Scarcity When resources are finite. It sometimes feels as if we have temporarily solved the problem of scarcity and replaced it with the problem of excess. -Matt Haig Economics, as a field, exists because of a fundamental problem we face as individuals, groups, and a species: how to allocate scarce resources to meet limitless needs. All resources are scarce, meaning there is a finite amount available. Scarcity is like having one pizza for a hundred people at a party. You don''t have enough for everyone who wants it. In economics, scarcity means a limited supply of things people want or need, such as money, time, or raw materials. One way to look at the development of human societies over time is as a process of overcoming different kinds of scarcity.

Technology enables us to increase our access to scarce resources or to decrease our requirements for them. Scarcity forces creativity and invention. When we run up against limits, we find ways to increase supply of or reduce demand for resources. While eliminating scarcity is unlikely, technology helps us make resources go further. Where there is scarcity of something, its price goes up. For a resource to have economic value, it must be both scarce and desirable. If something is scarce, but no one wants or needs it, then it has no or low value. If something is desirable but not scarce, its value is also low or nonexistent.

A resource can be valuable purely by dint of being scarce-for example, if owning it serves as a signal of wealth. Perceptions of scarcity impact our ability to make decisions. Not only does scarcity trigger our biological instinct for self-preservation, it often results in making trade-offs. We become fenced in by perceived limits, whether they reflect actual limits or not. Experiencing temporary scarcity of something essential can impact our actions for a long time after. For example, someone who grows up in poverty and then, later in life, makes a lot of money may continue to fear running out of money or may retain frugal habits that are no longer needed. The Great Depression is an example of this; many people who grew up during the Depression maintained the same resource-preserving behaviors well after it ended. Looking back at how our time or money was spent during moments of scarcity, we are bound to be disappointed.

Immediate scarcity looms large, and important things unrelated to it will be neglected. When we experience scarcity again and again, these omissions can add up. -Sendhil Mullainathan and Eldar Shafir When we lack what we need, we are often forced to make complex, even constant, calculations, which is mentally taxing and leaves less attention for other things. Scarcity may be harmful to us when it comes to the requirements of living, like food, but that doesn''t mean abundance is always good news for our thinking. The kind of abundance many people in wealthy countries experience is something altogether new in human history. Food, for example, has never been more abundant in wealthy countries. Yes, we need to eat, but we don''t need to eat a lot of refined sugar. When a resource that has been scarce for much of human history becomes abundant to the point where we can access more than we need or have the capacity to use, we may struggle to stop consuming it.

When one resource becomes more abundant, something else tends to become the bottleneck restricting how much we can consume. Making a lot of money, say, can come at the expense of not having enough time to spend it. We may need to moderate our use of one resource to allow us to realize the benefit of another. Sometimes, making something more abundant (whether in reality or perception) can go both ways in terms of affecting how much of it people consume. Usually, the more abundant something desirable is, the more of it we consume. Think rice in Asia, bread in Italy, coconuts in Costa Rica-the abundance of something brings its price down. However, if we expect something desirable to be in short supply, we may behave in detrimental ways. The possibility of a short supply of a resource can trigger the urge to hoard as much of it as possible for ourselves, as we saw with the hoarding of basics like toilet paper during the early days of the COVID pandemic.

Scarcity can also perpetuate itself. When access to a resource has previously been severely limited, leading to high economic value, it creates strong incentives to maintain its scarcity, even if the resource actually becomes abundant. Take diamonds: for centuries, their supply was tightly controlled, making them expensive. Now we can grow flawless diamonds in labs, but the industry still works hard to preserve the perception of scarcity. They''re not selling diamonds; they''re selling the story. Scarcity is the business model of the luxury sector. Luxury brands take advantage of one particular aspect of psychology: the fact that the more scarce something is, the more we want it. Hermès can make more Birkin bags but chooses not to.

Fewer than 100,000 Birkins are made every year, and the process of buying one is famously difficult-it involves either waiting for months or having a purchase history with Hermès. This controlled scarcity is key to the high prices of the luxury sector. Scarcity as a model is very useful as a tool for second-order thinking. If I get more or less of something, what is the result? More money? Great! What will I spend it on? How will my life be different when I''ve made those choices? For example, money seems to be the most sought-after resource, since it''s key to obtaining many others. Yet lottery winners often end up richer (at least temporarily) but not much happier, having walked into new problems: loss of privacy, risk of exploitation, being valued for your money and not your character, and struggling to balance a huge new responsibility in a way your family and friends see as fair. In our personal lives, scarcity can be a great motivator. When we think about reducing scarcity, maybe we think about learning new skills to increase our income. Maybe we think about changing jobs to earn a higher salary or decrease our commute.

In both cases, we are aiming to give ourselves more of a resource, either money or time, and therefore to reduce the scarcity of those elements in our lives. When considering how to reduce scarcity, it''s equally important to consider what effects that reduction in scarcity might have. As in the example of lottery winners, we need to do a little second-order thinking and say, "Now that I have more money or time, what am I going to do with it?" It''s just as important to think, "If I do those things, then how does my life change?" Many seem to think that having a three-million-dollar net worth or a salary of five hundred thousand dollars would solve most of their problems. They are often surprised to find out that due to lifestyle creep (increasing your living standard to match a higher salary), many people with high salaries spend most of what they make and feel the same financial pressures as the rest of us. Whatever economic rung of the ladder you''re on, that cohort has its own financial cues, expectations, and mores. It''s about acknowledging that changes in one part of a system will often generate changes in another part. Reducing the Scarcity of Information To help us understand just how far-reaching the consequences of reducing scarcity can be, let''s look at the abundance of information created by the printing press. Exploring moments in history like this is not the same as evaluating the control we have over our individual choices, and the changes wrought by the printing press were almost entirely out of the realm of being predictable by its inventor.

But the printing press is, an excellent example of how changing scarcity can have rippling consequences in areas you might not initially consider. Before it, manuscripts were hand copied by scribes. Manuscripts were also often written on parchment, and these two factors go a long way toward explaining why there was comparatively little written material around. Parchment, made from animal skins, takes longer to produce than paper, and hand copying is time-consuming. Even if sufficient scribes could be hired to produce a manuscript in a few days, we can easily imagine how many copies a printing press could produce in the same amount of time. Information, before the printing press, was scarce. This scarcity meant that it required work for scribes to find manuscripts to copy. Christopher de Hamel explains that "the keeping, borrowing, begging, or hiring of exemplars [books to copy] was an important preliminary to the business of writing a medieval book.

" Further, hand copying inevitably introduced errors. Although many manuscripts display evidence of review, in that they contain corrections, it is a certainty that not all errors were caught. A scribe was lucky to have one text to copy; having two of the same, for comparison, would have been an inconceivable luxury. Because of the reality that hand copying risked perpetuating earlier errors while also introducing new errors, older texts often were more accurate. The scarcity of manuscripts also meant there was no way of knowing if more, better, or more useful information was out there. There was no index of all known works, no compendium of knowledge. People did not learn from manuscripts in the way we learn from books today. Manuscripts were not shared widely and thus were not considered a learning tool for the average person.

Knowledge was shared verbally and directly. To learn how to do something, you had to be tau.