First of all, before talking about the economic problem and what follows it will be better to start with what is the economy as such. So, economics is a term we hear everywhere and is present in all human societies. It is a discipline that studies the description and also analyzes the production, the exchanges, and the consumption of the goods and services of a society. It simply means that economics is a science that analyzes and describes how people living in society provide themselves with what they need in order to survive. Since the dawn of time, we know that different human societies are made up of people having the same custom, culture, and almost similar behaviors and are also constituted of different social classes. All human societies are distinguished from each other according to their geographical location and also their history. Among these societies, however, are the rich and the poor. From where emerges the universal problem which is the economic problem. This is a hidden reality that all human societies have in common.
The economic problem according to Heilbroner is “the way we manage the unlimited needs of all members of society by providing them with material welfare, with limited resources available” (Robert L Heilbroner, 2011). He argues that individuals in poor nations (underdeveloped countries) have some economic independence although they are in poverty. This is because individuals in poor nations are self-sufficient and provide the necessities for their own survival. Individuals living in poor nations are self-reliant because they do everything themselves, they do not depend on another person to do the work for them and their survival depends on their own ability. These individuals are born, raised, and have lived all their lives in that environment so they are used to this mode of life and they don’t have any problem to continue living so. On the other hand, individuals from wealthy nations, lack independence in the sense that they rely on other people for their survival. These individuals use people who have certain skills to do the work that they cannot do themselves. So, with this separation of labor, and the dependence of the individuals of the rich nations on others, there is an advantage for the individuals of the rich nations but if the people doing their work in their place can no longer be able to do it. Individuals from wealthy nations will be clueless because they are just not prepared to do this kind of work and they do know not how to do it.
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Therefore, by economic problem, we mean the way in which society distributes materials and resolve them through production and distribution. In terms of production and distribution, these are the two main tasks found in any society. The first task, which is production, consists in guaranteeing a sufficient production of goods and services for one's personal survival, and the second, which is distribution, consists in distributing the results of its production to generate even more production. However, it is difficult for societies to fulfill these two tasks, firstly to the unlimited need of individuals and secondly for the limited amount of available resources. The society also faces production and distribution difficulties due to a lack of good remuneration to push workers to do a good job or sometimes due to the fact that production is not fully distributed. So, they have to find people to do the job effectively and make sure that people produce the goods and services that society needs. We note then that these two distinct tasks are closely related. To ensure the continuous supply of material, society must ensure that its production is distributed in order to maintain continuous production and the desire to continue working.
These two tasks are at the head of the economic problem that we find everywhere. Therefore, to stabilize this economic problem and accomplish these tasks, we distinguish three solutions that are: by tradition, by command, and finally by the market. For centuries, various societies have used these three solutions to accomplish tasks and solve the economic problem. The first one: is tradition is the oldest technique and the main stabilizing force of societies. It consists in making sons follow the same career as their fathers. This succession allows the transfer of skills from generation to generation and also ensures society has enough working force to perform the tasks required for production and also solve the distribution problem. Heilbroner argues that even in societies that do not necessarily use tradition, custom plays an important role in solving the economic problem. Because of the customs, people have a specific type of work they want to do.
Then we have the second method which is by command. It is a method that started back several centuries and consists of a leader in charge of the economy, who dictates on the tasks to be performed. So, the leader is the one who decides everything, the different people who perform different tasks to provide the goods and services that society needs. This solution is very effective to solve economic problems, especially in difficult times. This solution can have a positive impact and a negative impact in the sense that there is a possibility of improving or reducing the economic efficiency of society. Finally, we have the third method which is the market. This method allows society to secure its own supply without having much recourse to tradition and command. That is, this method allows the economy to regulate itself through the mechanism of supply and demand.
Heilbroner came up with the conclusion that economics is not a physical and technical problem with nature, nor a problem of scarcity and a problem just for individuals but is a human problem. This is because members of society have unlimited needs because they always want more and more. Indeed, society also has non-fixed desires that change all the time. We also note that the performance varies according to the human skills and also according to the energy with the production and the distribution are carried out.
When we hear the word economy, we all tend to think that it is related to the wealth of individuals or nations and that its main purpose is to maximize wealth. But in reality, the main objective of the economy is not to maximize wealth but rather, to provide the goods and services that society needs and also to solve the economic problem by archive production and distribution tasks. As far as human nature is concerned, we are used to thinking that human beings are powerless as an economic individuals, but contrary we understand that they are the ones who have control because they are the ones who constitute a demand for goods and services, and it also because of them and how they decide to perform the work that the production and distribution result varies. Finally, in the case of the history of human beings, we tend to believe that people in developing countries live better and have economic independence, whereas it is quite the opposite. These people rely on other people to do their work; therefore, they lack autonomy. This is why I believe that the people of underdeveloped countries live better in the sense that they have a certain economic independence.
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