A few thoughts come to mind after writing part 1.
I define the simplified fundamental identity of real macroeconomics as:
- Production = Consumption + Investment
- Gross Domestic Product = Consumption + Investment + Government + Net Exports
I also don't distinguish between public and private goods. Public goods, defined as non-rival and/or non-exclusive goods, are still, at the real level, still physical goods. I'm happy (for now) to leave the choice of which goods to produce, public or private, to microeconomics.
When I look at the world specifically as an economist, I don't judge people's wants. If a lot of people want Big Macs, or a badass military, then that's what they want.
I am not yet concerned specifically with distribution of consumption, although distribution will come into play soon enough. Even if one person in a 1,000,000 person economy is consuming all the surplus production of the current capital stock and remaining 999,999 workers' labor, we don't have a macroeconomic crisis unless we cannot produce enough to feed those 999,999, or, for some reason, some of these 999,999 are not working to supply what the one consumer wants to consume. For now, I'm pushing the question of distribution to microeconomics and politics.
I was going to wait to differentiate needs and wants until an actual chapter, but I think the explanation is short enough that I can just include it here.
A need is something we have to produce to maintain the productivity of the labor force. If, for example, we had 1,000,000 people in the economy, but we could produce only enough food to feed 900,000 of them (or feed them all only enough to maintain 90% average productivity) we would not be producing as much food as we need. In contrast, a want is something we want but do not need per the above definition. If, for example, each of those 1,000,000 really wanted an iPad, we would not be compromising our productivity by producing only 1,000.