Economics without Scarcity

Sara Hsu

Economists have often been characterized as a dry, calculating bunch, focusing on the allocation of scarce resources with carefully drawn supply and demand curves.  The reason for this is that economics has, in Neoclassical theory and particularly within the writings of Lionel Robbins, emphasized choices and competition under conditions of scarcity.  Mainstream economic theory, rooted in Neoclassical thought, has continued in this vein, with a focus on market efficiency as the rule.  So, why do I have a problem with it?

Mainstream theory embodies decades of debate and rigorous application, but its focus on choice under scarcity has centered the study of economics on products, not people.  The assumption that people are there to either consume or produce products moves away from any requirements for basic human well-being, as emphasized by Amartya Sen in his own criticism of Neoclassical economics, supposes that consumers and producers always want to buy or sell more goods, and fails to focus on aspects of nature (such as forests or coral reefs) as more than resources, such as entities with a right to exist without subjugation to the human race.

These assumptions are flawed and not universally held.

First, with regard to the role of humans as producers or consumers, Karl Marx focused on labor not as one component in product, but as the most important component of value creation.  Marx centered on the struggle between capitalists and workers, and the exploitation by the former of the latter, as the primary economic issue.  As the Neoclassical school arose, Marx’s labor theory of value was ditched in favor of marginalism, with emphasizes consumer satisfaction and producer costs, with little to no emphasis on the plight of the worker.  Later, economists like Amartya Sen focused on economic development as more than accumulation of products or wealth, but as capabilities to live, function, and enjoy life.

Second, the assumption that consumers always want to buy more goods and producers always want to sell more goods may be true sometimes, but grossly oversimplifies the nature of production in society.  It defies the mind, but not all societies are about working and shopping.  In many places, accumulating goods or wealth is a means to an end, and not an end in itself.

Third, while environmental economics and theories of public goods have sought to describe how natural and common resources should be valued, there is a failure in both aspects of Mainstream theory to recognize the rights of nonhuman living beings to exist.  This idea is not that far-fetched; the nation of Ecuador recognized Rights for Nature in its Constitution adopted in September 2008.  The city of Santa Monica, California, also recognized “natural communities and ecosystems” right to exist.  Biocentric rights theories, and some religious and ethical theories make the same assertion.

What is more, in most cases, the concept of scarcity has rarely prevented economic agents from exploiting resources.  The fact is, despite the definition of economics as the study of the allocation of scarce resources, it doesn’t really work.  Labor and nature in particular have been used in many places and times as if they have no upper limit.  Workers are frequently overworked and underpaid as if labor was not scarce, and natural resources have been used up often without replenishment.

While I risk being accused of a lack of realism, I believe that the definition of economics as a study of scarcity is unethical and disingenuous in its current embodiment.  This study has helped to foster some of the ills we experience as a society, producing and consuming ever more as long as we can, without really considering our effect on humanity and nature.  After the global crisis, some economists, particularly heterodox, or non-Mainstream economists, called for a restructuring of the economics discipline.  This didn’t happen.  Now, as we face a potential climate crisis, can we change our understanding of this critical field?  Reshaping economics as the study of livelihoods, relationships to other humans, institutions, and nature, and well-being may be a step in the right direction.  Perhaps the next generation will understand that economics is more than filling our storage units and bank accounts, and give credence to other, essential aspects of life.

Triple Crisis welcomes your comments. Please share your thoughts below.

Triple Crisis is published by

Comments are closed.