When it comes to economics, there’s one rule that virtually everyone agrees on: scarcity and its associated problems are universal economic issues that affect all people and all industries in virtually every country in the world. This has been true since the beginning of economic theory and practice, even before Adam Smith, who so brilliantly described many of the concepts at work today. But what if it’s not true? What if scarcity isn’t a universal economy problem?
Theory on why scarcity is not universally applicable
One reason scarcity may not be universally applicable is because it assumes rational decision-making. But in reality, people are often irrational, and don't always make decisions based on what would maximize their utility. Additionally, scarcity assumes a certain level of knowledge and information about available resources and options, which may not be realistic in many situations. Scarcity also relies on the assumption of fixed preferences, but people's preferences can change over time. If one person starts to like something they disliked before, then others might start to see this as scarce. Lastly, there is an implication of sustainability in scarcity: if we use too much of something up now, then we won't have enough later when we need it more. However, sometimes things are just temporary shortages with no long-term implications for future availability.
Examples of systems where scarcity does apply
In capitalism, scarcity applies to the competition for goods and services. Businesses compete for customers, workers compete for jobs, and so on. The basic idea is that there are limited resources and everyone is trying to get as much of those resources as possible. When we are in competition with others, we have less of what they want and more of what we want. For example, if you have one apple and I have none, you can't eat your apple while I starve. So it would be in your best interest to trade your apple for something I might value more than an apple (such as two oranges). Scarcity also applies when people use their time inefficiently.
Why scarcity doesn't apply in some instances
In some cases, scarcity doesn't apply because there's an abundance of resources. For example, if you have a lot of money, you can buy anything you want. There's no need to ration your resources or make tough decisions about what to spend your money on. You can afford everything and still have plenty left over for the future.
Light at the end of the tunnel: On the other hand, when you're living paycheck-to-paycheck without any savings and are barely making ends meet from one month to the next, scarcity is a reality. You may be able to afford rent but not food; or in order to feed your family this week, you may need to sacrifice next week's groceries.