Humanity searchs to satisfy multiple needs and in order to the, alternative tasks and applications of labor bloom. These solve through the price system which change constantly through supply and demand. This system of “supply and demand”. When people demand more of an article, the business supply or offer more. Then the price of the product rises, just as the products of those who make the article. This movement expands production and more people are atracted to what the business is doing.

But when there a lot of supply the price and the profit margin (which is the difference between the cost and selling price) reduces. So, if at the end of the day, if the profit margin reduces a lot it could not generate benefits at all.“The marginal producers which are the least efficient, or whose costs of production are highest, will be driven out of business alltogether”. Efficient producers who operate the lower costs are the ones who will keep their businesses.

Prices are not determined by the cost of the production, they are determined as mentioned before by supply and demand, the wants of the people and how much they offer for that product. It could cost a lot to cultivate and toast coffee in the Sahara, but how much do people want Sahara's coffee? How much are they willing to pay basing their price not only in Guatemalan coffee but in other terms such as quality and the time it lasts? So, what commodities has cost to produce in the past cannot determine its value. It depends in the “present” subjective values that people give to products. But also, business men need to make expectations based in price and how much product will be made, this “expectation” calls and estimation which tends to accommodate related to what people “want”. So this is how it goes: the more demand, the more profits. The more profits, more production. With more production (adding competence), the quality increases. This increases supply of that product but reduces the supply of other commodities. And when demand falls, the prices go lower and production declines.

Many have the issue if this does produces scarcity. They complain that the enterprises make production valid only under the dynamic of their profits. But it is neccesary not to produce a lot of just one product because there are other needs to be satisfied. Industries shrink and others rise, because production evolutes.

1. 
   Based in what Dagny and Rearden discuss of value, why do people let things put value in things instead of viceversa? How does it happen?


2. 
   Wesley Mouch would give credit to certain  people who demostrated their neccesities and it actually considers these three questions: What was considered as a dempstration? What constitutes necessity? "Essential" for who? (Pag. 347 first Ed. Spanish)

The Birth of Value

Decisions are really important when we observe economically a situation, because in the time of choosing, the option preferred is accountable. Those decisions are based in value, being those under principles, situation, environment, and others. Having some end in mind, and limited means by which someone mught achieve those ends. Almost always we have limited access to resources , and under that situation we might choose what use we will do of that resources, and every kind of use is valid, but which is the necessary? Is it the one I want? What else can I consider? What satisfies me? Those characteristics also conform our procedure of choosing therefore we calificate a value.

Utility is valued, and when more limited and necessary these resources are, they are more taken care of. Like the example given in the text, having a lot of barrels of water will give Rich the chance to spend it in less “important” (under his values) events, which of course, Rich chooses. All of these attempts are actions, which are what economics study, embracing humanity which everyday finds itself making decisions, facing an uncertain future.

Rethinking the Social Responsibility of Business

A response to John Mackey and Milton Friedman's articles.

Humans certainly are social beings, they cooperate indirectly or directly with each other, either this interaction coming from philanthropy or simply by increasing individual profits. Capitalism is branded with series of pure selfish and greedy opinions because a lot of people think capitalist businesses just want to keep the money for themselves and not contribute to the growing of society. That is maybe because they just see the supperficial work of an enterprise and don't actually understand that the effort invested within the business will benefit the customers, employees, community, vendors and investors. All of the first are who valuate the service or product of the business, so it depends on society to maximize its profits.

John Mackie exposes how he does not take his business' purpose to maximize the shareholder's profits but to first benefit the customer. This means to an end a maximizing on profits. I think is good looking to the business like that, validating each perspective of value and following its dynamic. I'd like to mention a quote John Nash said: "The Best for the Group comes when everyone in the group does what's best for himself AND the group”. I think the work the invisible hand does is really effective, but why not voluntarily under our own judgement and responsibility accomplish and “invest” on society in order to make it better? It's just a matter of choosing some field we know we can help without making others dependent and knowing it will give something back, maybe not for ourselves but to the whole society we live in. Because as Mackey said, human nature isn't just about self interest; it also includes sympathy, empathy, friendship, love and the desire of social approval.