Society is confronted with a finite set of resources and a given state of technology at any given point in time. As a result, there is a finite amount of goods and services that can be produced in that time frame. Given human desires and need for food, clothing and shelter, it is not always possible to produce everything that every one would like to have. When individuals want more than can be produced they have the economic problem of scarcity. The problem of scarcity might be resolved by reducing individuals wants or by increasing the output of goods and services. If the solution is to reduce wants, which wants should be eliminated and which should be retained to be satisfied? The individual would necessarily be required to make a choice. If the solution was to produce more goods, which goods should be produced and how are they to be produced? Again, the individual must make choices. In modern, neoclassical, economic analysis (we will call this “orthodox” economics), the problem is structured so the wants are taken as given and the problem is to produce the goods that satisfy the greatest wants. Scarcity requires that the individual or agent make choices. An individual in isolation (Defoe’s Robinson Crusoe before Friday) would have to make choices since time and resources are limited. It would be necessary to choose whether time was to be spent catching fish, gathering coconuts, reading or building shelter. If the choice were to catch fish, he/she would have to choose between making a net, a fishing pole or trying to catch fish by hand. The choice to spend an hour fishing implies that that hour cannot be used to gather coconuts. The sacrifice of coconuts is called “opportunity cost.”

Even Robinson Crusoe’s world of isolation did not last long. When Friday came to the island, it became necessary to decide who did what and who got what. It is necessary to coordinate the preferences and activities of Crusoe and Friday. Since the story of Robinson Crusoe was written by an Englishman, Daniel Defoe (1659-1731), Crusoe is dominant and he has a greater influence on the decisions than Friday. In 1719, the perspective of an English writer was that aboriginals of various lands were subordinate. Still, it is necessary to coordinate their activities.