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Published online by Cambridge University Press: 16 August 2023
ECONOMIC ANALYSIS AND THE CONCEPT OF PROPERTY
Economic analysis illustrates the influence of prices on allocation of various resources used in production. Before we show how the economic system shapes social existence, we should first examine the primary assignments of resources, prior to any exchanges made. Modern analysis of economic policy often ignores this necessity, focusing instead on equilibrium, pre-determined competitive costs and prices, or economic policies that are “best” for society.
One of the first theorems economic students learn states that human needs are unlimited, whereas the resources that can satisfy those needs are not. Scarcity of means of production forces people to choose one course of action and to judge it as more important than the alternatives (Robbins 1937: 12 ff.). The theory relates to knowledge of the context in which market participants choose between scarce resources. The context which decides who controls a given good according to the law. Without it allocation of resources would not be possible.
The 1870s marginal revolution is considered to be among the most important events in the history of economic thought (Landreth & Colander 1998: 320). The revolutionaries were three great economists, who made consumer choices one of the main pillars of economics. Classical economics studied production, exchange and distribution, but it placed little emphasis on the consumer and the way the economy allocates resources on a microeconomic level. In other words, it did not dwell in detail upon which needs are satisfied and how they are satisfied according to a given theory of production.
Carl Menger gave four prerequisites for anything to be a good: that there is a human need to be satisfied; the thing has qualities that allow for the need to be satisfied; people have knowledge about these qualities; people are able to control the thing so that it can satisfy the need (Menger 1994: 52).
It is interesting to note that economics has concentrated chiefly on the first three prerequisites. Human needs are given a lot of attention; refined theories of utility are constructed to describe them (for example Samuelson 1956), and economics of information and knowledge in management is increasing in importance (since at least Akerlof 1970).
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