I don’t know about my colleagues at the Murphy Center, but I have found over my professional career that everyone has an opinion about economics and no one has an opinion about physics. I have wondered why this is so for many years.
I have a guess as to why. See, the toolbox of physics has constants in it like gravity, the speed of sound and the speed of light. You can’t argue about these for they are what they are. I have never heard an argument over gravity. Also, much of the world of physics comes from constants and, as such, there is really nothing to discuss.
Economics, however, appears to be absent of constants and is, therefore, largely theoretical and opinion. Here, personal positions are easy to stake out, and there is plenty to argue over.
This is however, wrong. There are economic constants that are as constant as gravity. Unfortunately, these are largely ignored. It is, after all, more fun to have an opinion than facts driven by constants. I want to discuss a few economic constants.
The first economic constant is that people have unlimited wants. You might have trouble with the word ‘unlimited’ because I could have said ‘infinite.’ At the very least, our wants are sufficiently large so that we could treat them as if they are infinite. This is an economic constant so much so that I could have called it economic gravity.
The second economic constant is that the resources that we use to fill our unlimited wants are, themselves, limited. I could have said finite. Our economic resources — land, labor, capital, and entrepreneurship — are combined in various ways to create good and services which we use to fill our unlimited wants. This, too, is like gravity. It is a constant that cannot go away. Your opinion does not change this.
Now if we combine our two economic constants, we create our third economic constant which could be called the economic problem. Combining the first two economic constants, we conclude that we can never fill all of our wants. We must make choices as to which ones we will fill. Choice is the outcome of two constants so it too is a constant.
Another way to describe the choice problem is to say that we must decide which wants will not be filled — which wants must we give up. This too is an economic constant. These unfilled wants are the true economic cost of our decisions. Money has no role in any of this other than to make exchange easier. After all, I simply use money to acquire goods and services I want and lets me avoid bartering.
Why am I using this space today for an opening economics lecture? I have tired a bit of hearing economic opinions that cannot be opinions. Let me give you an example — we need Medicare for all. A new Green New Deal. We need free college. We need free pre-k education. We need, we need, …… we need. This could have been presented as ‘changing priorities.’
Rather than tell us what they might give us or what priority is now important, I wish political leaders had the courage to tell us what they plan to take away from us, for take away they must do — more kindly, what priority is no less important.
It is easy to have an opinion about what we might need, it is another matter to have the courage to tell us what they plan to take away. You can’t avoid the ‘take away’ just like you cannot avoid gravity.