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Zaman – Normative Foundations of Scarcity

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By Asad Zaman

In my paper of this name (which has been published in Real-World Economics Review, Issue no. 61, 26 September 2012, pp. 22-39), I show that the apparently objective concept of scarcity is built on THREE normative assumptions. This argument destroys one of the basic ideas strongly argued in most conventional texts, that economics is a POSITIVE study of facts of our economic existence, and does not involve value judgement. The three normative pillars on which scarcity stands as the fundamental principle of economics are the following:

ONE: Private Property.
This is a cultural norm. For example, the Cherokee constitution states that the lands of the Cherokee Nations shall remain common property. If there is a cultural norm of sharing public resources, then the issue of scarcity would not arise (or at least, would be much less frequent). Anthropologists have shown that there is no starvation in subsistence societies because of strong norms of sharing. If the society as a whole has enough food, then EVERYBODY will get to eat. Note the violent contrast with the private property norm. In conventional economics, the Pareto principle embodies the normative idea that the right to property takes precedence over the right to life. If a poor man is starving, the rich man is NOT obligated to provide for him.

TWO: Consumer Sovereignty
Economists argue that we SHOULD not question consumer preferences as to where they come from and whether they are legitimate. Also, economists argue that we SHOULD design an economic system which fulfils ALL preferences (to the extent possible). Obviously if we differentiate between legitimate demands, and idle desires, scarcity would be much reduced. As Gandhi said, there is enough for everyone’s need, but not enough for everyone’s greed. The noxious NORMATIVE idea that the right of the super-rich to private jets trumps the right of the poor hungry child to bread is what leads to scarcity becoming the foundation of economics. If we change our norms to advocate and encourage simple lifestyles, and also consider the goal of an economic system to be that of taking care of the NEEDS of ALL, instead of maximizing the wealth of the wealthy, the problem of scarcity would not arise.

THREE: WELFARE Lies in fulfilment of desires
Again this is a normative judgment about the purpose of life, which is taken to be fulfilment of desires. If we really study what makes us happy, we find a lot of surprises. Firstly the Easterlin paradox shows that if people try to fulfil all desires, this does not lead to increased happiness. Because the normal level rises, and people judge their welfare relative to the average, this creates a futile rat race. Everybody works hard for increased wealth, but in the end no one is happier. Everybody would be better off if we followed the advice of Sonja Lyubomirsky who has written The How of Happiness and The Myths of Happiness — these show that the ancient virtues: kindness to others, gratitude for our blessings, compassion, sympathy, commitment etc. lead to long run happiness. Selfish maximization of personal consumption with complete indifference to others leads to long term misery. The normative preference of the economists for the homo economicus model creates an unhappy and lonely society for those who buy into these assumptions. See for example Robert Lane’s The Loss of Happiness in Market Democracies.

Abandoning these hidden normative commitments of economics, by allowing for more public spaces and common property, creating norms of social responsibility, and encouraging simple lifestyles would remove scarcity as the central economic problem. I have argued this is much greater detail in the paper cited in the first paragraph.

Franklin D Roosevelt said, “But while they prate of economic laws, men and women are starving. We must lay hold of the fact that economic laws are not made by nature. They are made by human beings.” 1

— Societies CHOOSE the economic laws they live by, according to their normative judgments.

1 Franklin D Roosevelt (1932, July 2nd) Address Accepting the Presidential Nomination at the Democratic National Convention in Chicago

Commentary added 9th April 2015

1 response

  • Richard Mochelle says:

    As I wrote in response to a comment made by Chuck Willer who questioned the assumption of scarcity:

    No economic system can escape the existential reality of time scarcity. With a zillion possible things we could do in response to multiple attractions and distractions, we have no choice in the matter of foregoing and neglecting 99.99..% of them and deciding on a highest priority time commitment. This time decision is an inescapable economic decision that each of us must make throughout our life. How do we (or should we) go about making this decision? Unfortunately there is a radical scarcity of economic texts that build theory from this ontological and ethical starting point.

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