What Scarcity Is and Isn’t
Sequence summary: This is a series of 18 articles on the most fundamental concepts of economics: scarcity, opportunity cost, marginalism, and self-interest. These are the atoms, molecules, cells, the core things you need to have a grip on to move on with the science, and, if all goes well, we will move on, but first it is absolutely vital to get a strong grasp of the fundamentals. Though these are basic concepts, they are not easy to understand. If you want evidence of this, open a newspaper....
Previous: Imagining Scarcity
A familiar example of something scarce is ordering in a restaurant. There are so many enticing options, but you can only order one. You want more than what you can choose to have. Whatever option you choose, you could have chosen another one, and that which you did not choose is now beyond your reach. Even if you come back and order that other choice the next day, it’s not the same day, you’re not quite the same you. All this means that your options are scarce.
Or say you’re packing to go hiking. You have only so much space in your pack. That means if you want to bring the flashlight, you won’t have room for those extra snack bars, not if you also want to fit in the spare batteries for the camera. You have to pick one and make a tradeoff—that is, your space is scarce.
(Maybe you could bring a bigger pack. But that would be more unwieldy, and with all the stuff in it, it will be heavier. So there’s your tradeoff—more stuff, or a more difficult hike?)
And don’t forget, you need a tent. It rains pretty hard round these parts. Do you want to spend more money on the super high-tech tent with the poly-something supercalifragilistic anti-water technology? Or do you want the cheaper one, even though there’s a chance you might get wet? Again, you have to make a choice, trading off one good for another because your money is scarce.
If only you had more money! If only you had more space! If only you could carry more weight! If only more restaurants would offer a tasting menu so you could sample everything and not torture you with the eternal mystery of what all these fascinating things actually are!
All these things are scarce.
Now that we have some examples, we can pin down a more precise definition of what makes something scarce. But first, I’m going to state very explicitly what does not make something scarce. Space is not scarce just because you don’t have as much space in your pack as you want. Strength is not scarce just because you don’t have as much strength as you would like. Money is not scarce just because you don’t have as much money as you would like.
Your options are not scarce just because you cannot order from a tasting menu. In other words, what makes something scarce is not that there is less of it than you want.
Money, space, time, and energy are not scarce because you don’t have as much of them as you want. That’s part of what creates scarcity, but it is not scarcity in and of itself.
Think about trying to get that sand-sphere of your values to fit into the too-small hole. You have to remove some of the sand, and that sucks. But suppose that the sand is homogeneous, so removing one grain is the same as removing any other. So you remove the sand necessary for the rest of the sphere to fit into the hole, and....
Since the sphere is homogeneous, what’s the difference between having to remove some sand yourself and just having a sphere that’s small enough to fit into the hole?
Whether you think of it as a too-big sphere or a too-small hole, the problem’s the same: you can only fit so much of the sphere into the hole, just like you could order only so many things in a restaurant or fit only so many things into your pack. You want more, but you can’t have more, and that’s not what makes it scarce.
Something is scarce not when there is less of it than you want but when it has alternative uses.
Your ordering choices in a restaurant are scarce not because you want to try everything and you can’t, but because whatever you order, you could have chosen some other thing. What you do in that restaurant with your time, money, and the space in your stomach could have been some other thing. That means you have to think about which dishes you want to try the most and order those, forgoing the chance to try the other dishes.
The space in your pack is scarce not because more things won’t fit, but because you have to choose which things you’re going to pack. You have to think about what you want the most, knowing that any item you pack means you can’t pack something else. Your strength is scarce not because you can’t carry as heavy a pack as you would like but because you can choose to do alternative things with your strength, like having a faster or more pleasant hike. The money you could spend on a tent is scarce not because you want more of it, but because you can choose to spend it on alternative things.
It is the presence of alternatives that makes something scarce, and that’s why the homogenous sphere of sand is not scarce. There are no choices to make, no alternative uses the sand can be put to; there’s no difference between choosing to remove one grain versus another. There is no difference between having to make the choice to remove sand versus just having less sand to begin with (disregarding the brief time and effort of brushing the sand away).
You want more sand. Every grain is one of your values. But it is only because each grain of sand is different, it is only because there is a meaningful sense in which you can choose which values to retain and which to sacrifice that there is scarcity, choice, and foregone opportunities, - the core elements of economics. It all begins with a choice: this value, or that? This alternative, or that one? A mere lack of sand is insufficient....
This is why I don’t take promises of a post-scarcity society very seriously. They seem to think in terms of leaps in production technology, as if the key to ending scarcity is producing lots and lots of stuff. But scarcity is the presence of alternative uses, not the presence of want, and making lots of stuff does nothing to address the former per se. Picard, who can make as much tea as he wants in his replicator, must still make choices.
Next: more on the relationship between cost and scarcity....
Is this simply a matter of people using the word scarcity differently?
When someone talks about a post-scarcity future, I doubt that they are thinking about a future without choice between alternatives, but indeed a future without unmet needs of one sort or another. Indeed, such futures tend to have a bewildering amount of choice and alternative uses of time.
Haven’t faintest idea what they really mean, frankly. Usually too fuzzy, vague; using technical terms in odd ways. “Post-scarcity” and “economics” or “economy” should occupy same sentence in only same way that “inorganic” and “biology” should.
Posit a world where sustenance, shelter, and well-being are magically provided—nobody actually needs to do anything to continue existing. This would be an instance of what is colloquially, and perhaps to an economist incorrectly, termed a post-scarcity society.
I’m less certain about this phrasing, I’m not yet comfortable with the semantics of the economic definition of scarce, but one could try: An society where only time and some luxuries are (economically) scarce.
You don’t need to do anything to continue existing already. Someone will find you, put you in hospital. Your life will be sustained regardless of wishes.
See, aren’t definitions tricky? Isn’t it nice that we’re spending 3 whole articles just nailing down the most basic concept? Concepts which are basic, but not easy? =)
You should add a link to the previous post at the top, so people who come across this don’t get confused by the sand metaphor.
This will hopefully be addressed in later posts, but on its own, this reads like an attempt to legislate a definition of the word ‘scarcity’ without a sufficient justification for why we should use the word in that way. (It could also be an explanation of how ‘scarcity’ is used as a technical term in economics, but it is not obvious to me that the alternate uses/unsatiated desires distinction is relevant to what most economists spend their time on. If this is your intention, could you elaborate and give evidence that economists do in fact use the term in this way?) Naively, it seems that if we have enough Star Trek replicators or whatever to satiate all human desires, then for all practical purposes scarcity has been eliminated, and insisting that it hasn’t really because things have alternative uses because some things still have alternative uses seems like playing unproductive word games. Can you explain why thinking of scarcity in your terms is advantageous?
Overall, this series has so far been quite fun to read. I look forward to more.
Is everybody going to have their own replicators on a spaceship? If so, just how big are they going to be? And, if they are big enough to replicate an elephant… then… it seems like it’s useful to think of the alternative uses of the space that all the large replicators and their produced items take up on a ship with limited space.
So at no point do you ever truly get away from the benefit maximization problem. Right now I have a bunch of bookcases filled with books. In theory I could free-up a bunch of space by digitizing all my books. But then I’d still have to figure out what to do with the free space.
Basically, it’s a continual process of freeing up resources for more valuable uses. Being free to valuate the alternatives is integral to this process. You can’t free-up resources for more valuable uses when individuals aren’t free to weigh and forego/sacrifice/give-up the less valuable alternatives.
Some good reading material...
Simon–Ehrlich wager
Running Out of Everything
Economists and Scarcity
Those are entirely valid points, but they only show that human desires are harder to satiate than you might think, not that satiating them would be insufficient to eliminate scarcity. And in fact, that could not possibly be the case even granting economy’s definition of scarcity, because if you have no unmet desires, you do not need to make choices about what uses to put things to. If once you digitize your books, you want nothing in life except to read all the books you can now store, you don’t need to put the shelf space to another use; you can just leave it empty.
Human desires are harder to satiate than I might think? Well...I think that human desire is insatiable. Let’s juxtapose a couple wonderful passages...
...and...
Human desire is limitless. The challenge is to figure out how to help people understand that we sabotage progress when we prevent each and every individual from having the freedom to prioritize their desires. And prioritizing desires doesn’t mean making a list… it means sacrificing accordingly. This effectively communicates to others what’s really important to us. Without this essential information… how can other people make informed decisions about how to put society’s limited resources to more valuable uses?
Right now we can’t choose where our taxes go. Instead, we elect a small group of people to represent humanity’s powerful desires for a better world. The point of understanding concepts such as “scarcity” and “opportunity cost” is to effectively evaluate the efficacy of our current system. If it’s beneficial to block your valuations from the public sector… then why isn’t it beneficial to block your valuations from the private sector? Why do your unique private priorities matter but your unique public priorities do not? How can your freedom to sacrifice a fancy dinner for 10 books be more important than your freedom to sacrifice the drug war for cancer research?
I’ve given this article a thumbs up. Does this effectively communicate how much I value it? Does the number of thumbs up that this article has received effectively communicate how much we value it? Does it really matter how much everybody on this forum values this article? Does it really matter how much we’d be willing to sacrifice/forego/give-up for this article?
The point that I’m trying to make is that these economic tools aren’t fancy paperweights. Whether our institutions are the forums that we participate in… or the governments that we pay taxes to… these economic tools serve a fundamentally important purpose of helping us to better understand our institutions. In the absence of this better understanding it’s less likely that we’ll greatly improve our institutions. No institution is perfect… and neither are the tools that we need to understand them.
Evidence would be any textbook, I hope. Problems are when economists speak lazily to laypeople and students or when use “want” in particular way so that definition comes out to one presented here. Indeed have used “use” in such a way, to some confusion, I see. Definition presented here is, as far as I know, the universally agreed upon definition in economics. No game, but need to understand how it differs from normal usage and common misconception.
Most economists, it is true, do not spend most their time on the most basic material....
This got me curious enough to haul out my old economics textbook, blow the dust off its top, and open it to page 2. An inset box headed “Key term” defines “scarcity” as “a situation that arises when people have unlimited wants in the face of limited resources”. The main text says
On the next page is a subsection headed “Scarcity and choice”. It begins
So I think your hope is in vain. My textbook defines scarcity as our unbounded desires outpacing our limited resources. Which, if I read you correctly, is what you emphasize scarcity isn’t. You define scarcity instead as the existence of alternatives from which one must choose — which the textbook mentions as a consequence of scarcity, rather than scarcity itself.
Hm, well, could argue that “want” is key word, undefined yet critical; could render section “scarcity and choice” redundant. But is probably not what author intended, and apophasis cheap tactic.. Concede point. New point: textbook definition insufficient to generate economics; my definition is sufficient to generate economics.
In the OP you say:
To say that having “so many enticing options” means that “your options are scarce” is exactly opposite of what people normally mean by “scarce”. And, per satt’s observation above, your definition of scarcity doesn’t match the textbook definition.
IMO starting a sequence with a definition of a word that is radically different from its every-day use and from its accepted academic use is not a good thing; I suggest sticking with more commonly recognized word usage.
The more commonly accepted usage doesn’t work—it’s literally wrong for the purpose of the technical term; one might as well complain that in “everyday” usage speed and velocity are synonyms—and the textbook definition is too dense, defining technical words with other technical words, leading to the illusion of understanding when none exists, as some of the comments show.
But frankly, I just never expected that people would get so hung up over the definition of scarcity. I just took it for granted that the community of a site with such a fantastic series of articles as this wouldn’t argue about definitions rather than rolling with the concept being conveyed. If “scarcity” is a problem, then just substitute “tabtab” or whatever random string on your own; no need to wait for me to do it.
It’s even more surprising because this is a community based around articles like this one. Surely it’s obvious that determining the proper label for the concept being conveyed does not make you stronger, and the goal instead should be to learn the economics presented in the articles. That there are things to learn is evidenced by the mistakes made in quite a few comments. For example, the most upvoted comment in this article describes the concept labeled scarcity erroneously, aside from the part of the description that came from my articles.
I realize my articles are very basic (but not easy) and not particularly relevant or fun. This article is riddled with errors, many of them quite egregious, and yet it seems to have been well-received, being topical and pretending to a shared understanding that is really a shared ignorance among the writer and all the commenters. It invites discussion, opinions, debate, and though it all may be based on illusion, those who see the phantasms will never know the difference. So I am unimpressed by the self-awareness, curiosity, and ability-to-learn represented by many of the responses to my articles. That doesn’t mean my own presentation isn’t at fault, but as I said elsewhere, I have already gained most of the benefit from these articles. That which remains to be reaped is mostly you all’s. That the modal response does not seem to be “How can I use these articles to become stronger?” is disappointing, albeit perfectly normal.
Responding days after the fact to someone who’s deleted their account, but what the hell.
I sympathize with this.
I don’t sympathize with this. It’s a hypocritical bullshit move to spend 2,500 words baroquely belabouring your preferred meaning of “scarcity”, and to then affect surprise & disappointment about other people getting “hung up” about the word’s meaning.
But part of the point of the “37 Ways That Words Can Be Wrong” post you linked one sentence earlier is that words aren’t fungible like that, because they carry connotations (way 26), can be used in a needlessly odd and hard-to-understand fashion (way 20), start needless arguments (way 22), and so on!
Sure it can make you stronger; it can help you avoid the failure modes listed in “37 Ways”. And in the end there wasn’t much “economics presented in the articles” aside from the languid discussion of scarcity.
This smells like a fully general counterargument one could use to brush off any criticism of one’s writing in a cool-sounding, world-weary way.
18 articles!? Very cool! Now I see what you’re doing. Tiny steps. Slowly building a solid foundation. So that maybe one day we’ll open the paper and the stories will accurately reflect a basic understanding of economics. That would certainly be progress. I’m really looking forward to reading the rest of the articles!
At some point and at times I encounter people for which evolution is a boody battle of the surival of the fittest. However the true conception of “fit” also includes capability to cooperate most passionately. It seems to me that something similar here is happening with the word “scarce” where it is invented and explained in one connotation and then a more general technical definiton is used but the “other connotations” are largely ignored.
The reading of the article was a little jarring because I could easily come up with a system where there are restraurants that let you eat each and every kid of dish on the menu as much as you want. They are called buffets. Even if I were in a traditional restaurant I could order up all the foods. But even if I ordered all of them I proably would not eat 24 meals in one sitting. My stomach is not infinite. I realise that this is also why getting banned from a buffet is way of making fun of someone being a big eater. Buffets work only if when people are given free reign to take as much food as they need they take only a finite amount instead of all of it. There is a certain limit amount of food that if you take it you are a net negative to the retaurant as it it in their interest to not accept you as a customer.
But if people take only a moderate amount we don’t need to track on person to person basis on who takes what what amount. One person taking potatoes doesn’t make the other person unable to pick those. When a buffet takes market share from a portion serving restaurant it reduces scarcity. When the product is “one person eating” it makes no longer sense to talk about how much a portion of rice costs. When you pay for a buffet you have less options to choose from but this is the good kind of limitation, you are forced to take all of them instead some of them.
Now in a sense when there is portion serving restaurant and a buffet opens next to it, technically now there is more opportunities to use the same money to receive different products. So scarcity has increased. But this makes no f sense with the standard connotation of the word. It would make even less sense that forcing the buffet to close down via community legistation would be in some sense improvement because scarctiy would have decreased especially if you could choose to have an equivalent meal from the buffet at the same price that a portion at the other restaurant would cost.
But if there is a price difference it might be that customers migth like the product difference more than the price difference (in either way). In that sense one of them might be outcompeteed “naturally”. When there is only one restaurant alive that means less products to choose for so scarcity is decreased. If you happen to be one that would have preferred the other kind of restaurant the others have in effect chosen for you that you don’t get to make the choice on how you want the terms of your meal to go. So instead of having the optino of enjoying the kind of meal that you like you are driven back to all the other activities you coudl be doing instead of having a meal. But it can be easy to think that the “fallback” activity is slightly less fun than having a meal woudl have been, so one can end up hoping that the situation woudl have been more scarse.
It also seemst that scarcse and degenerate are close ot being synonyms.
This post strikes me as odd.
The “insufficient quantity” definition matches both what I have seen in economics textbooks, and the common definition of the word. The fact that then choices must be made follows from this definition. If the standard conception follows from your definition, they are equivalent, and I would use the one that matches standard terminology. If it doesn’t, I would say that makes the first preferable (as the relevant fact is derived from the definition).
This seems a little unfair to me. When we speak of a post-scarcity society, it is one where you do not have to make a choice between feeding yourself and feeding your children. If you still have to make a choice between eating chocolate cake or eating ravioli, well… there’s a sense in which these choices are the same, but I think the way in which they’re different is more important.
From the economic perspective… there’s absolutely no difference between...
choosing between feeding or clothing your children
choosing which bundle of genetic traits your children will have
The rules/laws of economics don’t change just because you change the variables.
Then many societies throughout history have been post-scarcity...any semblance of civilization has passed such harsh subsistence long while back.
They are easy. Gene Callahan’s Economics For Real People is something a child could understand. Rather it is that
People are simply not exposed to it
Simply reject some of their conclusions because they dislike them
Often a lot of people peddle a form of very simplistic libertarianism online that is based on the micro 101 level (say mises.org) without any inkling of the post-Keynesian macro synthesis, IS/LM and so on. They squabble with the people who know serious macro, who laugh their butts off and make fun of the idiots assuming people who know serious macro somehow don’t know basic micro. However for the general public there is an unfortunate fallout: they think basic micro is worthless, look at how the serious guys are laughing at it! They are not laughing at basic micro, they are laughing at the idea that econ stops there. But this gives basic micro a bad name, kind of. It is the over-use and over-reliance on basic micro to make a political point is what gives it a bad name.
As for your point here, you are taking pos-scarcity too literally. Really it is based on marginalism. It is about satisfying the most basic wants that have the highest marginal disutility. It is about feeding the proles bread and circus and not having a significant social problem or unrest on your hand so basically you can focus on things like exploring the galaxy.
Haven’t read it, will add it to list....
Plenty of bread and circus already. Food cheap, entertainment often free. Therefore, is practically post-scarcity society already, no?