Thoughts to ponder

by on July 27, 2007 at 6:02 am in Books | Permalink

This book review has introduced me to a new enemy, the economist Tyler Cowen…

…”The critical economic problem is scarcity,” he says in his book.
Like all other capitalist economist, Cowen is ideologically welded to
this bad idea of lack and shortages as the key problem. However,
scarcity is rarely real but manufactured. There is an abundance of
energy in the world. The sun gives it to us daily for free. All this
talk about there being not enough energy, food, fuel has been
essentially false. And the wars that have been fought to protect the
little there is for survival have been false wars–wars whose only truth
is that they befitted those who in this or that period of history owned
the means of production.

If scarcity was an authentic problem (rather than a fabricated one) then Africa would not be poor.

Here is the full review, which is titled "Bad Economics."  The pointer is from a loyal MR reader.

1 thom July 27, 2007 at 7:47 am

Wow. That’s it then, the game’s up. We’ve all been wasting our time.

At least it’s not scarce though.

2 Arnold Kling July 27, 2007 at 8:08 am

He may be spot-on about Africa. My sense is that the scarcity there *is* contrived, by bad government and unproductive culture.

The part about abundant energy from the sun may be right some day, too. But your critic seems to be implying that I don’t have a solar-powered car because of some evil conspiracy. Such a conspiracy theory would be loony.

But there is a kernel of truth in what he is saying. Lots of things that were scarce years ago are abundant today. And things that are scarce today may be abundant tomorrow. And when your problem is “so many movies, so little time,” that *does* sound more like abundance than scarcity.

3 Grant Gould July 27, 2007 at 8:49 am

Marxists have been quite right to ask the question, “who benefits from scarcity, and to what extent does this group overlap with those able to create or preserve scarcity?” Their answers may be incoherent at times (or indeed nearly always), but that does not make the question any less relevant. Scarcity creates market power outright, solves coordination problems for cartels, and favors certain sorts of cultural norms and their purveyors. Nobody corners the market for oxygen, or divides up the market for dirt, or denounces people from the pulpit for wasting sunlight on frivolous and decadent pursuits, nor do we see oxygen monopolists or dirt barons or sunlight-moralists lobbying in the halls of Congress.

Tradeable rights-of-scarcity, such as licenses to do business in certain goods in certain places, have been the building blocks of ruling classes since the Middle Ages. They remain politically popular today — see, eg, taxi medallions, liquor licenses, professional licensing, intellectual property, cap-and-trade emissions-credits schemes, etc. It would be naive, under such circumstances, to look at scarcity as a purely natural phenomenon, or to look at efficient ways of managing externalities (as all the above are alleged to be) in purely economic rather than class terms. The Marxists have an important point, even if they run with it in a somewhat silly direction.

4 thom July 27, 2007 at 8:53 am

Arnold Kling – I don’t think you understand why this guy is wrong.

Scarcity in the context Tyler used it is about infinite wants and needs and limited resources. Tyler *wants* to see all the movies but he has a limited amount of time and a whole abundance of other things to do with it. The opposite of scarce is not abundant but free, in the sense of having no opportunity cost.

5 josh July 27, 2007 at 8:59 am

Why do people have such strong oppingions about things they clearly don’t understand. Why can’t we just say, “I don’t have the expertise to be completly sure, but this doesn’t seem right to me.” This guy reminds me of those people who go around saying “If man came from monkeys, why are there still monkeys around and why don’t they give birth to any people!” I reasonable statement if you don’t understand either the facts or the theory.

6 Chicagoan July 27, 2007 at 9:31 am

Is it any surprise that someone from Seattle has come up with another pipe dream? Honestly, when will reality finally break through that bleak climate. Such whiners!

7 Sharath July 27, 2007 at 9:45 am

I think Tyler’s scarcity argument is along the lines of what Herbert Simon talked about –

“What information consumes is rather obvious: it consumes the attention of its recipients. Hence a wealth of information creates a poverty of attention, and a need to allocate that attention efficiently among the overabundance of information sources that might consume it.”

I would say there is scarcity of attention because they is abundance of movies/books.

8 Matt July 27, 2007 at 9:46 am

Like many people, Mr. Mudede confuses just what a scarce resource is. It is not energy that is scarce. The universe is overflowing with energy. It is the silicon and the complex manufacturing processes required to convert one form of energy, sunlight, into useful electrical energy that is scarce. Similar arguments can be made about his other points on the scarcity of food and the poverty of Africa.

9 Yancey Ward July 27, 2007 at 10:15 am

Paul D defines the concept best.

10 Jim Outen July 27, 2007 at 10:28 am

Maybe too much of any one of those, at a certain time, but never enough of all of them at all times.

11 Shiraz Allidina July 27, 2007 at 10:46 am

You shall judge a man by his foes as well as by his friends.

12 J. July 27, 2007 at 11:16 am

I was trying to figure out what Tyler would bother post such a trite and ridiculous review. What’s his incentive? My theory is now that this is actually positive publicity for his book. The fact that such a silly critic dislikes the book so intensely is (defeasible) evidence that the book is good and worth reading.

13 almrr July 27, 2007 at 12:00 pm

p at Jul 27, 2007 11:28:44 AM:

Do you not see the incredible entertainment value in a guy suggesting that scarcity is not real?

Geez louise.

14 Paul D July 27, 2007 at 12:27 pm

“importantly, the juxtaposition of infinite wants with limited resources implies one can never NOT have scarcity. What a useless concept, then, don’t you think? What use is an all-inclusive concept?”

I think that it is generally true that the juxtaposition of infinite wants with limited resources implies one can never NOT have scarcity. The example I gave is perhaps an exception–the air that we breathe, although even that is some circumstances can become a scarce good.
The notion of scarcity as economists define it is an axiom–a self-evident concept, similar to the axiom in geometry that parellel lines do not intersect. Economics is the study of how scarce goods are allocated by a society. Economists build upon the concept of scarcity to develop other ideas that are not so self evident much as those who study geometry start with basic axioms to develop more elaborate proofs.
One concept that economists build upon the idea of scarcity is the the concept of opportunity costs– the idea that pursuing a worthwhile objective necessarily involves trade-offs, that is if you want more of one worthwhile object you necesarily must give up some of another worthwhile obect.
While the idea of opportunity costs seems obvious, I am amazed how often people try to ignore opportunity costs when advocating for a particular policy. As a very simple example, every time one hears a politician say, “you cannot put a value on human life”, I would suggest that the politician is trying to ignore the opportunity costs of pursuing the objective of prevserving human life.

15 martin July 27, 2007 at 1:24 pm

Ah the inexperience and self-certain judgmentalism of youth. Reminiscent of many of Alex’s poster…

16 J. Mauad July 27, 2007 at 2:09 pm

Did you see the profile of this guy, Mudede? What can we expect from someone who proudly confess that “reads ‘Lolita’ at least three times a year”? I like ‘Lolita’ too, but to read it at least 3 times a year one must be crazy.

17 CMS July 27, 2007 at 5:31 pm

For what its worth, Charles Mudede was my journalism teacher my first year at Seattle Central CC and he was a miserable one at that. He passively allowed the fabrication of stories, shot down people’s good ideas (about a range of things) in favor of pro-leftist/socialist stories, and generally held no one to any standard of journalism except that of The Stranger, the rag of a paper that half of Seattle manages to choke through.

This article is vintage Mudede–he reads X, translates it as Y and then attacks Z, but intends not to let anyone know that by using the same word or phrase for X, Y and Z.

He ain’t all bad though, he liked me a lot. Ha!

18 Sam July 27, 2007 at 8:52 pm

Charles is surely right in the sense that if we decided to abolish property rights tomorrow and opt for equal fair share as a principle of distribution, scarcity of resources would be much less of a problem (although would not be eliminated completely). I wouldn’t want to advocate this as a solution, but it seems reasonable to be concerned about global equity without being a paid-up pinko. Isn’t that what Charles is getting at?

19 Nasikabatrachus July 27, 2007 at 10:22 pm

I doubt that would work, Sam. Prices are there because of scarcity, not the other way around: thus, the elimination of prices, as would follow from the elimination of private property, would lead to more of a mismatch between supply and demand because prices allow for economic calculation, hence more people would go without. Not that things need to have prices to move around efficiently, but people need a metric of value for disposing of the effects of their actions and only private property can provide that.

20 TGGP July 28, 2007 at 10:00 pm

Did crime, drug addiction and so on go down with the advent of the Great Society? Everything I’ve read indicates the contrary.

21 Tracy W July 30, 2007 at 11:11 am

Charles is surely right in the sense that if we decided to abolish property rights tomorrow and opt for equal fair share as a principle of distribution, scarcity of resources would be much less of a problem equal fair share as a principle of distribution, scarcity of resources would be much less of a problem

How?

Firstly, you can’t separate distribution from production. Which means you can’t separate the distribution of goods from the incentives to produce them (or in the case of things like clean air, from the incentives to avoid polluting them). Scarcity of resources was a major problem in Communist Russia, and pollution was a far greater problem than in the West, due to the lack of incentives to produce goods, or to refrain from polluting goods.

Secondly the concept of equal fair share raises all sorts of problems too. What’s an equal fair share between healthy me and a person with cystic fibrosis?

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