In our third class, Rizzo defined economics in 4 words: man act with purpose. This means exactly what it says. But the reason behind this is that the world is characterized by scarcity.
Scarcity is the condition where there is an unlimited want for limited goods and we must choose. There's not enough rare coins for everyone in the world to have. There's also not enough Vince Lombardi trophies for the Bills, Jets, or Eagles. But everyone wants one. We live in a world full of scarcity.
But in heaven there is no scarcity. If I want a bear riding a unicycle as a pet I can snap my fingers and it appears. The unlimited want is matched by unlimited goods in heaven.
But how do us mortals deal with scarcity? We economize. We use rationality and compare expected benefits with the expected costs. However, the values and costs are individualized. Rizzo used sky diving as an example. I personally would love to pay for sky diving. I have the expected benefit of being able to sky dive, and the expected cost of about $200. Rizzo on the other hand would need to be paid to sky dive. He has the expected benefit of getting money. And the expected cost of dying. Each person is different when it comes to dealing with scarcity.
Economics deals with so many factors, not only financial costs and benefits, but also popularity and ethics.
Rizzo then talked about incentives again in describing England sending prisoners to Australia. The captains were paid before the prisoners arrived so the prisoners were not treated well. However, when they switched the payment to being based on how many prisoners lived, then the survival rates improved. The sailors had to try and keep the prisoners alive so they would get paid. The sailors didn't try and keep the prisoners alive because they didn't care and it would cost them money. Whether or not this posses an immoral situation on the sailors may be a problem, but I'm more scared for the kangaroos who have to deal with prisoners trying to steal their Joeys.
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