Scarcity: The Most Solid Foundation for Economics

Summary：This article discusses scarcity as the most solid foundation for economics. Unlike the assumptions of "rational man" or "selfish human nature," scarcity is a fundamental fact because human desires are infinite and resources are limited. The reasons for scarcity include people's demand for the same items and the constant upgrading of human needs. The article explores the broad meaning of scarcity, encompassing not only tangible materials but also intangible resources, space, and geographic location. Trust is also considered a scarce resource. Human needs are endless, and many modern demands, though seemingly "man-made," are actually pursuits of higher quality of life, further emphasizing the importance of scarcity in economics.

What is the most solid foundation on which to build the edifice of economics? "Rational man" cannot serve as the fundamental assumption of economics because humans are not always rational. Similarly, "selfish human nature" is not a basic assumption because people are not always selfish.

We have another choice: "scarcity."

 1. Scarcity as a Fundamental Fact

Economics should be built on the premise of scarcity, but scarcity is not a hypothesis. As long as we live in this world, we must face scarcity—it is a basic fact. There are two reasons for scarcity:

- The things you want are also desired by others.

- Human needs are constantly changing and upgrading.

Regarding the first reason, have you ever experienced finding your favorite item in a store and discovering it has the highest price? This suggests that what you like is likely also favored by others.

The second reason for scarcity is that human desires are infinite. When people only have wild vegetables, they want buns. When they have buns, they want meat and alcohol. To get a bite of meat or a sip of alcohol, many buns must be consumed.

With buns, meat, and alcohol, people still feel unsatisfied and seek to appreciate art. At this point, more resources are needed to support artists to make movies and perform plays.

Then people say it is not enough and want to climb mountains for self-fulfillment, requiring even more resources. For instance, a female mountaineer once used a helicopter for part of her journey to Mount Everest. While this seemed convenient, her peers criticized her because using a helicopter diluted the honor of reaching the summit. People want to ensure that such honors remain scarce and difficult to achieve.

Clearly, this type of demand is deliberately created by people. Will human desires ever be fully satisfied? I believe not. The day when material abundance meets all human desires will never come.

2. The Broad Meaning of Scarcity

Scarcity has a wide meaning, starting with the easily understood tangible scarcity: iron, minerals, water, and timber are all scarce. Additionally, intangible resources such as beautiful scenery and fresh air are also scarce.

Space and time are also scarce. For example, the same flight may offer the same physical service, but its price varies greatly at different times.

Geographic location is another scarce resource. Many say land is scarce and limited. I disagree. When you look out from an airplane, you see vast land—land is unlimited. Major cities like Beijing, Shanghai, Guangzhou, and Shenzhen are mere pinpoints on the globe. The reason cities resort to land reclamation is not because of land scarcity but because of location scarcity.

Trust is also scarce and not easily established. Classmates are important because they determine your future social circles and career levels. Many people attend school not just for the professors but for the connections with classmates, as the trust built among them is invaluable.

Modern life is often criticized for fostering unnecessary demands. Are these demands truly unnecessary? Even the simplest pencil comes in different colors, shapes, and markings to satisfy aesthetic desires, consuming significant resources.

 3. Human Needs Are Endless

Whenever scarcity is mentioned, some might argue that certain goods are not scarce because people don't demand more once they have them, like an appendectomy. People undergo the surgery once and don't seek it again.

True, we don't need multiple appendectomies or medications if the disease is cured. However, different treatments for the same illness vary. Some drugs have significant side effects, while others are more comfortable to use. Striving for better options consumes a lot of resources.

For example, two high blood pressure medications—one domestic and one imported—might have identical efficacy. The difference is the domestic one causes hand tremors, while the imported one does not. Treating high blood pressure, whether hands tremble, matters. Patients will choose the imported drug, consuming many resources to develop a tremor-free medication. Is human demand finite or infinite?

Most people take medicine not to save their lives but to reduce pain. Over the past 50 to 100 years, have we identified more or fewer diseases? Many more. Why? Because our standards for health are rising, and we are becoming more particular. Is there an end to our demands?

There's also the idea that the government could cover all medical expenses, which is a finite amount. This notion ignores a fundamental issue: human needs are infinite. I often say an ordinary person can eat three taels of food, but at a buffet, they can eat a jin. When the government covers all medical costs, people's demands will no longer be what they once were, contributing to the ever-increasing healthcare spending in welfare states.