Defining What Should Be Produced

After a society has determined the frontier of an inefficient combination of products, the next step will be to determine the point throughout the frontier that produces the combination of goods and services that make people more content. If you only choose between the combinations of the frontier, production efficiency will be guaranteed. If you choose the only combination over the frontier that is able to obtain maximum happiness, distribution efficiency will be guaranteed.  

Due to the fact that determining where the frontier is mainly an engineering problem and applying everyday technology to the available resources, it does generate a bit of controversy. However, deciding the specific combination of products that a society as a whole should choose is a big more complicated. As we are well aware of, people have different preferences, as individuals and groups, over all the products that make them happier. A person that at their moment chooses their personal Production Possibility Frontier does not have any conflict; they are simply determining the combination of products that makes them happier and then produces it and uses it.

The process of making decisions becomes more complicated when you consider the Production Possibility Frontier of a whole society, in which case you can be sure that you will have radical disagreements about the combination of goods that should be produced with societies limited amount of resources. For example, it is possible that the people living next door to you are not that concerned about all the contamination he or she produces by smoking outside on his or her porch all the time. If this person were living in the world alone, contamination would not matter, but since you live next to him or her, you feel affected by it and are against it. It is possible that in this type of situation you will look for intervention in some way to put limits on the neighbor. In the same way, the government discusses that what should be produced with limited resources and some people are in favor of the agricultural subsidiaries, while others favor the expense of defense or programs that favor the needy.

As a result of these antagonistic priorities, it is necessary to establish some process of decision making to determine what is going to be produced and so that most people will agree on it most of the time.

In almost all the modern economies, this process is the result of decisions that are both private as they are public that go about through a combination of free markets and government actions. The process does not always go about smoothly, but it has achieved the highest levels of life in the history of the world.