Scarcity (7) - Imagination Unleashed

Supply and demand are not fixed. The supply of goods depends on our ability to combine energy, intelligence and stuff from the earth to produce things that people want. Supply can increase gradually over time, but cannot increase dramatically unless new technology emerges.

Demand depends on our attitudes and desires and is only limited by our imagination.

A strange thing has happened in the modern world. The supply of goods has increased steadily. This would normally cause prices to fall, except that demand has grown even faster. Our needs and desires have expanded radically. If a poor man from Jesus time were offered the lifestyle of a person living on welfare today, he would feel incredibly rich. The lifestyle of a rich person from Jesus time would be seen as inadequate today.

This has a strange consequence. Although we are the richest generation that has ever lived, we are also the most dissatisfied generation that has ever lived. We have gone into debt, so we can have more stuff now, but we still want more. This is a different scarcity. An unbound imagination can never be satisfied.

Scarcity now derives from demand rather than supply. In traditional society, scarcity was the consequence of severe limits on the ability to produce. A subsistence farmer or hunter often needs to work all day, just to produce enough food to live. He had no time to dream about luxuries. Scarcity arises out of technical constraints on the ability to produce.

In the modern world, pressure on scarcity comes from the demand side. Free market capitalism has largely resolved the problem on the supply side. A modern economy can easily produce food and shelter for all members of society. In the Western world, scarcity arises more out of the insatiable demand for more and more goods and services. The problem is that there are no physical or technical limits on what people can desire or want.

Scarcity arising from the demand side cannot be resolved by producing more, as desires and wants can grow faster than productivity capacity. The only solution to pressure from this side is for people to be happy with what they have got.