Goods are limited; wants are unlimited. This observation leads economists to say that the fundamental purpose of economics is finding the best way to make finite goods meet infinite wants (though it never seems to work with random sexual fantasies). While trying to make finite goods meet infinite wants, economists spend a lot of time mulling over something they call “efficiency.” Economists explain efficiency as being the situation where an economy cannot produce more of one good without producing less of another good. If you have two jobs, you’ve probably reached labor efficiency. You can’t put in more overtime on job A without putting in less overtime on job B or the child-welfare authorities will come. You’re efficient, although neither of your bosses may think so. The example of efficiency that economists usually give is guns and butter. A society can produce both guns and butter, they say, but if the society wants to produce more guns, it will have to—because of allocation of resources, capital, and labor—produce less butter. Using this example you’ll notice that at the far reaches of gun-producing efficiency, howitzers are being manufactured by cows. And this is just one of the reasons we can’t take economists too seriously. In fact, efficiency is a condition that’s never been achieved, as you’ve seen from watching your job A and job B coworkers. Economists don’t really know much about efficiency, and neither does anyone else. Doubtless the citizens of eighteenth-century England thought they were producing as many lumps of coal and wads of knitting as they possibly could. One more coal miner would mean one less stocking knitter. Then, James Watt invents the steam engine. Pretty soon, coal carts are hauling themselves, and knitting mills are clicking away automatically, and everybody has more socks and more fires to put wet, smelly stocking feet up in front of. Efficiency is constantly changing, and economists can’t keep up with this because they have to grade papers and figure out what Y equals. One thing that economists do know is that the study of economics is divided into two fields, “microeconomics” and “macroeconomics.” Micro is the study of individual economic behavior, and macro is the study of how economies behave as a whole. That is, microeconomics concerns things that economists are specifically wrong about, while macroeconomics concerns things economists are wrong about generally. Or to be more technical, microeconomics is about money
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