Is Scarcity Man’s Best Friend?

All right, I know this does not sound convincing but scarcity (and not some canine four legged mammal) is really man’s best friend. Scarcity is the common problem of human beings with infinite wants and needs chasing after the limited resources the world can provide. Simply put, the world though filled with natural resources cannot fulfill the needs and wants of the common Homo Sapein.

Ironically, scarcity may prove to be most beneficial to human development. The first of our ancestors had to deal with scarcity to an extreme extent during the last ice age which happened some 11,000 years ago. According to famous historian, Hendrik Willem Van Loon, the ice age which threatened to destroy the human race, became its greatest teacher because it forced man to use his (or her) brain.

Scarcity in the ice age (the lack of proper shelter and food) forced humans to invent tools from sharpen stones and wood. More importantly, scarcity forced human beings who are by nature weak compared to every other predator to invent means of communication for working together more efficiently. In this way, language was born!

The entire ancient history of humanity is actually a summary of mankind’s fight to overcome scarcity of necessities such as food through agriculture, migration, conquest, and trade. Civilizations sprang to life at every corner of the globe when mankind succeeded in overcoming the obstacles and challenges of scarcity.

All kinds of art, like masonry, music, paintings, and literature came into existence because mankind no longer needed to spend all their time in search for food!

But why does scarcity provide the stimulus to human development? In a beneficial way, scarcity forces human beings to make the right decision. Say you have two mutually exclusive investments with investment yielding higher returns (with similar risk) than investment B. Because you can only choose one of the options, any rational human being would choose investment A.

Therefore scarcity serves to force us into allocating our resources in the most efficient and effective manner. Without scarcity, we would take everything for granted and there would be a lot of wastage of resources.

Robert Herbold’s book, ‘Seduced by Success’ is a very good example of what can happen when corporations take things for granted. Companies like Microsoft lost market share to Google due to its attitude of entitlement (I am the big shot in IT) and legacy practices (the lack of efficient and effective allocation of its resources).

The same can be said about Sony’s Walkman versus Apple’s iPod and General Motors versus Toyota. The lack of stimulus caused companies to perform less efficiently than they really can. An economist should write a book titled, ‘Seduced by Scarcity’ for the benefit of mankind.

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