Fundamentals of Economic Analysis: A Causal-Realist Approach
1. Scarcity, Choice, and Value
The causal-realist approach began with Menger who based all of his observations upon reality that was intimately tied to the price system.
Humans ceaselessly seek to remove unease. They consciously use means to attain their ends. Scarcity implies desirability and limitation. There are two types of goods and services. They are consumer goods or producer goods. Consumer goods directly serve human wants. Producer goods are natural resources, e.g. original land, capital goods, labor, and technology. Consumer and producer goods are determined by how they are used.
Time is a scarce good. Action demonstrates time preference. Humans prefer action in the present rather than in the future. Humans must subjectively value their choices while allocating scarce resources. They rank their preferences in ordinal, not cardinal, ways.
Menger solved the paradox of bread and diamonds, by deriving the law of diminishing marginal utility.
The first in a series of ten lectures, from Fundamentals of Economic Analysis: A Causal-Realist Approach.