LETTERS: In modern economies, most resources are allocated through price changes in a market.
For example, if people demand more rice, then the price of rice increases and farmers allocate more of their land to rice production, assuming other factors remain constant.
In the long run, we are likely to see more rice fields. If we, the buyers, start preferring more environmentally friendly products, then more resources will be allocated to these products and we will see a more environmentally friendly world taking shape.
In economic theory, corporations competing with each other to maximise profit can benefit society. To do that in a competitive market, corporations have to lower their cost, which implies saving Earth's resources.
For example, if a paper company wants to lower its cost, then it has to become more efficient by using fewer trees to make more newsprint. Thus, more trees are saved.
This illustrates the famous observation of economics by Adam Smith: individuals pursuing their own self-interests (for example, profit) can promote greater good (for example, saving trees).
However, there is definitely a dark side of mindless profit seeking and consumerism, and this is where economics advocates government intervention and regulation.
Hence, a balance between freedom given to businesses and regulation by the government needs to be maintained. This brings us to optimisation.
It implies finding the right and balanced amount, which is, in most cases, neither too little nor too much. There is an optimum amount of food, sleep, work, study and socialisation.
The cost-benefit analysis, taught in most introductory economics courses, informs us that benefits do not come without costs, and considering only the benefits and ignoring the costs can have devastating effects.
Economic growth has its benefits, such as higher standards of living. However, if we do not consider the costs of economic growth, such as environmental pollution, there can be severe consequences, such as global warming.
Hence, economic theory teaches us to keep a broader perspective and consider the benefits and costs of our decisions.
Lastly, economics reminds us that the resources on this planet — water, trees, animals, fossil fuels — are limited and scarce.
Hence, it is humanity's responsibility to sustainably manage, use and take care of these resources.
Nabeel Iqbal
Lecturer, School of Business and Economics, North South University, Bangladesh
The views expressed in this article are the author's own and do not necessarily reflect those of the New Straits Times