attainment and
with the use of the material requisites of well being.”
Economists generally deal with the “what is” rather than the
“ought,” so to that extent the study of economics is not compa
rable to moral or political philosophy. Yet, there is a relationship
between morality and political philosophy and economic theory
which is important. For our purposes, we shall try to see
economics as a part of the study of human ideas in juxtaposition
to moral and political theory. Therefore, we will place emphasis
on economic theory as it applies to the nature of man and the
implications of that theory, rather than the statistical, specula
tive, and purely analytical aspects of the subject. Since econom
ics is the study of the production, distribution, and consumption
of goods and services, it is important to consider how to best
accomplish the desired end within the context of acceptable
moral and political postulates.
All economists agree that a basic concept necessary to under
stand economics is the law of scarcity. When one considers the
world we live in, there are certain obvious observable truths.
There is only so much land, water, iron, coal, or, for that matter,
any other resources. Sooner or later those resources will be used,
or used up in most cases. Considering that there are millions
upon millions of people on this earth, all engaged in using or
wanting to use some of the available resources, we are faced with
the fact that in the long run all resources are in danger of being
used up. Some say that sooner or later we are going to run out of
everything. Others contend that the mind of man will prevail,
and that technology as a response to scarcity will provide the
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