Scarcity and Abundance
AS economics student Ed Hardy offers his interpretation of this question: “Within a few years the common problems we associate with scarcity will be a thing of the past.” Do you agree?
On the one hand, yes, scarcity will be a thing of the past within a few years. This is because of the technological advances that can be made should processing power continue to grow according to Moore’s Law. With a long-term vision we could end up in a world where artificial intelligence equals human beings in most tasks and dramatically increases our efficiency and utilising and manufacturing materials. However, if you look in the short term steps are already being made towards this goal.
For example, with the invention of 3D printing people are now capable of designing, manufacturing and building almost any product from the comfort of their own home. This new technology has the potential to remove supply chains, middle men and salesmen and as a result remove the threat of scarcity.
Ultimately eliminating scarcity comes down to creating an abundance of key resources required to produce goods and services. The critical part of this argument is relating to ‘key resources’. The problem with goods and services in the past was that they required large numbers of components to work which made them vastly expensive, however, modern technologies allow for less components to be used and for less to actually achieve more, this is a process known as dematerialisation.
Matt Ridley uses the example of the smartphone to demonstrate dematerialisation in action. He states that, ‘An iPhone weighs 1/100th and costs 1/10th as much as an Osborne Executive computer did in 1982, but it has 150 times the processing speed and 100,000 times the memory’. He goes on to point out that this dematerialisation is not just limited to computing hardware but is also occurring as a result of the software these devices can handle. Banking, books, music and films are all available on a smartphone or tablet and no longer need the physical presence that was once so important. In fact taking one look at an AppStore demonstrates that there is an abundance of applications to assist a humans day-to-day life in a way that would have previously required another physical product.
Economist Diane Coyle believes that for scarcity to become a thing of the past there are still hurdles to be overcome. She states that while the technological advances are indeed impressive the, ‘techno-optimists can lack an important nuance’. In this instance she is referring to their ability to ignore important questions such as how financing will be raised for continued investment in innovation, where infrastructure will come from and how politics will ‘navigate the sharing of costs and benefits’.
These are all fair concerns and supported by the fact that lending to small firms from banks fell £500 million in the last six months according to the Daily Telegraph and if these small firms are not supported then innovation will stall. Finance is available from venture capital and private equity, however, the large number of new start=ups makes firms risk-averse as they back companies who have a logical and clear route to exit.
There is also an argument that for the ever increasing number of industries provide information or experience as a primary good, scarcity is quickly evaporating. However, if you look deeper at the business models of these companies (that are entirely unconstrained by production costs and materials) they look to actively introduce scarcity. This is because scarcity is embedded in our culture and society to a greater extent than we realise. A deal that is only available for a limited time or a limited number of people is immediately more attractive to the consumer, seeing the rise of many last minute deal sites such as Groupon and lastminute.com.
Some market researchers for a technology start-up found that by creating an incentive that was scarce uptake was increased by at least 50% and occasionally even double. The rising popularity of online auctions, such as eBay, further demonstrates the extent to which scarcity is ingrained into our culture.
Sendhil Mullainathan and Eldar Sharif, in their book Scarcity, go further and actually suggest that scarcity drives a work ethic similar to that of City bankers under a deadline. A review in the Guardian of the book states that they go as far to suggest that other words, ‘the stressed-out time-poor of the west have common cause with the actual dollar-a-day poor of the developing world’. By having to face scarcity on a daily basis, those in less developed countries actually have a tunnel vision that can be far more creative and productive than their Western counterparts. Therefore, one could surmise that scarcity is actually a beneficial concept in a modern world and there is no need to remove the problems that it causes over the next couple of years.
In conclusion, I believe that scarcity will not be a thing of the past within the next few years. This is because the greatest forms of scarcity, such as water scarcity, effect so many people every day that it is simply to big a task to suggest that all of the problems will be eliminated - or even elevated.
However, I do believe that scarcity on other scales will start to diminish, and the problems as a result, as we move into a new abundant era thanks to the introduction of new technologies such as 3D printing and smartphones that cut out the need for either a physical product or a manufacturer.