Difference between revisions of "Artificial scarcity"
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| − | '''Artificial scarcity''' | + | '''Artificial scarcity''' describes the [[scarcity]] of items even though the technology and [[Economic production|production]] capacity exists to create an abundance. The term is aptly applied to non-rival resources, i.e. those that do not diminish due to one person's use, although there are other resources which could be categorized as artificially scarce. The most common causes are [[monopoly]] pricing structures, such as those enabled by [[intellectual property]] rights or by high fixed costs in a particular marketplace. The inefficiency associated with artificial scarcity is formally known as a [[deadweight loss]]. |
| − | An example of artificial scarcity is often used when describing [[proprietary software|proprietary]], or [[closed-source]], computer software. Any software application can be easily duplicated billions of times over for a relatively cheap production price (an initial investment in a computer, an internet connection, and any power consumption costs). On the margin, the price of copying software is next to nothing, costing only a small amount of power and a fraction of a second. Things like serial numbers, license agreements, and [[intellectual property]] rights ensure that production is artificially lowered in order for business to gain a monetary benefit, thus giving | + | An example of artificial scarcity is often used when describing [[proprietary software|proprietary]], or [[closed-source]], computer software. Any software application can be easily duplicated billions of times over for a relatively cheap production price (an initial investment in a computer, an internet connection, and any power consumption costs). On the margin, the price of copying software is next to nothing, costing only a small amount of power and a fraction of a second. Things like serial numbers, license agreements, and [[intellectual property]] rights ensure that production is artificially lowered in order for business to gain a monetary benefit, thus giving businesses an incentive to produce software. Technocrats argue that if the [[Technocratic views of the Price system|the price system]] were removed, there would be no personal [[incentive]] to artificially create scarcity in products, and thus something similar to the [[open source]] model of distributions would exist. |
[[Image:Ppfofdigitalinformation.gif|thumb|right|485px|[[Production possibilities frontier]] of showing trade-off.]] | [[Image:Ppfofdigitalinformation.gif|thumb|right|485px|[[Production possibilities frontier]] of showing trade-off.]] | ||
| − | + | With nearly all goods, a trade-off that occurs when decisions are decided about production. The graph shows the economic anomaly that occurs with artificially scarce products. Because leather boots consumer resources, a trade-off is noticed between running shoes; i.e. in order to produce more boots one has to give up producing running shoes because of limited resources. This trade-off is illustrated by a move from P1 to P2 in the Production Possibilities graph on the left. | |
| − | With computer software, no trade-off occurs (at least not one of significant value). To produce more of a certain piece of digital information, | + | With computer software, no trade-off occurs (at least not one of significant value). To produce more of a certain piece of digital information, since virtually no resources are used to copy the information there is no trade-off with the production of other things, like shoes and boots. In essence, problems of artificial scarcity usually arise when a good that was once scarce becomes abundant due to extreme increases productivity and technology.[http://www.automation.com/sitepages/pid1698.php] |
== The need for artificial scarcity == | == The need for artificial scarcity == | ||
| − | + | In a market economic system, an abundance is not produced because excess product is considered an inefficient use of resources; those resources could be used elsewhere to produce something in greater demand to fulfill more wants. A paradox is reached with artificially scarce products, as an abundance is possible, yet without creating scarcity via legal or subversive means, there is minimal profitability. If scarcity is allowed to reach zero, the economic model fails. If natural scarcity no longer exists scarcity has to be created to ensure function of the system.[http://www.manageability.org/blog/stuff/artificial-scarcity/view] | |
== Economic tools to promote artificial scarcity == | == Economic tools to promote artificial scarcity == | ||
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