Professor Shannon is a professor in the Department of Economics, College of Industrial Management and Textile Science, Clemson University.
Our economics professor enters the classroom. Walking over to the lectern, he opens his notes, smiles at the students and utters a single word: “Scarcity.”
No, it is not the name of a disco hit sung by the Bee Gees. No, it is not engraved on his childhood sled. No, it is not the secret word, so a duck will not descend and deliver one hundred dollars—as it used to do on Groucho Marx’s TV program, “You Bet Your Life.” Our professor simply calls attention to the core of his course.
Scarcity confronts people from Maine to Miami, from Connecticut to California. In fact, Canadians, Cubans, Colombians, Czechoslovakians, Cambodians, and Chinese all share the same fate. Such different peoples may choose to deal with scarcity in different ways. But scarcity is a pervasive, universal problem that no one can duck. Just like air, scarcity is everywhere.
What is scarcity all about? “I’m glad you asked,” our professor replies, “because I plan to tell you anyway.” As he points out, scarcity comprises two integral and conflicting aspects—unlimited human wants and limited resources. “From those facts,” he says, “we must conclude that happiness is elusive. We cannot satisfy all our desires. We all are always forced to choose. That’s why we call economics ‘dismal.’”
What should we choose? How should we go about making choices? First we must understand the underlying essence of scarcity. Then the answers to those questions simply leap out at us.
Consider your own wants. What would appear on a list of all the things you’d really like to have? Probably food, clothes, books, travel; perhaps football, flowers, furniture, friends. But the list will go on and on, and if tomorrow or on another day you’re told to make a list again, it very likely will be longer still.
Remember when you were a child—20, 30, 40 or more years ago—and someone asked about your Christmas wish? Probably you sought a doll or a watch, perhaps a new suit, a train, or a bike. Yet for many modern children, no single sleigh can convey all they say they seek. Now, only a plethora will please!
Recall reacting to your first big paycheck? Your income had suddenly risen—from a measly weekly allowance to several thousand dollars a year. You may have wondered, How will I ever spend it all? Yet by now—oh, how you wish you could earn more! George Stigler once wrote in reference to Thomas Malthus that ‘he did not deny categorically the insatiability of human wants, nor has any married economist since his time . . .”
Our list of wants is unlimited indeed—and always expanding. But there’s more to such lists than length. There’s also variety. Each individual’s wants are different.
Suppose you ask each member of a group for a list of wants. Compare their lists when they’re done. There may be many common items—hamburgers, shirts, movie tickets, books. But each person’s list will be unique. Some will want mayonnaise, button-downs, “Alien,” and Overload. Others prefer ketchup, tee-shirts, “Hair,” and Zen and the Art of Motorcycle Maintenance. Certain items may appear but once. Just like fingerprints and snowflakes, no two lists of human wants are ever apt to be alike.
Roger J. Williams on Individual Variations
The basis of this incredible diversity of wants was explored not long ago by Roger J. Williams, a chemist at the University of Texas. His article is reprinted in a book called Essays on Individuality; edited by Felix Morley, it was recently republished by the Liberty Press of Indianapolis.
Williams notes, for example, that in normal people the length of the small intestine may vary from 11 feet to almost 30 feet. Thyroid glands range from 9 to 50 grams in weight. Our bones and even our digestive juices are enormously varied. An orange may not always be sweet, and there is no such thing, Williams maintains, as an “average” anatomy.
Shakespeare said it in Hamlet: “What a piece of work is a man! . . . how infinite in faculty!” He knew, too, that our human and material wants are both infinite and infinitely varied. We can admire the bard for both his rhymes and his ability to reason.
But our economics professor makes us pause. “In the face of all these diverse wants,” he says again, “we are confronted with a sad, stark fact. We simply cannot do or have everything. Our workers, our land, our factories, and our equipment are insufficient. Our transportation and communication systems now span the globe, but still they are in adequate. Our days are too short and too few. Andrew Marvell laments, ‘Had we but world enough, and time!’ But we have not. So we must choose.”
But who should choose? What is the most efficient way of deciding what is best? Should we let our choices be made primarily on an individual basis, in the “market,” as we are inclined to do here? Or should we have instead a centralized coordinating committee of some sort to make our crucial choices?
Surely a committee could not comprehend the vast variety of human wants. It would inevitably ignore individual idiosyncrasies. Would it be better if we all ate and dressed alike and if all our homes looked just the same? What if all our clothes were brown, if houses all were brick, and if the only vegetable allowed were broccoli?
Some people might like it that way, but they ignore certain crucial matters. For one, in those countries where centralized choice prevails—such as Russia and China—the general standards of living are much lower than ours. Opportunities are fewer. Environmental problems arise. Life is more apt to be drab.
The Results of Choice
Why does permitting more scope for individual choice produce better results? Reconsider our resources. Although they truly are limited, they too are varied. More importantly, like our wants they can expand!
Roger Williams also notes the range of human options. Muscular differences such as those in the thumb, he says, permit, promote, or prevent a wide range of activity from brain surgery to watch making to pocket picking. Someone with excellent potential for developing a great voice may end up singing grand opera—or yodeling! Talk about resource variety!
But also notice resource expansion. For one example, our farmers have become so productive that now one farmer in America feeds about 60 people. Only 4 percent of our population directly works at raising crops. It surely hasn’t always been that way. In fact, in most parts of the world, it isn’t that way even now. In many places, a majority of people work at farming, because one farmer feeds far fewer people. In some places, the Malthusian specter of starvation still stalks the land.
The Expansion of Resources
Wilfred Beckerman, an Oxford economist, offers a similarly dramatic example of resource expansion in his book, Two Cheers for the Affluent Society. Once upon a time, Beckerman says, aluminum articles were produced only for the very rich. Now we use aluminum to make common wrappers and throw-away articles. Aluminum has gone from treasure to trash.
“Or,” says our own economics professor, “take natural gas. In 1955 our gas reserves were reported to be 22.5 trillion cubic feet. In the same year, we used up 9 trillion cubic feet. Simple arithmetic tells us that, at that rate, there won’t be any left at all to heat our homes this winter. And yet, despite that frigid forecast, in 1976 we used 20 trillion cubic feet, and our remaining supplies were 216 trillion cubic feet. Where on earth did we get all that gas?”
Of course, no dinosaurs have died recently. The gas has been there all along. But gas as an economic resource is not only a physical but also a mental matter. It is a function of man’s mind. For example, we discover unknown supplies under-ground—such as in Alaska. We also develop new methods of extraction—such as by forcing steam into the ground. And we devise better methods of resource utilization—such as the new automobile engines which greatly improve gasoline mileage. “Knowledge,” Erich Zimmerman once wrote, “is truly the mother of all other resources.” It is in the fertile womb of his mind that man creates resources.
“Perhaps this may seem to be a bit out of line for an economist,” our professor says, “but let me remind you of the first great act of Creation. It is reported to us in Genesis, and you surely recall the ultimate achievement of that act—the creation of man himself.
“What is the nature of man? We are given a clue by the writer of Genesis, who tells us God created man ‘in his own image.’ Of course, we are surely not the same as God; we have merely a ‘likeness.’ Man cannot create a whole universe. But just as God spun one with his great power and inordinate abilities, so too with this ‘likeness’ man can create and expand his resources. When he does, he can better satisfy his diverse and growing wants.”
Jacob Bronowski approaches the same matter from a different but equally striking perspective in The Ascent of Man. Like nature herself, Bronowski says, “Man has become an architect of his environment . . . His method has been selective and probing: an intellectual approach in which action depends on understanding.” The wonder and magnificence of man’s creative abilities can thus emerge from the views of theology and science as well as economics.
The Market Mechanism
What, then, is the social mechanism most conducive to the development of man’s abilities and resources? Certainly an open and free market has much to recommend it. After all, no government guidance was needed when timber ran out in the late Middle Ages and man switched to coal for power. Similarly, when we pursued the prospects of petroleum a century ago as whale oil became increasingly scarce, no representative of a Department of Energy hovered over Edwin Drake at Titusville.
“Far too much of what our government does,” the economics professor says, “is simply restrictive. Too often governmental policies discourage competition, hamper change, fix prices, limit imports, require licenses, stipulate procedures, and reduce options. The minds and motives of men are too often cramped, encumbered, and confined. Look at what has happened as a result: our rate of economic growth is now so slow we envy the snail.”
We should remember, our economist might well add, that man can not only create; he can also deploy. Given the resource capabilities man now has, he must decide how best to utilize them. But no single man can perceive all the available options. Though admirably well-intentioned, in his limited individual knowledge, he’s bound at times to err.
Our former Energy Secretary, James Schlesinger, clearly demonstrates that fact. By all accounts the man is well-educated, highly informed, and hard-working. Yet, while Energy Secretary, he prevented oil companies from buying oil on the spot market. Then he required them to devote more refinery capacity to assuring adequate fuel supplies for the winter several months away.
Left alone, what would the giant petroleum companies have done? For them, the secret word is profit. For us, the tragedy is that they have not been allowed to pursue it. For some of these giants, there would have been ample incentive to provide more winter fuel. But others might have seen better prospect for profit in producing motor fuel. With the decision makers both numerous and dispersed, last summer’s gas pains would surely have been less severe.
The problems inherent in government guidance emerge even more starkly in the government efforts to distribute diesel fuel. At first, farmers were given priority. That seems to be a sensible decision, since food is essential for all, regardless of race, creed, sex, or financial status. Without adequate fuel for farmers, what would we eat?
Yet, Meg Cox reported in the Wall Street Journal for May 25, 1979, a remarkable but largely unremarked development in farming. Some farmers now simply skip plowing and plant “right on top of the previous year’s crop.” There are some difficulties involved in this technique, but those farmers who can manage it require only about one gallon of fuel per acre—instead of the 5 to 7 gallons needed for ordinary tillage. That’s a fuel saving of at least 80 per cent!
Quite obviously, then, the demand for fuel by at least some farmers can respond to rising prices and limited availability. Given such an incentive, some farmers surely would have gotten by with less. What then? More diesel fuel would have been available for truckers. Its price would not have been so high. The truckers’ strike might not have occurred. We might have been spared the terror of snipers aiming at our highways. And the food that farmers grew might not have been left to decay in the fields. We paid a high price, indeed, for permitting economic decisions to become more centralized.
Competing to Serve
Allowing for free and open competition seems to be both a surer and a safer way to satisfy the diverse wants of man. In fact, many of our farmers’ crops were saved—because the railroads came to their rescue. In the nick of time, removal of regulations by the Interstate Commerce Commission allowed trains to transport produce across the land on the “Salad Bowl Express.” Here is a striking testimony to the marvels of the free market.
Man’s capacity to consume may be infinite. Given time, his capabilities to produce may be similarly boundless. But the knowledge of one man has limits. It was the presumption that he knew everything—eating the fruit of the tree of knowledge—that deprived man of the bounty of Eden. Even now, our arrogant belief that all knowledge and wisdom can reside in a single individual—or in a handful of government officials—is denying us the bounty we might well create.
“What should we do?” our economics professor asks. “First of all, let’s recognize the enormous range and diversity of our individual wants. Then recall the tremendous innovative achievements of the people in our past—our Franklins, our Edisons, our Wright brothers, our Bor-dens, our Swifts, our Sears, our Woolworths, and our Walgreens. Then restore and renew the system that evoked their efforts so that once again we might emulate their achievements.
“If we are determined to approach the energy crisis and the other problems of scarcity in the most creative and constructive way, then we will cut back the constraints imposed by government. We will grant people the power to pursue their own preferences. We will allow an open system of free markets. If we will only do that, then scarcity will be less oppressive, our horizons will expand with a multitude of new opportunities, and our future will be much brighter.”
And saying that, our professor again smiles warmly at the class, picks up his scattered notes, and walks slowly out through the open door.