Mark Thoma

Whenever the rewards for an action – profits, reproductive success, whatever – depend upon the relative performance of individuals within a group the problem of a divergence between the interests of individuals and the interest of the larger society is likely to be present. The book gives example after example of this “arms race” for positional goods, and details the waste of resources that this causes.

It’s possible to give two very different interpretations of the Obama presidency so far. The first is a relatively positive interpretation. Proponents of this view argue that even though Obama has faced a united GOP willing and able to use filibusters to thwart initiatives, and even though he has had opposition within his own party to progressive initiatives, he has still managed to rack up an impressive list of achievements. Take health care as an example. The health care legislation wasn’t all that progressives wanted, not by a long shot. But the legislation is an impressive start and, importantly, it leaves the door open to further change. Though people forget, programs such as Social Security or Medicare weren’t perfect at first, but were improved substantially over time.

Economics attempts to understand how societies solve a very basic problem. Because our resources are limited, people cannot have everything that they desire. Given that reality, how do we decide what to produce, how to produce it, and how to distribute the output? Economics strives to understand how societies and individuals make choices about how to allocate their scarce resources over the nearly unlimited wants of individuals within the society.