The term scarcity implies a lack of a given thing, of it not being plentiful or easy to find. It is a term that does not impress one as having anything to do with science. For economics, however, scarcity is the starting point, a state of affairs that gives rise to a series of deductions that build the whole formal structure of economic science.
In the somewhat technical jargon of economics, scarcity represents a situation in which the existing means (resources, goods, etc.) are not sufficient for the achievement of all existing ends (goals, wishes, desires, etc.). Under such circumstances, it is indispensable to make decisions about which ends one will strive to achieve and which ones will be left unattended to. All such decisions imply the existence of some benefits (or utility), associated with the achievement of certain ends, and of some costs, corresponding to the benefits associated with the achievement of ends that were forgone. It is in terms of benefits and costs that economists conceive of every decision, and it is through benefits and costs that changes in external conditions have an impact on human behavior.
It is easy to see that in a world where everything was abundant—where scarcity would not apply—all the above categories would be meaningless and economics would not exist. However, scarcity does exist, and it is not a mere empirical coincidence. It is a condition of life as human beings perceive it, and as such it cannot be undone. One can certainly imagine having many times more resources at one’s disposal and having more of every good than could possibly be enjoyed (although humans are very far from experiencing this scenario). And yet this would not free one from having to make any decision whatsoever: One would still be forced to choose between different ways of enjoying all those superabundant supplies of goods, for human beings cannot engage in mutually exclusive activities. Thus, due to the inescapable scarcity of time, it is not possible to conceive of a world in which scarcity would not be known. This is why most scholars (or economists, at any rate) consider scarcity to be a universal and necessary human condition.
The presence of the scarcity problem people face, and in particular the need for trade-offs in dealing with scarcity, is reflected in popular common-sense adages such as "there ain’t no such thing as a free lunch" (coined by Robert A. Heinlein in The Moon Is a Harsh Mistress [1966] and popularized in economics by Milton Friedman). In economic science, it is typically illustrated by the "production possibility frontier," a two-dimensional graph showing maximum amounts of two goods (e.g., "guns and butter") that can be produced with given resources. The frontier, which graphically represents the finiteness of options, also illustrates the concept of cost, for it shows that as long as all resources are being used, the output of one good can be increased only at the expense of a lower output of the other good.
While scarcity may be considered an omnipresent condition of human life, it is possible to view human behavior as a struggle to reduce its acuteness. The extent to which people are successful at narrowing the gap between means and ends can, in turn, be seen as a subjective degree of wealth as perceived by the person in question.
In economics, this process of reducing the problem of scarcity can also be shown with the help of the production possibility frontier. A more efficient use of resources allows for greater production of both goods, which in turn allows for more ends to be achieved and (with given wants) gives rise to a feeling of being wealthier than before. This more efficient use of resources, graphically pictured as an outward shift of the frontier, is usually attributed to three different sources of improvement: (1) improvement in human capital, (2) accumulation in physical capital, and (3) human cooperation (a division of labor and exchange).
The omnipresence of scarcity and its central position in orthodox economics has been challenged both from within economics and from without it. The attack from within has come from progressively minded economists. Believers in the enormous capacities of technological progress and the human mind have claimed there is a possibility of doing away with scarcity at some point in the future by devising ever more efficient ways of using resources, and thus making goods so plentiful as to accommodate all practical needs.
While this theory is usually propounded by some lesser lights among economists, there have been notable exceptions. John Maynard Keynes, for example, insisted that scarcity is kept unnecessarily high by an artificially high interest rate. In a similar vein, John Kenneth Galbraith, not incidentally an admirer of Keynes and a well-known economist as well, undermined the importance of scarcity with his concept of the "affluent society." Our society is supposed to have reached a sufficient degree of affluence to enable it to provide all the genuine needs people may have. The remaining feelings of scarcity are a product of artificial wants, as Galbraith would have it, created by advertising. None of these authors, however, have attacked scarcity directly, nor have they claimed that scarcity would cease to exist altogether. Instead, they have alluded to its man-made, and thus unnecessary, nature, and to a possibility of its substantial elimination through proper government policy.
From outside of economics, the assault on scarcity has come from anthropologists such as Marshall Sahlins. Their point is that a large degree of affluence did exist before the advent of civilization, among the Paleolithic hunter-gatherers. They show that, contrary to conventional wisdom, such societies did not struggle, but rather enjoyed a life of relative plenty, with more leisure time and (some claim) greater happiness than an average modern person would have today. All this, of course, is due to their having had drastically more modest needs.
While these ideas, just like those of Galbraith, can be justly considered as criticism of the modern consumer civilization, they do not show the logical possibility of a world without scarcity. Even the most austere monks living on water would surely have to make some decisions, if only what to meditate about. Thus, these criticisms may well play down the necessity of the scarcity in human affairs (i.e., its severity and centrality in the human mind), but they will hardly cause the orthodox economics to crumble under its weight.
