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Scarcity
Learn about the concept of scarcity, a crucial concept in the field of economics. Examine various examples of scarce resources (e.g. caviar, labor, housing) as well as free resources (e.g. air, water in certain contexts) as you learn how economics is a study of how to allocate scarce resources.
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Isn't it interesting how knowledge about something can turn a free resource into a scarce resource or vice versa? Like in the lake example, in primitive times, you could have just drank it! But now that we know about bacteria, viruses, fungi and other pathogens in the environment we have to filter the water therefore making it a scarce resource.(52 votes)
One of the reasons seawater is considered a free resource is because though there is demand for it, there is just too much seawater for that demand to ever be matched. The same goes with something like oxygen.(13 votes)
Wouldn't air already be a scarce resource when considering it in terms of pollution, as ultimately many people would prefer living in places with cleaner air, and people pay higher taxes to plant trees etc in their areas, thus improving the quality of said air? So although air itself may not be a scarce resource, won't the quality of that air be a scarce one?(27 votes)- You are definitively right! Quality in itself can turn free resources in scarce resources. Scarce resources aren't always profitable, but if it is, you can make a business out of it. As an example of what you're saying: https://edition.cnn.com/2015/12/15/asia/china-canadian-company-selling-clean-air/index.html(17 votes)
Can future technologies such as 3d printing and renewable energy begin to make a scarcity-based economic system obsolete?(4 votes)
No, because all scarcity is really just based on labor.
You can make gold. Did you know that? Transmute a base metal like lead into gold, pretty easy. You just use a high-energy neutron source to create radioactive lead, which then decays, and then you bring it up to 79 (Au) with a Fusor.
Why is gold so expensive?
The sheer amount of energy required to transmute lead into gold is enormous. That's a lot of oil, solar, geothermal, or any other type of electricity you can generate. It's a LOT of labor.
It's much cheaper to go dig it out of the ground.
If this sounds ridiculous, look at the history of artificial diamonds. Diamonds from the earth are cheap (the price is artificial); artificially-manufactured diamonds, until recently, cost more than just paying the DeBeers mark-up. Lots and lots of labor.
We could make infinite caviar, too. It just requires building huge vats and expending a lot of energy farming fish. The labor investment would be enormous, and all those wages…the cost would be unfathomable. Rich people couldn't afford that.
Technology will make things cheaper by reducing the labor investment, thus the wages paid ($10/hr x 5 hours = $50; make a factory and invest a total 10 labor-minutes into each such produced thing and now $50/hr x 0.167 hours = $8.33 to buy the same thing). We're not looking at post-scarcity; we're looking at wealth by structural change (do you think we need as many people working to make those things with this factory? No. New jobs will appear; a different set of people may get those jobs, even if unemployment rates remain the same).
I waited so long to get into economics because of stuff like this: the video presents an accurate description of modern economic theory; what I present here is an accurate explanation of what's actually happening, which modern economic theory kind of dances around. The economists hate this, because it breaks their abstractions (land is a modifier for labor; capital is just labor).(40 votes)
So human labor is considered to be a scarce resource, but how about once we have machines and robots doing all the menial factory jobs? Would machine labor then count as a free resource?(10 votes)- No. They would need to be build of materials, and use power. It could make labour much cheaper, but not free.(2 votes)
- why is scarcity important(3 votes)
If resources weren't scarce, it wouldn't matter what we did with them because they would never run out. But because they are scarce, we have to decide what to do with them, and those choices have consequences.
Without scarcity, the field of economics would be unnecessary.(13 votes)
- Isn't the knowledge of scarcity a subjective topic? What might be scarce for others might be abundant for others?(9 votes)
No, because all scarcity is really just based on labor.
You can make gold. Did you know that? Transmute a base metal like lead into gold, pretty easy. You just use a high-energy neutron source to create radioactive lead, which then decays, and then you bring it up to 79 (Au) with a Fusor.
Why is gold so expensive?
The sheer amount of energy required to transmute lead into gold is enormous. That's a lot of oil, solar, geothermal, or any other type of electricity you can generate. It's a LOT of labor.
It's much cheaper to go dig it out of the ground.
If this sounds ridiculous, look at the history of artificial diamonds. Diamonds from the earth are cheap (the price is artificial); artificially-manufactured diamonds, until recently, cost more than just paying the DeBeers mark-up. Lots and lots of labor.
We could make infinite caviar, too. It just requires building huge vats and expending a lot of energy farming fish. The labor investment would be enormous, and all those wages…the cost would be unfathomable. Rich people couldn't afford that.
Technology will make things cheaper by reducing the labor investment, thus the wages paid ($10/hr x 5 hours = $50; make a factory and invest a total 10 labor-minutes into each such produced thing and now $50/hr x 0.167 hours = $8.33 to buy the same thing). We're not looking at post-scarcity; we're looking at wealth by structural change (do you think we need as many people working to make those things with this factory? No. New jobs will appear; a different set of people may get those jobs, even if unemployment rates remain the same).
I waited so long to get into economics because of stuff like this: the video presents an accurate description of modern economic theory; what I present here is an accurate explanation of what's actually happening, which modern economic theory kind of dances around. The economists hate this, because it breaks their abstractions (land is a modifier for labor; capital is just labor).(0 votes)
Time is generally known as a scarce resource, but...
I do not quite get the notion of time being a scarce or free resource. You could consider it a scarce resource if you think of it like- you have only 24 hours a day, and also you do not live forever, so obviously you have little time.
But if you look at it in a general perspective, time is never going to be over (maybe only for you, but atleast not for the entire universe). And also you do not have to give anything in return for having time, or your usage of time does not hinder someone else’s.
So how can time possibly be considered scarce?`(8 votes)
Humanity as a whole has to put in the effort to make sure they don't cause some catastrophe that kills us all. Also, the universe will eventually die. There are many astronomy videos on the subject. Lastly, because we humans exist, many species on Earth are hurt. If we gave up our time, those species would probably thrive. So our usage of time does hinder others.(1 vote)
A lot of economists seems to use models that aim to predict people's behaviors logically based purely on things like price, interests rates, etc with theories such as aggregate supply and aggregate demand. But as you will see later in the playlist, Sal seems to think human emotions play a great role as well, i.e., how good they feel about the economy in determining whether they will spend or save. So, short answer, very important--but it is perhaps just as important as to what motivates said behavior or reaction.
How important is it to understand people's behavior and potential reactions when it comes to making economic policy?(5 votes)- It's pretty important.
But one of the things to keep in mind about economics, especially in an introductory course, is that a lot of the assumptions you are describing get dropped, or at least loosened, as you get into more complicated economic topics and deeper into the discipline.(5 votes)
- hey :) caviar/fish eggs are not really deep down in the water but held in the belly of fishes who have to be killed and so their eggs can be harvested. Unfortunately.(7 votes)
At0:15the definition is that scarcity is when there is not enough of something but isn't it enough of something to satisfy human needs?(4 votes)- Correct. Part of that relates to the idea of rivalry, though. Rivalry exists when one person consuming a good interferes with another person consuming that good. For example, cookies are rival because if I eat a cookie, there is one less cookie for you to eat. Part of why there isn't enough of something is because it is rival.(4 votes)
0:15Video transcript
- [Instructor] The
entire field of economics is based on the idea of scarcity. And, arguably, we wouldn't even need a field of economics, if there wasn't the notion of scarcity in the world. So what does scarcity mean? Well, think about what does
it mean in everyday life? It means that there's not enough of something to go around. If we're talking about scarce goods, scarce services, scarce resources, we're talking about
things where if there was no cost associated with
them, people would use far more of that than
there actually is around. And in this video we're gonna think about different types
of goods and services or just resources and think about whether they are scarce or not. So a related idea to scarce
resources is it's opposite, which is the notion of a free resource. So this is something
that, you could argue, is infinitely abundant or at least in a certain context is so abundant that it feels like people can have as much of it as they want. The more that one person has of it, it doesn't take away from someone else. And the reason why scarcity is essential to economics is because
economics is the study of how do you allocate
these scarce resources. If there's more demand for it than the amount of thing that there is, well, who gets it, how
much of it do they get, and what do they have to give up in exchange to get those scarce resources? But for the sake of this video, let's just first make sure we understand and have a good idea of what resources are scarce and which ones aren't, and why. So this is a picture of caviar, which is essentially fish eggs, and it's not easy to get. The fish eggs are deep in the water, someone has to get to them, and then they have to package it in some way, and they have to get it to your plate. And so, do you think that caviar is a scarce resource or a free resource? Well, if it was a free
resource, that means that we're just swimming in caviar, that it's so abundant
that I could just have as much caviar as I want and there's still as much as you want and that everyone gets as much caviar as they like. Well, that's clearly not the case. Caviar is a scarce resource. In fact it is a quite scarce resource, and because of that, if you want it, you have to give up a good bit to get it. This is a picture of some
people working in a factory, and the resource that jumps
out here is that of labor. And labor's interesting because it's not as tangible as something like caviar but it is a resource. And one could even argue
that caviar on your plate, some of its scarcity comes
from the labor involved of getting it to your plate. But here these are clearly, it looks like these are gentlemen who
are putting together some type of fabric. And so, would you consider labor, would you consider that a scarce resource or a free resource? Well, it would be a
free resource if people were willing to just do as
much work for other people, actually willing to do an
infinite amount of work for other people, which
isn't even humanly possible. And even is it was humanly possible, people aren't willing to do that. They want something in return. And so, once again, it
is a scarce resource. There's many resources that
are pictured right here. You have this beautiful town
next to this alpine lake. And so, some clear scarce
resources are here. Many people would love to have a view like you would get from
this house or hotel right over here, but not everyone, and many people would love to live there because of the view, but
not everyone can live there. So that is a scarce resource. The water here is an interesting one. I can imagine in earlier times, if before there was a town here, if there was just a primitive village living next to this fresh water, they would probably view
it as a free resource. If someone was thirsty,
they would just go up to the lake and they would
just drink from the lake. They would not have to give up
anything to drink from that. But now the town, it
might be a little bit more of a scarce resource. They might want to preserve
it for various reasons. In order to get the water to your sink in your house, there
might be some services or goods or labor involved. Someone has to set up the pipes, maybe it has to be cleaned in some way. Well, then it might
become a little bit more of a scarce resource. Air for most of human history has been considered a free resource. And even today I'd argue that something like oxygen, at least on our planet, is considered a free resource. When I take a deep
breath (breathes deeply) it does not affect your
ability to take a deep breath. It does not take oxygen away from you. Now is there an infinite amount of oxygen in our atmosphere? No. But for our purposes it feels like there's an infinite amount. Now if the photosynthetic
plants were to disappear and all of a sudden oxygen
started to get diminished, or if we were in a space
station where there isn't a seemingly infinite amount of oxygen, well then you could imagine a world where it could become a scarce resource. You can imagine a colony on the Moon or on Mars or in the space station where it had some type of economic system to decide who gets how much oxygen. So I will leave you there. As already mentioned, scarcity is the central idea in all of economics. It's the reason why we even need a field called economics. And as you go forward
in your study of both micro and macroeconomics, we'll be looking at ways to allocate
these scarce resources. We'll try to study what
people have to give up in order to have access
to these resources, and we will have models that will help us understand what are the implications for these different methods
of allocating resources.