Tuesday, July 24, 2012

Economic Goods Are Scarce

Not even governments can make goods appear out of thin air. Like it or not, economic goods are scarce because the demand for them exceeds their supply freely available from nature. Because goods are scarce, they must be allocated, allowing sum ends to be fulfilled and leaving others unfulfilled. Many states, facing fiscal challenges, are presently pressed to make difficult choices.

A good example is the state of South Carolina. Its governor Nikki Haley has just recently vetoed approximately $57 million of spending, because she says the state cannot afford it. Many have voiced skepticism about the motive of Haley, suspecting she is merely using potential budget problems as an excuse to gut education, arts, and healthcare programs she does not like anyway.

Whether or not Haley likes or dislikes the areas that will be receiving less money, (and there are a number of philosophical reasons why one may oppose government funded education, art, and healthcare) the fact remains that these sorts of decisions are necessary because economic goods are scarce. States only have a limited amount of resources and cannot fund every possible project that someone might think the government needs to undertake.

The state is not an economic Santa Claus. It produces nothing. It only gets its resources from taking from the citizenry. If it increases its take, there is less saving and productive investment over time. Capital is consumed and productivity and real output falls. At some point, there is noting left to take.

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