The Scarcity reference article from the English Wikipedia on 24-Jul-2004
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Scarcity

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Scarcity is a central concept in economics. In fact, neoclassical economics, the dominant school of economics today, defines its field as involving scarcity: following Lionel Robbins' definition, it is the study of the allocation of scarce goods among competing ends. Scarcity means not having sufficent resources to produce enough to fill subjective wants.

"Resources scarcity" is defined as there being a difference between the desire and the demand for a good. What this means is that a good is scarce if people would consume more of it if it were free.

Goods and services are scarce because of the limited availability of resources (the factors of production) along with the limits on our technology and our management skills. These determine the location of society's production possibilities frontier or curve (PPF). Inefficiencies in the use of resources (less than full employment or inappropriate employment of inputs) may limit the amount produced so the economy operates below its PPF. If it difficult to abolish them, these inefficiencies imply institutional (artificial) scarcity.

Where goods are scarce it is necessary for society to make choices as to how they are allocated and used. Economists study (among other things) how societies perform the optimal allocation of these resources -- along with how societies often fail to attain this optimality and are instead inefficient.

For example, we may all want to own gold jewelery. However, the amount of gold available is limited, so it is necessary to make choices as to how it is allocated. In a market economy, this is achieved by trade. (Other ways to make this decision involve tradition, community democracy, and government top-down or centralized command.) In the market, individuals and organizations (such as corporations) trade resources amongst themselves, reallocating resources to where they are most wanted by those with purchasing power. In a smoothly operating market system, the rate of exchange between different resources, or price will adjust so that demand is equal to supply. One of the roles of the economist is to discover the relationship between demand and supply and to develop mechanisms (such as pricing, incentives, or penalties) to achieve an optimal outcome (in terms of consumer welfare).

Some see this definition of scarcity as invalid, on the grounds that it assumes both human wants are unlimited. "Unlimited wants" seems a product of indoctrination (say, by advertisers) or a product of the unsatisfying nature of work in a capitalist economy. Alternatively, the "unlimited wants" may be the result of alienated labor: the needs resulting from a worker doing noncreative work under some manager's command to produce something that is of no interest (except to earn a wage) can be "solved" by buying unnecessary product. Thus in News from Nowhere, a somewhat Marxian utopian novel by William Morris, the existence of creative work for all helps to abolish the scarcity of products. However, most economists disagree with these critiques.

Certain intangible goods are likely to remain scarce by definition or by design; examples include awards generated by honours systems, fame, and membership of elites. These things are said to have scarcity value; that is to say, all or most of their value is derived from their scarcity. But these are examples of artificial scarcity, reflecting societal institutions.

As informational goods can be copied at negligible cost, they do not need to be scarce. This is why copies of free software such as GNU/Linux are typically available for very little money. However, proprietary software and many other products are kept artificially scarce by copyright and patent law.

"Substantivist" economists and economic anthropologists have argued that "scarcity" is a social construct and not a universal.

Further reading:

see also Thomas Malthus

Topics in microeconomics
Scarcity | Opportunity cost | Supply and demand | Elasticity | Economic surplus | Aggregation of individual demand to total, or market, demand | Consumer theory | Production, costs, and pricing | Market form | Welfare economics | Market failure