≡ Menu

Quotation of the Day…

… is from page 184 of the original edition of James M. Buchanan’s and Richard E. Wagner’s superb 1977 book, Democracy in Deficit: The Political Legacy of Lord Keynes (footnote deleted):

A nation cannot survive with political institutions that do not face up squarely to the essential fact of scarcity…. Scarcity is indeed a fact of life, and political institutions that do not confront this fact threaten the existence of a prosperous and free society.

DBx: A great deal – arguably most – political discourse either ignores the reality of scarcity altogether or treats scarcity as being much less binding than it really is, as when demagogues propose to fund the masses’ bread and circuses and health care with tax revenues extracted from “the rich.”

The ability of politicians to get away with ignoring or discounting scarcity is made possible, of course, by the public’s economic ignorance. But not only by this ignorance: Ironically, this ability to treat scarcity as if it is, at most, a minor inconvenience easily escaped is enhanced by the very market that nearly all scarcity-deniers hold in such low esteem. The market’s robustness – its capacity, even when saddled with state-imposed absurdities, to continue to produce ever-more output at lower and lower costs – conveys the mistaken impression that scarcity isn’t very binding after all and that the economic process of wealth creation is rather automatic, a force of nature largely independent of human agency and institutions.

The market’s robustness and actual record of stupendous success and relatively little failure are, as I’ve argued before, far more responsible for government intervention than are any actual market failures. (If you think, as some of you will, that my use of the word “stupendous” is over the top and Pollyannaish, take a few moments to ponder the reality of your daily life – of the processes that make it possible for you to wear the shoes now on your feet, to have eaten the food now in your belly, to drive in a car to the supermarket, the supermarket!) It is simply a myth – although one widely accepted even by most economists – that the market is a highly imperfect institution, one failing left and right and constantly and, thus, kept on life support and functional only through the scientific attention of apolitical social engineers employed by the state.

The fact that innovative market processes continue to produce more and more output at lower and lower costs does not mean that scarcity is unreal or escapable. Scarcity will always be with us and, hence, we must always sacrifice some guns to get more butter, some swords to get more plowshares, some consumption today to get even more consumption tomorrow. It’s too bad that the great productive capacity of innovative markets blinds so many people to the reality of the scarcity that markets deal with so successfully.