Choices Are Everywhere:Why Can't We Just Have It All - Article Example

Article Review Wolla, S.A. . “Choices Are Everywhere: Why Can’t We Just Have It All?”Page One Economics Newsletter. Wolla’s article, “Choices Are Everywhere: Why Can’t We Just Have It All?” explores the concepts of scarcity and opportunity cost. Wolla examines a challenging issue on the best way to reduce government debt, which has been a heated debate in the recent times. According to him, wants surpass the available resources. Government expenditure is supported by current revenues obtained from taxation or borrowing.

Wolla argues that the fiscal cliff resulted from high debt level that emanated from wanting and purchasing more than what could be paid for. Dissecting to the article, debt reduction includes two difficult choices. The first choice involves reducing government expenditure on goods and services. However, this choice is surrounded by a difficult decision on which government spending to be reduced. The second choice of reducing government debt is through raising taxes. However, the question is who should pay more?

One choice could be preferred over the other or the two choices could be blended. Wolla argues that these choices also apply to household budgets. Whichever choice one makes, basic understanding of economic concepts of Scarcity and opportunity cost remains imperative. In an attempt to clarify the concepts of scarcity and opportunity cost with regard to personal and household spending, Wolla uses a $20 gift card. The $20 is the budget constraint for the individual who receive the gift card. According to Wolla, wants are unlimited while the resources to satisfy these wants are limited.

It is this situation of having limited resources and unlimited wants that he refers to as scarcity. According to the article, the $20 mark means that the card holder cannot have anything to spend more than the limit and thus, cannot purchase all that he or she wants. In Wolla’s own words, “the $20 limit means that you can’t have all the CDs, movies, or games you want; you must choose that one you want the most” (Wolla, 2013, p.1). According to Gwartney et al. (2011), scarcity necessitates choice.

An individual has to make a choice between two competing items depending on their level importance. For example, one could be faced with a choice of spending his last $30 on a movie or a new shirt. Because he cannot purchase both the movie and shirt, he has to make a choice between the two items. Wolla’s argument that deciding between recently released music CD from a band and a new movie involves a choice, involves opportunity cost, is quite to the point. Wolla defines opportunity cost as “the value of the next-best alternative when a decision is made” (Wolla 2013, p.1). This resonates with Lindeman’s argument that “opportunity cost is the economist’s way of saying that nothing is really free” (Lindeman, 2002, p. 26). Daily decisions contain the elements of scarcity, choice and opportunity cost.

For example, Charles is in dilemma whether to start a business or use the money for his college education. Going to college involves spending money in terms of paying school fees, which could be used to start the business. Therefore, the opportunity cost of going to college is not starting the business. Opportunity cost is the value of the forgone item or decision (McEachern 2013). The more one spends on an item, for example food, the less he spends on another (movies). Scarcity and choice involves trade-offs (Gwartney et al., 2011). Credit cards have been established to enable people to borrow beyond their expenditure limits.

However, as Wolla notes, credit cards have limits and translate to less future disposable income. Therefore, the more one uses credit cards, the lower income for spending he has for the future. Wolla further argues that the government faces similar tough choices that households face. The government has to satisfy collective wants of citizens through spending its revenues in public goods and services such as health care, social security and defense among others. However, the ability of the government to satisfy the collective wants of citizens is constrained by the amount of revenue mainly obtained from taxation of individuals and companies.

Similar to households, opportunity cost arises when the government chooses to satisfy one public want over the others (Wolla, 2013). Spending more revenue on defense would mean spending less on health care and vice versa. Just like households use credit to purchase beyond their budget constraint, the government can also borrows to finance its expenditure (Mishkin & Eakins, 2012). However, this increases government debts and diminishes the amount of government income available in the future for spending on goods and services.

Wolla concludes by saying that making good economic decisions entails deep understanding of the concept of scarcity and opportunity cost. Wolla’s article presents an important piece about crucial economic concepts, but fails to tell the readers how individuals make rational choices, which comes with scarcity of resources. Further, Wolla makes no inference to previous research on the same topic, which makes the ideas in his article more of mere individual opinions. It would be great if wolla backed up his claims with numerous researches to create some element of validity to the article.

Nonetheless, the article remains crucial for government officials, individual and households in making economic decisions. References Gwartney, J.D., Stroup, R.L., Sobel, R.S. & MacPherson, D.A. (2011). Macroeconomics: private and public choice. Mason, OH: South-Western Cengage Learning. Lindeman, J.B. (2002). Microeconomics. Hauppauge, NY Barron's. McEachern, W.A. (2013). Economics: a contemporary introduction. Mason, OH: South-Western Cengage Learning. Mishkin, F. S., & Eakins, S. G. (2012).

Financial markets and institutions (7th Ed.). Upper Saddle River, NJ: Prentice Hall. Wolla, S.A. (2013). “Choices Are Everywhere: Why Can’t We Just Have It All?”Page One Economics Newsletter. Retrieved on November 1, 2013 from http://research.stlouisfed.org/pageone-economics/pages/newsletter_summary.php?edition=classroom