Scarcity

THE CURRENT PROSPERITY of the West and recent rapid economic growth of countries such as China and India are, from a historical perspective, an aberration. It is an exception to the rule. For most of time, the overwhelming majority of people on earth have lived in poverty and suffered tremendously. The overwhelming natural shortage—omnipresent scarcity—of most goods was a historical norm. Food, shelter, healthcare, and security do not naturally exist in sufficient quantities to satisfy the needs and wishes of all people. Scarcity is therefore a defining feature of our world and would remain so even if the earth were converted into the Garden of Eden.

Though scarcity cannot be completely eliminated, it can be partly alleviated. People's efforts to overcome scarcity gave rise to several scientific disciplines that analyze the consequences of the existence of scarcity for social life. The existence of scarcity implies, on the one hand, the necessity of choice. As resources are scarce, people have to choose which resources will be used to satisfy their distinct needs. The science of economics is designed specifically for this purpose—to analyze under which conditions the most urgent preferences of people will be satisfied, or in other words, under which social institutions prosperity will be produced and which will cause only waste of scarce resources and, ultimately, poverty.

On the other hand, scarcity of resources implies the possibility of conflict. With scarcity in place, two (or more) people may want to use a particular scarce good for incompatible purposes. And since only one (or some) purpose can be pursued, there will be some who will be ultimately able to use the scarce good and benefit, and others who will be deprived of this possibility. The existing conflict over the scarce resource can be solved in principle only by two means—brute force or peacefully. Here we see how scarcity becomes a reason for having a science of law that would come up with a resolution to these conflicts, and through principles of property create a foundation of peaceful coexistence among human society within the world of scarcity.

The respect of these elementary insights within these two sciences—the crucial need for people to demonstrate their preferences in economic activities for the functioning of the economic system and production of prosperity, and respect for property rights as a precondition of peace—changed the gloomy picture of the world. Prosperity and peace, rather than poverty and perpetual conflict, are today a standard in some parts of the world.

It should be emphasized that poverty and omnipresent scarcity is not a product of climate, availability of natural resources, or geographical location, but primarily of social organization. Social institutions play a decisive role in overcoming scarcity. Adam Smith, generally considered to be a founding father of economic science, in his famous book An Inquiry into the Nature and Causes of the Wealth of Nations, developed exactly this point.

Wealth of nations is generated by people seeking their own interest in an ordered fashion. Butchers and bakers—to echo Smith's most famous quote—are led by the invisible hand to the general benefit only if their property in meat and bread is secure, only if they can make their choices of when and for how much to sell them and make a profit. History provides us with ample evidence of post-scarcity utopias. Societies that decided to ignore economic science and opted for abolishing property invariably did not end up in the Garden of Eden, but in a state of disorder and poverty.

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