Abundance vs. Scarcity

Herman Daly on Abundance vs. Scarcity

A lecture by Hermand Daly sets out the problematic of scarcity vs. abundance, which is key to economic governance.

Lecture Summary by Jing Cao

"A commonwealth is a resource created either by nature, or by aggregate human effort. Natural resources would fall into the first category; knowledge belongs to the second. Sustaining our commonwealths means using with maintenance. We must realize what the maximum amount of a resource we can consume while still maintaining our commonwealths. The problem in the current economy is that nature is treated as a non-scarce resource when it is in fact scarce. Knowledge has the opposite problem, it is treated as scarce when it is in fact non-scarce.

In economics, goods are either rival or non-rival, and excludable or non-excludable.

A rival good is one where if I consume it, that prevents you from consuming it. Clothing, for example, is rival. Sunlight is non-rival since my consumption of it doesn't prevent you from enjoying it.

Rivalnessis a physical property. Excludability is a legal concept. Excludable goods can be made private property, such as a private residence. Non-excludable goods are those not privatized.

1. Rival, excludable goods are the ones the market was made for... market goods.
2. Non-rival, non-excludable goods are public goods.
3. Rival, non-excludable goods give way to the tragedy of the commons. These goods, fishing rights or clean air, are rival, yet because there is no way of making these excludable, each party will try to consume them before another party exhausts the resource, leading to competitive depletion instead of cooperative conservation, which would be in the best interest of all parties.
4. Non-rival, excludable goods, such as knowledge, result in the tragedy of artificial scarcity. Sustainability is not a problem with the commonwealth of knowledge because knowledge is a non-rival resource. For existing knowledge, since there is zero opportunity cost for its use (my use of a piece of knowledge does not prevent you from using it) its price should be zero. However, there is an expenditure of rival resources for the pursuit of new knowledge. Some pieces of knowledge, such as the discovery of subatomic particles, may come at a high cost. Others, such as Descartes' fathoming of analytical geometry while staring at his ceiling from his bed, may come at no cost. The acquisition of a new piece of knowledge may also be for the delight of discovery.

However conventional wisdom says that without a profit motive, no new knowledge will be created. The production of new knowledge requires extrinsic stimulation and to this end it is made artificially rival through patents and intellectual property rights. However, since new knowledge is created from old knowledge, if old knowledge is made artificially expensive, then the production of new knowledge is hindered. Not all knowledge is equally beneficial to mankind, and the interests of private profit isn't always the best filter. The profit incentive has given us liposuction and Viagra, but no cure to AIDS or malaria. We should drastically cut back on intellectual property rights and rely on public funds and the human drive to learn for the continued production of new knowledge.

Nature, on the other hand, is rival, but treated as non-rival. Rival goods sometimes become non-rival if demand is low, and my consumption does not hinder your consumption. Water used to be such a resource. Some resources, such as timber, are rival generationally, since within a generation there is only a limited supply, but can be non-rival in the long-term if exploited at levels of sustainable yield, that is if only income and not capital is consumed. It is necessary to protect these fundamentally rival goods by making them excludable. The commonwealth of nature needs to be protected by individual or social property rights, not open access.

The market solution to this is the cap-and-trade system. Rival resources such as fishing rights or polluting rights would be capped at an ecologically sustainable level, and then traded on a market. The cap-and-trade system brings up the questions of scale, distribution,and allocation. The decision of where to place the cap on the scale of the use of a resource must be a social and ecological decision. The market assumes a preexisting scale and has no mechanism for setting one. The market also deals very little with distribution, since the market takes ownership as a given."

Comment from Soenke Zehle

"This is key: "Some resources, such as timber, are rival generationally, since within a generation there is only a limited supply, but can be non-rival in the long-term if exploited at levels of sustainable yield, that is if only income and not capital is consumed." This is where all classical economics fails; the whole idea of achieving allocative optima through self-regulating markets is at odds with any thought of futurity, econ theory accommodates this rather awkwardly through fiddling with discount rates for future use. That's also why, imo, ecological economists like Daly (one-time World Bank dissident who was actually much more interesting than Stiglitz, for example) and others like Martinez have turned the problem of inter-generational allocation of resources into a major area of emphasis"

Andre-Jacques Holbecq on Post-1960 Abundance Economics

Towards an Economics of Abundance

André-Jacques Holbecq distinguishes two great ecomic periods: one marked by scarcity, until 1960, one market by the abundance of economic goods, after that period. This shift forces to rethink all our assumptions and to change our paradigm, which is why he proposes the alternative of the ecosocietal movement.

"Nous pouvons résumer deux périodes de l'évolution de l'environnement économique : Une longue période de pénurie jusqu'en 1960 : la demande est supérieure à l'offre manifestée. On encourage la production qui génère le pouvoir d'achat. Il s’agit de produire plus et il faut « produire PUIS vendre ». La capacité de production est optimisée, les stocks et les délais sont importants. Les prix ont une tendance à la hausse. Après une période de transition, c’est, depuis 1980 le début de l'ère d'abondance dans tous les pays industrialisés. L’offre est supérieure à la demande manifestée ou potentielle. Le marketing et la publicité sont dominant pour susciter une demande non manifestée, la production est instable, le process de fabrication est prioritaire. Il faut « vendre PUIS produire ». Les prix ont une tendance à la baisse, mais la conséquence est une diminution du pouvoir d'achat. Depuis quelques décennies la production mécanisée a explosé. D’une société de pénurie, nous sommes passés à une société d’abondance : celle où les biens de consommation existent en quantités suffisantes pour satisfaire aux besoins de tous. Mais il ne suffit pas que les biens abondent ou surabondent. Il faut, en plus, que les consommateurs les achètent, qu’ils disposent d’un pouvoir d’achat.

Sous un régime de pénurie, le pouvoir d’achat dépend de la production et il est suscité par elle. Sous un régime d’abondance, la production dépend du pouvoir d’achat et elle est suscitée par lui. Le pouvoir d’achat conditionne la prospérité."

Marshall Sahlins on The Original Abundance Economy

Learning from the tribal gift economy

Marshall Sahlins, celebrated anthropologist, was one of the first to challenge the industrial-era myth of progress, showing in his essay on The Original Affluent Society, that tribal economies were in fact operating in a context of abundance.

"When Herskovits was writing his Economic Anthropology (1958), it was common anthropological practice to take the Bushmen or the native Australians as "a classic illustration; of a people whose economic resources are of the scantiest", so precariously situated that "only the most intense application makes survival possible". Today the "classic" understanding can be fairly reversed- on evidence largely from these two groups. A good case can be made that hunters and gatherers work less than we do; and, rather than a continuous travail, the food quest is intermittent, leisure abundant, and there is a greater amount of sleep in the daytime per capita per year than in any other condition of society. The most obvious, immediate conclusion is that the people do not work hard. The average length of time per person per day put into the appropriation and preparation of food was four or five hours. Moreover, they do not work continuously. The subsistence quest was highly intermittent. It would stop for the time being when the people had procured enough for the time being. Which left them plenty of time to spare. Clearly in subsistence as in other sectors of production, we have to do with an economy of specific, limited objectives. By hunting and gathering these objectives are apt to be irregularly accomplished, so the work pattern becomes correspondingly erratic."