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==Scarcity==

==Scarcity==

“Scarcity” is when the available good or service is not enough to satisfy everyone’s needs or wants.  There is a scarcity of oil and gasoline, for example.  Gas is expensive because there is not enough easily available to completely satisfy everyone’s desire for it in fueling their cars and supplying their other energy needs.  Drinking water is scarce also in some areas of the world.  Drinking water is more scarce in western states like Arizona and California than in northeastern states like New Jersey, where there are many wells.

“Scarcity” in economics refers to anything that is not free, and which costs at least something to obtain.  Air is not scarce, but almost everything else is "scarce" in economics because it costs money.  There is a scarcity of oil and gasoline, for example.  Gas costs money because its supply in refined form is limited, and the high demand for the limited supply drives up its price.  Drinking water is scarce also in some areas of the world, such as western states like Arizona and California.

Note that the economic definition of scarcity includes nearly all types of goods and services.  Economists would say that television shows are scarce, while most of us would not ordinarily say that.  Economists would say that junk food is scarce, while most of us would say there is too much it.  Economists would say that fatty foods are scarce, even though that sounds odd.

Economics is about "scarce" goods and services, which is almost everything.  Economists would say that television shows are scarce, while most of us would not ordinarily say that.  Economists would say that junk food is scarce, while most of us would say there is too much it.  Economists would say that fatty foods are scarce, even though that sounds odd.  All these things cost money, and are not free (in the case of television, the "cost" to viewers includes the time they have to waste watching advertisements).

The reason for the broad definition of scarcity in economics is to include any good or service that can be bought and sold.  If an item is so plentiful that everyone’s needs are fully satisfied, then there is no market to buy or sell it (e.g., air).  Once a price can be put on a scarce good or service, then some will not be willing to pay for it.  Often people will not be able to obtain all of the good or service that they want.  They may be better off without (e.g., fatty desserts at restaurants), though economists don’t address how we are better off because of scarcity sometimes.

The reason for the broad definition of scarcity in economics is to include any good or service that can be bought and sold.  If an item is so plentiful that everyone’s needs are fully satisfied, then there is no market to buy or sell it (e.g., air).  Once a price can be put on a scarce good or service, then some are not willing to pay for it.  Often people will not be able to obtain all of the good or service that they want.  They may be better off without it (e.g., fatty desserts at restaurants), but economists don’t care how scarcity may make people better off.

“The best things in life are free!”  True, but even free things can be considered scarce.  If the New Yankees gave away some free tickets to a World Series game, they would still be very scarce.  People would wait for days in line to get a chance to grab those tickets.  However, many other items of great value are not scarce.  There is no scarcity of prayer, for example.  It’s available to anyone at any time without charge.  Exercise, in some form, is not scarce either.  But many types of exercise are scarce, such as memberships in a health club.

Goods that no one wants are not scarce.  For example, a new deodorant that smells like a skunk would not be a scarce good.  You could charge nothing for it and your supply would still far exceed demand.  Toothpaste that turns your teeth yellow would not be scarce either.  How about hairspray that makes your hair fall out?  If the price of the good is always and truly free, like air, then it is not scarce.

Based on our definition of scarcity, we can now refine our definition of “economics”.  “Economics” is the study of ''scarcity'', especially as it relates to goods and services.  If there is no scarcity, then everyone has what they want.  There is no scarcity of air, so economics does not study the everyday uses of air.  But there is a scarcity of land and oil, so we do study how they are bought and sold.

 

Based on our definition of scarcity, we can now refine our definition of “economics”.  “Economics” is the study of ''scarcity'', especially as it relates to goods and services.  If there is no scarcity, then everyone has what they want.  For example, there is no scarcity of air, so economics does not study the everyday uses of air.  But there is a scarcity of land and oil, so we do study how they are bought and sold, along with everything else that is bought and sold.

Can you define “scarcity” now in just four words?  Here we go: scarcity consists of “wants greater than means.”

Can you define “scarcity” now in just four words?  Here we go: scarcity consists of “wants greater than means.”

There was a famous bet made in 1980 after the liberal Paul Ehrlich claimed that an increase in world population would cause greater scarcity in basic natural resources, such as copper, chromium, nickel, tin, and tungsten.  A "classical" (conservative) economist, Julian Simon, predicted that people would seek and find substitutes for scarce resources, such as other materials, and that this would prevent greater scarcity and higher prices.  The wager was that Ehrlich predicted that the price of these metals (also called "commodities") copper, chromium, nickel, tin, and tungsten would increase in price by 1990; Simon predicted their prices would not.

There was a famous bet made in 1980 after the liberal Paul Ehrlich claimed that an increase in world population would cause greater scarcity in basic natural resources, such as copper, chromium, nickel, tin, and tungsten.  A "classical" (conservative) economist, Julian Simon, predicted that people would seek and find substitutes for scarce resources, such as other materials, and that this would prevent greater scarcity and higher prices.  The wager was that the liberal Ehrlich predicted that the price of these metals (also called "commodities") copper, chromium, nickel, tin, and tungsten would increase in price by 1990; the conservative Simon predicted their prices would not increase.

The classical economist Simon won the bet: the price of three of the five metals fell over that period and, when the price was adjusted for inflation, all five metals declined in their real prices.  In the case of tin, its price fell from $8.72 a pound in 1980 to only $3.88 a pound in 1990.  This was true even though the world's population increased by 800 million during that period.

The classical economist Simon won the bet: the price of three of the five metals fell over that period and, when the price was adjusted for inflation, all five metals declined in their real prices.  In the case of tin, its price fell from $8.72 a pound in 1980 to only $3.88 a pound in 1990.  This was true even though the world's population increased by 800 million during that period.