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Scarcity is not shortage

The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it.

I might only be an amateur student of economics, and a lazy one at that (I have totally failed at reading a couple of the economics books I had planned to back in the fall), and I might show my bias towards the Austrian theories of economics on a regular basis, but at least I understand the things I do write about. At least I understand the words I use.

State-worshipping socialist idiots who erect shameful attempts at strawmen and then advocate further State interventions into the economy (extortion backed by the threat of murder) that have already been tried and failed…uhhh, not so much.

Take this commenter at Radley Balko’s blag, who hasn’t gone to any effort to, y’know, actually learn anything about economics or agriculture, but still thinks he is qualified to delegate the violent, deadly police power of government to a bunch of thugs in Washington so that they can govern how other people grow, sell, and buy food.

If there is one aspect of the economy which maybe should be tinkered with it’s farming. There is not much harm in having a perpetual oversupply of food than otherwise would have happened in a free market, but the consequences of the inevitable shortages created by a market economy are pretty grave. It’s one thing if there are too few cars made to meet the demand, but a food supply shortage is too gruesome.

This dolt obviously hasn’t thought much about the big picture or the broader ideas he absorbs from his TV and dutifully spits up, so I sure as hell shouldn’t expect him to pay close attention to the actual meaning of any individual word he uses, but I can’t help pointing out that he uses the word “shortage” in exactly the wrong way.

As Robert Prechter reminds us in a clear and entertaining column at Mises.org, it is literally impossible for there to be a shortage in a free market. Only coercive, freedom-reducing intervention (i.e., by the State) can create shortages of goods.

People who have actually studied some level of economics beyond listening to to Lou Dobbs or Jim Cramer know that the first lesson of economics is scarcity: every economic good is scarce. Every physical thing is scarce and everything involving human input of any kind—physical labor, mental labor, time, effort—is scarce. The only thing I can think of that doesn’t yet fit this axiom is oxygen, but in the future in off-world habitats this too will become the subject of economic scarcity.

Because of the scarcity of everything that everybody wants, freely acting people work at the expense of leisure and put a price on the things they produce and sell and buy. This will never change under any economic system or any foreseeable transformation of mankind.

Because of the law of scarcity, in a free market things that are demanded more cost more and/or are produced in higher numbers. Things that are demanded less cost less and/or are produced in lower numbers. Only if people are threatened with abuse, kidnap, enslavement, and murder (government regulation) would the price system that matches supply to demand fail to adjust to reality and result in a shortage. A shortage is different from scarcity. They are spelled and pronounced differently because they mean different things. A shortage means that prices or supply are not allowed to rise to meet demand. This is not what scarcity is. Everything is already scarce. That’s why we work and pay money for things—essentially, exchange our labor for others’ labor. If it is generally agreed that there is a “shortage” of a good, it’s because its price is forcibly prevented from rising to meet the high demand in a situation of low supply, or because other economic interventions restrict people’s freedom to go into business and increase the supply of that good to compensate for the high demand and low supply.

In a gasoline or water or food shortage, the mere fact that something is more expensive or more scarce than before does not change the law of scarcity, or anything else, for that matter. Either, a) the price of the good will be allowed to go up to meet demand, encourage thrift, and stimulate increased production of this good by selfish, profit-seeking entrepreneurs; or, b) much more likely, government restrictions of economic activity will have forcibly prevented prices from rising to lower the quantity demanded and encourage thrift, or they will have forcibly prevented other people from taking advantage of this great profit opportunity and entering the market to increase the supply of the “extra-scarce” good. Case (b) is called a shortage. Both the good and all the inputs that went into production of the good were already scarce. To all of you who endorse State measures that keep prices low in times of (State-created) shortage: who are you to say what price something should have, anyway? And how do you justify the prior and ongoing State actions that keep the supply and prices down?

[This post was edited on 12-12-08 so the last paragraph makes sense.]

Posted in Economics, Statolatry, Stupid