Quora – The fundamental economic problem is scarcity. Why?

The fundamental economic problem is scarcity. Why?

[ 24/8/20 ]

What definition are you using of economic?

Is it one that focuses on the management of the “household” of planet earth, or one that concentrates purely on market values.

Scarcity is central to market value.

Markets produce a value metric (value in exchange) that is a product of some assessment of desire multiplied by scarcity (where scarcity is the inverse of availability).

Thus we can have things that are universally considered valuable, but are universally available, that have zero market value (like the air we breath).

Thus scarcity is a fundamental aspect of market value, and that is the cause of a great many issues that are profound in their implications, across all aspects of society; as many of the systems are optimised for profit, and not designed to meet the reasonable needs of all people. A potentially useful intermediate term resolution to that issue would be some form of universal income (seen as dividend on the combined accumulated knowledge and technological capital of humanity). If such a universal income were livable, then it would alter employment dynamics substantially, and we would likely see some very positive changes.

Unfortunately, if market value is used as a planning metric, then the scarcity component will continue to see scarcity persist to maintain market value. The fact that we have the tools and technology to deliver all the reasonable needs of all humans for the essentials of life and liberty will never be enough to see those needs met in any market based system, as in doing so the market value of such things drops to zero (like air).

And it is really complex, as there are some things that are genuinely scarce, but not many that many people would actually consider so essential that they would be unhappy with an abundant substitute that was close enough to be functionally indistinguishable in ordinary use.

And there are many dangers.

We have the twin tyrannies (the majority and the minority) – both of which must be avoided. Maintaining real individual security and individual liberty demands massive decentralisation and massive diversity; just as it demands high fidelity dispersed networks of relationship and information.

Everyone has responsibilities.

The right to freedom comes with responsibilities to ensure the lives and freedoms of all others.

This is a level of cooperation that is fundamental to the security of all.
So the idea that markets can solve any problem is clearly, logically and mathematically false.

Markets are useful tools only in the domain of those things that are genuinely scarce, and even there they come with many levels of dangers.

We need to all see that our survival and freedom are necessarily based in cooperation. There can be many useful places for competitive systems, but competitive systems are only survivable if built on a cooperative base (every level).

The difference is clear – the NZ response to covid-19 is built on a cooperative base.

About Ted Howard NZ

Seems like I might be a cancer survivor. Thinking about the systemic incentives within the world we find ourselves in, and how we might adjust them to provide an environment that supports everyone (no exceptions) - see www.tedhowardnz.com/money
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