196 Economic Theory: An Introductionmeans to provide for our insatiable wants. Therefore, man must
always conserve and/or make the most efficient use of his
resources, and/or come up with the technology which is required
to maintain himself.
Man also recognizes that despite the law of scarcity, there is
a side to his nature that demands one important thing— morel
While a person can only wear one pair of pants at a time he wants
more—dress pants, play pants, work pants, lounging pants,
yellow pants, plaid pants, and on and on and on. If one considers
that this simple example is multiplied by an infinite number of
desires held by an infinite number of people, it becomes clear
that all our resources would be used up— and then no wants
could be satisfied. Since there is a limited number of resources
and an infinite number of desires, the study of economics is
essential in order to understand how to maximize the fulfillment
of those desires in light of the limited resources necessary to do
so.
What to produce, how to produce, and for whom to produce
are the three questions which naturally grow out of this under
standing of scarcity and human desires. What should we pro
duce? Since we cannot have all things, we must prioritize our
desires— and that becomes the choice of what to produce. Most
people are concerned with the primary wants of food, clothing,
and shelter. Thus production in these areas is high on our list of
priorities. These things are produced first. People also desire
goods other than these basic wants, and those choices are made
according to taste, culture, and tradition. How should we pro
duce? First we have to understand what are the component parts
that production entails. They are land, labor, capital, and enter
prise. We need the natural resource (land). The labor changes
that resource into a good, the tools (capital) that aid labor in the
production of goods, and the organizing ability to do so (enter
prise) comprise those component parts. The law of scarcity
demands the most efficient combination and use of these factors.
For whom should we produce? Once we have the good— who is
the recipient? Those people who have contributed most to its
production? Those people who need it most? Those people who
have surplus wealth? The answers to these questions are perhaps
more moral or political than economic—but economic theory
addresses them all.