Tuesday, May 25, 2010

Scarcity Not Abundance

by L. Carlos Lara | Thursday, April 29, 2010


(This Article is a modified excerpt from Chapter 2 of How Privatized Banking Really Works by L. Carlos Lara and Robert P. Murphy, PhD. Click this link to download Introduction)

Mankind lives in a world of scarcity not abundance. Resources, in all places and in all times, are scarce. This is a fact of human existence here on planet earth. It is the primary reason why we must all learn to be frugal and economize. In essence we must save -- put something back from what we have produced to contend with the uncertainty of the future.

Scarcity, however, can be a confusing concept for people to understand in this day and time, especially here in the United States. After all, look around—do we not see abundance everywhere? This obvious fact is pointed out to us on any given day by simply walking through any local supermarket. Everywhere we look, the shelves in any aisle are filled to the brim with food products of every type and description. There are also fruits and vegetables piled high on all the counters and shopping bins. Meats, dairy products, breads, the list goes on and on. Abundance everywhere!


The same is true in shopping malls. There are retail shops and department stores filled with apparel, footwear and all types of accessories for men, women and children. Hundreds, sometimes thousands, of different designers and manufacturers have produced these goods. Most of them are manufactured in different parts of the world and imported here especially for our consumption.

We also see cars everywhere; in parking lots and on the roads. When we travel in our own cars, going in any direction, we can drive by apartment houses, condos and manicured neighborhoods with beautiful homes. The high rises, office buildings and even skyscrapers make clear what we see. It is not scarcity, but rather the opposite...abundance!

What we are seeing, however, is the perception of abundance—an illusion of a sort. Yes, the items are there and do exist, but we must go behind these products to see the undeniable economic principle of scarcity of which we speak; for if we were to stop producing for any length of time, all of this abundance would quickly disappear. What we find behind all of these products, and the services associated with them, is the production that goes into making them and replacing them when they are consumed. Under closer inspection we discover what ancient thinkers and economists have always pointed out---that human wants are endless and man sets out to acquire his wants, yet the means for acquiring them are themselves scarce.


"All human life must take place in time. A man's time is always scarce. He is not immortal; his time on earth is limited. Each day of his life has only twenty-four hours in which he can attain his ends. Time is a means...all means are scarce" (1.)
- Murray N. Rothbard



The Means of Production

The means of production are land, labor and capital. Land, if nothing more than a place to stand, is scarce. The resources in the land, from the top soil used to grow food products to the oil or gold we can extract from it, are also scarce. We do not need to be environmentalists to recognize this fact. But, surprisingly, so is labor. The scarcity of labor can be even more difficult to fathom than consumer goods, especially in an economic environment where so many seem to be out of work and we are being bombarded with unemployment statistics everyday.

To see that labor is scarce we need to look behind the statistics and study ourselves as individuals. What we find is that we all have a great many more things that need doing or those we want to get done, but we have neither the time, energy, nor initiative to do them. Some of these tasks obviously require materials, but all of them require labor. If one merely extrapolates this fact in one's mind to extend beyond his own small world of activities, to the activities of his city, his state, his nation, his world, one quickly begins to see that the potential demand for labor is indeed endless. In the end, this is precisely why labor is scarce. Unemployment is actually voluntary!

Finally, there is no great argument needed to realize that capital is scarce. This is especially true if we are thinking of capital in terms of money and credit. But actually, capital is the equipment or tools we use in production. Capital goods are what allow us to produce even more consumer goods and the primary requirement for obtaining capital is savings. When we restrict our consumption, we save. When we transfer our labor and our land to the formation of capital goods, we are investing in production for the future. Savings, therefore, is an essential part of a thriving economy, even if it is the economy of one person.

"In order to illuminate clearly the nature of capital formation and the position of capital in production, let us start with the hypothetical example of Robinson Crusoe stranded on a desert island. Robinson, on landing, we assume finds himself without the aid of capital goods of any kind. All that is available is his own labor and the elements of production given him by nature" (2.)
- Murray N. Rothbard

Private Property

"Property is a necessary consequence of the nature of man" (3.) wrote the French economist Frederic Bastiat, in the middle of the 19th century. This is like saying that ownership of ourselves and our faculties is primal, but then so are all of the scarce natural resources we find all around us.

Economist Murray Rothbard, in his great thesis Man, Economy and State, makes clear that "...the origin of all property is ultimately traceable to the appropriation of an unused nature-given factor by a man and his 'mixing' his labor with this natural factor to produce a capital good or a consumers' good. For when we trace back through gifts and through exchanges, we must reach a man and an unowned natural resource. In a free society, any piece of nature that has never been used is unowned and is subject to a man's ownership through his first use or mixing of his labor with this resource." (4.)

Furthermore, deductive reasoning tells us that without ownership of our own private property we would not be able to exercise the frugal use of scarce resources to achieve as many ends as possible. Even the ability to exchange our property in a market place would be impossible, for we must first own it outright. Ultimately, without property ownership there would be no such thing as a market or even an economy. Therefore, if we are to have an economy at all, ownership or control over property by the individual is imperative.

These very important economic principles are classical and carefully reasoned deductions made by great thinkers of the past as they observed man and the world about him. There is, however, a growing assault on these established premises and especially on property, not only in this country, but throughout the world. This intrusion began in the 19th century and has continued to increase during our time. The idea of communal ownership as promoted under social reforms threatens our most fundamental human rights of private property and is putting our civilization in great danger. The need to turn back to these traditional standards is greater now than it has ever been in the history of the world. But how does one do this? This, and other questions like this, can best be answered by the study of Austrian Economics. Not only is the Austrian school of economic thought able to explain the why and how we have gotten to this point, it shows us a way out. By studying Austrian economics we can end our frustration and cease our scattered ranting and raving. Instead, we can be exact and precise with regards to the problems and their solutions. And, when there are enough of us thinking like this, we can actually get something done before it is too late!

L. Carlos Lara manages a consulting firm specializing in trust services, business consulting, and debtor-creditor relations. The firm's primary service is working with companies in financial crisis. Lara is the co-author of How Privatized Banking really Works.


Message of Hope

Each one of us must do our part, yet it all seems too big to fix. Here we must remind ourselves the starting point for change is in our individual education. A great place to begin this education is at our annual "Night of Clarity" event coming up this July 16th & 17th in Nashville, Tennessee. Here, all of your unanswerable economic questions can be answered. You will not want to miss this exciting event with nationally known speakers and Austrian economists. This event is open to the general public and student discounts are available. Go to this link to obtain event details and registration information. Hope to see you this summer!




Notes
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1. Murray N. Rothbard, Man, Economy and State, pages 3 and 4, Published by Ludwig Von Mises Institute 518 West magnolia Avenue, Auburn, Alabama, 36832, www.mises.org
2. Murray N. Rothbard, Man, Economy and State, pages 40 and 41
3. Frederic Bastiat, The Law, published by Foundation for Economic Education, Irvington, New York, 10533, www.fee.org
4. Murray N. Rothbard, Man, Economy and State, pages 147