Economics: The Science of Character
By DR. TULSI P. UPRETY
It is difficult to accept but it is a fact that in today’s global economic society over 35,000 young children die of hunger everyday. According to the report presented by the United Nations, 2.8 billion of the world’s population, two in five live on less than $2 a day. More than 1.1 billion people do not have access to safe drinking water and 2.4 billion people live without basic sanitation. At the same time the world population is expected to reach up to 9.1 billion by the year 2050. Most of this population growth is going to take place in developing countries, but at the same time, the population of richer developed countries is expected to remain the same. Ongoing world hunger, a widening gap between the haves and have-nots, and worsening global environment leads one to believe that the existing economic theories and policies have made only a limited contribution to making an efficient allocation of scarce resources for fulfilling the most pressing economic needs. Hence, the establishment of a more equitable distribution of income is in dire need.
Economists continue to define economics as the discipline that teaches to optimize limited resources to fulfill unlimited human wants/desires while paying very little or no attention to placing a ceiling on unlimited wants/desires. Economics is not just a science of efficiently utilizing limited resources but also a methodology which can be considered as the science of character, which shapes the choices that we make by placing the ceiling on unlimited wants/desires.
Thus far, economics is defined as the study of how best to utilize limited resources to fulfill unlimited wants. However, economics is not defined as a product of character of human being. Human actions are the reflections of a person’s character, society and nation. These actions are the product of economic wants/desires and are driven by unchecked and unlimited wants and needs. Thus, actions taken on economic activities reflect the economic character of a person, society or nation. Consequently, economic choices or decisions are the result of human character. Wrong characteristics lead to wrong economic choices. Since human behaviors and their actions are the products of character, the types of choices depend on the type of character. Therefore, character defines an individual, character defines a community or a nation, and character defines the global society. In other words, our character is our identity. Accordingly, economics is not merely a discipline that teaches us to efficiently utilize limited resources to fulfilling unlimited wants or desires but also the science of character, which shapes economic wants/desires.
If the availability of limited resources is one side of the coin of economics and unlimited wants/desires is the other, then the science of economics has taught us to utilize limited resources in an efficient manner so that maximum economic benefit can be achieved. Nevertheless, it has virtually ignored the other side of the coin, which states that a limit can be placed on unlimited human wants/desires. The second half of this economic definition is based on the assumption that the wants/desires are unlimited, which implies that the unlimited human wants cannot be controlled to ease the excessive burden on limited resources. Thus far, economics has only dealt with one half of the equation by focusing only on limited resources and how to use them efficiently. However, it has ignored the fact that the unlimited desires/wants can be limited by placing the ceiling on desires. Existing definition of economics is as:
Efficient utilization of limited resources $1,000
Study of economics = ---------------------------------------------- = ----- = $2.50
Unlimited Economic needs/desires $ 400
Based on this definition, let us suppose that $1,000 worth of resources or budget is available to be utilized for fulfilling our 400 different economic wants/desires. If we divide the total budget among all economic wants/desires, then only $2.50 can be allocated for each. If we are supposed to spend $2.50 at the average on each economic wants/desires we will be able to fulfill four hundred of them. If you have more than 400 economic wants/desires then those cannot be fulfilled at this cost because the given budget amount is simply not enough unless, we increase our budget from B1 to B2 or B3 as it is shown in the Graph 1. It also tells us that if the economic wants/desires cost more than $2.50 each, then we have to let go of some wants/desires or they will not be fulfilled unless the budget amount is increased.
From this simple calculation it is obvious that if the denominator is a small number (if the economic wants/desires are scaled down), then more and more resources would be available to fulfill the remaining economic needs/desires. If the denominator is not checked then one can easily be lost in the jungle of economic wants/desires, which may be impossible to be fulfilled and attain the desired satisfaction. Unchecked economic wants/desires will eventually cloud the judgment to make an efficient utilization of limited resources.
Ceiling on economic wants/desires should be placed and taken into serious consideration while consuming goods and services, and/or utilizing factor of productions, land, labor, capital, entrepreneurship that are used to produce goods and services for fulfilling the demand of consumers. Placing ceiling on human wants/desires can possibly create a state of balance between economic needs and resources that are available for fulfilling them.
One could argue that curtailing economic wants is a pessimistic view, which would have negative impact on economic growth, more specifically, it would hinder creating new employment and on prices of goods and services. If a country would operate under this theory then its economy might face stagnation due to the lack of economic growth, and as a result, the economic condition of the people would not be improved. This may be the case if one continues to operate under the basic premise that wanting/desiring more and more and fulfilling those ever increasing economic wants/desires make one happy. However, we are prescribing just an opposite view, that is, by limiting or placing a ceiling on wants/desires and allocating resources accordingly makes one satisfied and happy as well. One would be equally satisfied if he or she could cut down economic wants/desires to the level where his or her resources would be enough to fulfill their wants/desires. Placing a ceiling on wants and desires will lead to conservation of resources, higher savings, a budget surplus, the optimum use of limited resources, more equitable distribution of resources, the conservation and preservation of the environment, and a relief on economic tension. Control of wants/desires does not mean the suppression of economic wants/desires but rather it is the utilization of sound judgments on wants/desires. If we cannot exercise our prudence to place a ceiling on economic wants and desires it may lead us to the jungles of economic wants and desires, which would be the recipe for economic downfall. Ceilings on wants/desires can be placed by utilizing the power of discernment, which will lead in distinguishing between the essential, necessary and right wants/needs. Discernment can be exercised by using intellect, higher mind to control the lower mind that tends to gravitate towards instant gratification, glamorization, temporary glorification and attraction.
Let us examine the case of two college students who have to maintain their lifestyle by utilizing the given budget of $2,000 a month. Student “A” has unlimited economic needs, and student “B” has placed a ceiling on economic needs or has limited desires to be fulfilled. Student “A” spends his money indiscriminately, his desire for the many goods and services is driven by the availability of those goods and services and the consumption craze created by producers and sellers alike. He cannot control his wants and does not see a need to do so. In contrast, student “B” controls her economic desires and spends her limited budget on only those goods that are essential and so fulfills her responsibilities. Their unlimited and limited needs and allocation of their resources are as follows:
Student “A” Student “B”
Tuition fee 500 Tuition fee 500
Books & supplies 150 Books & supplies 150
Rent 400 Rent 400
Food 350 Food 100
Clothing 300 Clothing 50
Transportation 300 Transportation 100
Recreation 700 Recreation 100
Gifts &Celebration 200 Gifts & Celebration 20
Others 100 Others 00
Total 2,900 (900) Total 1,400 600
Aside from absolutely necessary items such as tuition fee, books & supplies and rent, student “A” has additional economic needs than Student “B”. Student “A” feels that he has to go out and eat at least three times a week and moreover he has to treat to his girlfriend. Therefore, he has to allocate and spend at least $350 to maintain his eating habits/desires. On the contrary, student “B” spends only $100 on food because she feels that she cannot afford eating out and does not spend the scarce money on many recreational activities. She may like to go out and enjoy the food but she controls her economic urges or desires, and also tries to be economical. Similarly, student “A” spends $350 on clothing because he feels that he must have designer clothing and shoes, which cost a lot more than the regular items. Student “B” spends only $50 to buy her clothes. Student “A” has allocated $1,300 on transportation, recreation, gifts and other big ticket items, compared to just $220 allocated by student “B” for the same items. Student “A” has evidently chosen a lavish lifestyle with an expensive sports vehicle, which requires more money for gas, license and insurance. He has to frequently visit night clubs, go to every ball game in town, and lavishly buy gifts and celebrate birthdays and anniversaries. On the contrary student “B” simply controls or limits her economic needs, and as a result, spends a lot less on these items.
Notice that student “A” has uncontrolled and unlimited economic needs whereas student “B” has controlled or limited economic needs. Student “A” faces a deficit of $900 in his given budget; however, student “B” has a surplus of $600. To meet this budget deficit, student “A” must borrow the amount and go into debt of $900 to meet his expenses, which is a direct result of his uncontrolled economic wants/ desires.
Students must realize that they are students and their primary purpose is to study and gain proper knowledge. They must think and realize for themselves that the designer clothes and shoes, expensive vehicle, frequent visits to night clubs, and spending time and energy in celebration and gifts have no contribution to being a good student. In this case, they can be students without these items or by following the path of student “B”.
Student “A” is consumed with a false sense of accomplishment and achievement by engaging in those economic and social activities that have no bearing for being a student. False sense of accomplishment, achievement or a sign of success is the result of the social environment we live in and the values we uphold. Such excessive demands on limited resources for fulfilling the unlimited economic wants/desires puts the individual such as student “A” in an extreme economic pressure. Either he has to earn that money by engaging in some kind of work, or by borrowing the money. Either way, he would be placed under growing economic tension, and as a result, he is likely to deviate from his primary path or goal, which is to be a student and graduate from college on time with an acceptable grade point average. Due to the added economic pressures, he will be mentally and physically unhappy, which is contrary to the economic thinking that is by wanting/desiring more and fulfilling those desires makes one happy. However, students would be better off by limiting economic wants/desires and concentrating on their primary responsibilities and this applies to all individuals and professionals.
In the case of student “B,” she is able to fulfill all her economic wants/desires and save some money as well. From this example, it can also be claimed that giving up economic wants/desires makes one happy by not having to face an undue economic pressure, which pushes us to deviate from the primary path. If we limit our economic desires, we would be able to conserve and save resources, which can be reinvested for further economic growth. If not, it can eventually be utilized to create more equitable distribution of income for fulfilling one of the fundamental goals of capitalism. Savings can be seen as a vehicle for maintaining the stable prices of goods and services in the economy, and it can be used for further innovation and investment. Thus, the process of placing a ceiling on economic wants/desire requires making the right choices in the given circumstances.
There are conflicting economic goals and motivations between producers/suppliers and consumers. Assuming that the given price of a product is acceptable to producers and/or suppliers, and the other determinant factors remain the same, they would generate higher profit by selling as many goods and services as they can in the marketplace. They tend to sell their goods and services more if the marketplace is full of consumers who have unlimited economic wants/desires. Therefore, producers/suppliers engage in creating unlimited and unchecked economic wants/desires by investing a substantial portion of their capital in glamorizing the marketing and advertising. They have no economic motivation whatsoever to check the uncontrolled and unchecked economic wants/desires of the consumers in the marketplace. On the contrary, consumers have limited resources for fulfilling unlimited economic wants/desires. It would be to the consumers’ economic advantage to limit their economic wants/desires so that they can engage and spend their limited resources on those goods and services that are essential to their respective conditions and environment. This can be done only when the study of economics will give a serious thought to the second part of the equation, which is that economics is the study that teaches to place ceiling on unlimited human wants/desires, in addition to efficiently utilizing the limited resources.
As stated above, unlimited wants/desires can be checked by placing a ceiling on those wants/desires, or limiting them to reduce an excessive burden on inadequate resources, and also to reduce the demand for goods and services, which in effect, causes the prices to come down. Take an example of the demand and price of gasoline, which has currently been increasing in an alarming rate contributed by number of factors such as a growing demand for gasoline in Asian countries to sustain their unprecedented economic growth, limited supply of gasoline, steady increase in demand for gasoline in the United States that is essential to maintain our present lifestyle, and so on. Continuing rise in gasoline price has forced the consumers to look for ways to cut down the use, or demand, for gasoline. Consumers’ changing behavior to conserve gasoline is reflected in their actions such as not taking long trips for vacation, carpooling, using public transportation, buying fuel economy vehicles, and so on. In a sense, they are limiting their wants/desires to reduce the demand for gasoline. This is an obvious indication that the consumers have to change or limit their wants/desires for buying less gasoline in the marketplace due to the increasing prices. Thus, placing a ceiling on wants/desires leads to conservation of resources, a budget surplus, more equitable allocation of limited resources, conservation and preservation of the environment, and a relief of economic tension.
(Dr. Tulsi P. Upretyhas twenty five years of experience in economic development. As an economic development specialist, Dr. Uprety specializes in industrial and business development, formulation of development policies and planning, financing and institutionalization of development process. He taught micro and macro economic classes in various colleges. Dr. Uprety participated in development activities of Native American Indians of Northern America and in Asia . He has a Doctorate Degree in Economic Development and Public Administration from the University of California , Berkeley )
