Society’s Objectives and the Allocation of Resources

Abstract

This chapter is intended to be primarily for those readers with a limited or non-existent background in formal economics, but it may also serve as a convenient synopsis for the reader with more extensive knowledge. Its purpose is to provide an analytical framework which can be applied in each of the subsequent chapters to the study of particular social problems. Accordingly, after a brief discussion of some terms and concepts, we begin by specifying society’s objectives in relation to economic activity. Over all it is argued that any society will have two main objectives. First, it will need to select the level of output for each good and service that leads to the highest attainable level of economic welfare. We have termed such an output the ‘socially efficient level of output’. Second, it will want to make sure that the socially efficient level of output is distributed between its members in a way that is considered socially just or equitable. Thus society’s dual objectives will be the achievement of efficiency and equity. Having considered these objectives we proceed to give an account of the way in which a private market economy, or market system, will organise economic activity and to examine the extent to which it can be expected to realise these objectives.