Economic Growth Does Not Eliminate Scarcity

by Don Boudreaux on June 26, 2011

in Complexity & Emergence, Economics, Energy, Growth, Myths and Fallacies, Reality Is Not Optional

The understandable question arises: if resources are not necessarily finite in economic terms, are resources therefore not scarce?

No.  Resources will always be scarce.  A thing is not scarce if and only if that thing is instantly and fully available without requiring of each and every consumer of that thing any choices or conscious actions directed at acquiring that thing.  Some of the non-scarce things that are useful to human beings are breathable air and gravity.

Salt was once a precious commodity – so precious that salaries in ancient times were sometimes paid in salt.  Today salt is much more abundant than it was in ancient times; the economic supplies of salt are today much greater than they were in the past.  But salt remains scarce today, just as it was scarce in ancient times.  Even today, salt is not immediately and costlessly available to each and every person who wants it in whatever quantities each and every person would want it if each and every person were freed from the necessity of expending any effort or resources to acquire salt.

One helpful economic heuristic devise is the production-possibilities curve.  (You’ll find several images of this curve here.)  The production-possibilities curve (or “frontier”) shows that, for an economy operating on the curve, to get more of good X in a given period of time requires producing fewer units of good Y – for producing more of X requires that more resources be devoted to the production of X, resources that, in the framework of the production-possibilities curve, must be removed from the production of good Y. To produce more guns today means producing less butter today.

Guns and butter are scarce because to get more of one means giving up some of the other.

But over time the production-possibilities curve can (and, especially over the past 200 years in the capitalist world, does) shift outward.  Combinations of quanties of X and Y that were earlier impossible to produce become possible to produce.

A well-recognized cause for a ‘shifting-out’ of the production-possibilities curve is an increase in the supply of resources.  The brilliant scientist in my earlier post who figures out a low-cost way to quadruple the amount of energy extracted from each ounce of petroleum makes possible an increase in the quantities produced of both X and Y.  Yet goods X and Y both remain scarce – to get more of one requires sacrificing some of the other.  And petroleum, too, remains scarce: acquiring more of it requires sacrificing the production (and consumption) of other goods and services that could have been produced were not resources used instead to bring more petroleum to market.


104 comments    Share Share    Print    Email

Previous post:

Next post: