DIFFERENCE IN GOALS : ECONOMICS

The goal of economics is to produce a scientific understanding of how and perhaps why human beings allocate limited resources to fulfill their wants and needs or in other words, their demands. The five major goals in this direction are the following.

1. Full employment: Full employment is achieved when all available resources (labor, capital, land and entrepreneurship) are used to produce goods and services. This goal is commonly indicated by the employment of labor resources (measured by the unemployment rate). The economy benefits from full employment because resources produce the goods that satisfy the wants and needs that lessen the scarcity problem. If the resources are not employed, then they are not producing and satisfaction is not achieved.

2. Stability: Stability is achieved by avoiding or limiting fluctuations in production, employment, and prices. Stability seeks to avoid the recessionary declines and inflationary expansions of business cycles. This goal is indicated by month-to-month and year-to-year changes in various economic indicators such as the inflation rate, the unemployment rate, and the growth rate of production. If these remain unchanged, then stability is at hand. Maintaining stability is beneficial because it means uncertainty and disruptions in the economy are avoided. It means consumers and businesses can safely pursue long-term consumption and production plans..

3. Economic Growth: Economic growth is achieved by increasing the economy's ability to produce goods and services. This goal is best indicated by measuring the growth rate of production. If the economy produces more goods in the current year than the previous year, then it is growing. Economic growth is also indicated by increases in the quantities of the resources--labor, capital, land, and entrepreneurship--used to produce goods. With economic growth, society gets more goods that can be used to satisfy more wants and needs--people are better off; living standards rise; and scarcity is less of a problem. Policy makers are usually most concerned with growth rate, price stability and the inflation rate

4. Equity: Equity is achieved when income and wealth are fairly distributed within a society. Almost everyone wants a fair distribution. However, what constitutes a fair and equitable distribution is debatable. Some might contend that equity is achieved when everyone has the same income and wealth. Others contend that equity results when people receive income and wealth based on the value of their production. Still others argue that equity is achieved when each has only the income and wealth that they need.

5. Efficiency: Efficiency is achieved when society is able to get the greatest amount of satisfaction from available resources. With efficiency, society cannot change the way resources are used in any way that would decrease the total amount of satisfaction obtained by society. The pervasive scarcity problem is best addressed when limited resources are used to satisfy as many wants and needs as possible.

The five economic goals of full employment, stability, economic growth, efficiency, and equity are widely considered to be beneficial and worth pursuing. Each goal, achieved by itself, improves the overall well-being of society.

However, the pursuit of one goal often restricts attainment of others. For example, policies that promote efficiency might create unemployment or policies that improve equity might limit economic growth or policies that want to achieve full employment and stability may cause inflation or pursuit of policy of equity may cause less efficiency in the workers

In a mixed economy, the pursuit of these goals is largely directed by governments. This, of course, brings into play the wonderful world of politics and never-ending debates over which of these five goals is most worth pursuing. As the discussion turns to politics and policies, controversies start emerging among the political classes that can result in destabilizing the body politic.