-the redhead- (theredhead) wrote,
-the redhead-

The economics of scarcity

The classical concept of scarcity is unlimited wants vs. limited resources. That people's wants are unlimited but the means to satisfy those wants are not. There are two flavors of limitation that create scarcity – external limitation which is a hard ceiling on the amount of a resource available (ex. oil), and internal, or 'man-made', limitations where there may be a sufficient amount of the resource in question but it is unevenly distributed or badly managed (ex. food).

Scarcity exists in closed economic systems. And other systems as well, but I'll get to that later. Scarcity can be alleviated in a couple of ways. Increasing the supply of goods and services will do so, as will improving the apportionment of the resources in question.

Markets (are supposed to) regulate scarcity by storing information about consumer's wants and needs and harmonize the supply and demand thereof. In economic systems they accomplish this through the price mechanism. Money therefore acts as both a vital unit of information and conductor of the price signal. As we've all experienced, increasing scarcity leads to higher prices. If a resource is freely available, then it (supposedly) has no value. Keep in mind that price is merely an indicator of the market value of an asset, and that resources can have non-monetary value.

Scarcity and markets are intimately intermingled, for markets would be completely unnecessary in the absence of scarcity. Then it would be like living in Star Trek, where money didn't exist and one only had to ask for what they wanted. Nice place – maybe we should all go there…

So, why do we fear scarcity? Some of us fear it because we have known times of deprivation. We fear it based on having suffered it. Generally we thing about it in terms of money but we are also exposed to scarcity of natural resources, such as oil and natural gas, as well.

So I said all that, so I could say this…

But how many of us fear scarcity because we've suffered not a lack of material resources, but emotional ones? Love, caring, nurturing, friendship? Security? Respect? To feel important somehow? What happens when one doesn't get those sorts of things? Just as one can hoard physical things, so can we 'hoard' our time, our energy, our emotions.

Scarcity applies to several non-monetary things in life that affect us, most notably time, love, understanding, and respect.

Are all these things really finite? Do we have to settle for internal limitations on these precious resources, or can more be created? Can they be managed better?

Is time more than just a commodity, but a sign of worth as well? How are we supposed to measure the worth of love?

This concludes the randomly geeky interlude for the day. We now return you to your regular programming…

-the redhead-
Tags: musings
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