Capital
Scarcity is often a problem of capital. For example, 71 percent of the world's surface is covered in water but many regions in the world face severe water scarcity. Capital such as desalination facilities and groundwater recharge infrastructure could solve this problem on a global basis. However, the cost of this capital may be extremely high.Supply
Supply is the amount of a resource that producers are willing to supply at a given price. Generally speaking, when prices rise, supply eventually rises as producers invest in more capital.Demand
Demand is the amount of something that consumers and businesses are willing to buy at a price. When prices rise, demand typically falls. In many cases, this occurs because people are unable to afford items they want or need.Innovation
Innovation is the improvement of goods and production. The term implies a leap forward as opposed to a gradual improvement. Innovation can reduce scarcity. For example, if an inexpensive way is found to desalinate water and deliver it to arid regions, this could make fresh water far less scarce.Substitution
Substitution is another way that people deal with scarcity. For example, if meat becomes more expensive due to a supply shortage, people may switch to tofu.Limitless Wants
Economic theories related to scarcity often talk of "limitless wants" with the implication being that scarcity is inevitable. For example, a single person might want all of the water on the planet for themselves. Luckily, no single person has limitless wealth, therefore limitless wants can't generate limitless demand.Non-scarce Goods
Non-scare goods are things that are plentiful in supply and limited in demand like rocks or seawater.Supply Shock
A supply shock is a shortage that occurs when supply of a good suddenly drops. This can occur due to resource depletion such as low fish stocks. It can also occur due to a dispute or disruption such as a trade war.Opportunity Costs
The existence of scarcity implies that people need to make choices between goods. Economists refer to these trade-offs as opportunity costs.Renewable Resources vs Nonrenewable Resources
A renewable resource is a stock that regenerates itself if properly managed. For example, fish are a renewable resource if people don't overfish or damage water ecosystems. A nonrenewable resource is a stock that doesn't regenerate such that it is eventually depleted such as oil.Tragedy of the Commons
Tragedy of the commons is when a resource is easily consumed by all such that it is eventually depleted or damaged. For example, overfishing can easily lead to the extinction of a species. Likewise, air, water and land are commonly polluted with waste as this can often be done without penalty or constraint.Malthusian Catastrophe
It was commonly believed in the 19th century that population growth would eventually outstrip the planet's food producing capacity. The 19th century economist Thomas Malthus theorized that innovations that increased agricultural yield only served to increase population further. This is invalidated by the modern observation that affluent countries tend to see a declining birthrate. Malthus predicted a tragedy whereby population would outstrip the planet's ability to feed people. Similar theories are still popular today such as the idea that the world has a carrying capacity that represents a hard limit on the number of people that can be supported based on modern lifestyle expectations.Economic Growth vs Population Growth
Generally speaking, world economic growth vastly outstrips population growth. For example, world GDP per capita was around $450 in 1960 and was $10,192 in 2015.Wealth Distribution
Although the world currently has enough production capacity to give everyone the basics of life, this doesn't always happen because wealth is distributed extremely unevenly with a large concentration of the world's resources in the hands of 2% of individuals.Superabundance
Superabundance is the theory that technology in areas such as artificial intelligence, automation and nanotechnology will continue to increase GDP per capita at an ever increasing growth rate. This scenario would allow for the construction of large scale facilities in space such that human populations could expand beyond the constraints of the planet.| Overview: Scarcity | ||
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Definition | A limited supply of a good. | |
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