Difference between revisions of "Artificial scarcity"
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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 coercive means, there is minimal profitability for the creator (or the distributor) of the product. If scarcity is allowed to reach zero, the economic model is irrelevant. If natural scarcity no longer exists, scarcity has to be created to ensure a price system of supply and demand. <ref>[http://www.manageability.org/blog/stuff/artificial-scarcity/view Manageability- Artificial Scarcity]</ref> | 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 coercive means, there is minimal profitability for the creator (or the distributor) of the product. If scarcity is allowed to reach zero, the economic model is irrelevant. If natural scarcity no longer exists, scarcity has to be created to ensure a price system of supply and demand. <ref>[http://www.manageability.org/blog/stuff/artificial-scarcity/view Manageability- Artificial Scarcity]</ref> | ||
| − | Artificial scarcities are said to be necessary to promote the development of goods. In the example of digital information, it may be free to copy information ad infinitum, but it requires a significant investment to develop the information in the first place. In the example of the drug industry, production of drugs is fairly cheap to execute on a large scale, but new drugs are very expensive. This is because the initial investment to develop a drug is generally billions of dollars, due to strict regulation. Typically drug companies have profit margins much higher than this initial investment, but the high payoff also attracts many companies to compete, increasing the pace of drug development. A feature of many economies is also time limit in patent rights; after a set number of years enjoying an artificial scarcity, the patent wears off and cheap generic versions of a product enter the market. Thus, the drug developer gets a return on investment, and other companies subsequently compete to lower prices. | + | Artificial scarcities are said to be necessary to promote the development of goods. In the example of digital information, it may be free to copy information ad infinitum, but it requires a significant investment to develop the information in the first place. In the example of the drug industry, production of drugs is fairly cheap to execute on a large scale, but new drugs are very expensive. This is because the initial investment to develop a drug is generally billions of dollars, due to strict regulation. Typically drug companies have profit margins much higher than this initial investment, but the high payoff also attracts many companies to compete, increasing the pace of drug development[citation needed]. A feature of many economies is also time limit in patent rights; after a set number of years enjoying an artificial scarcity, the patent wears off and cheap generic versions of a product enter the market. Thus, the drug developer gets a return on investment, and other companies subsequently compete to lower prices. |
There have been plenty of examples however where the development of goods was present without artificial scarcity, particularly with the [[free software movement]]. Free software like Firefox, Linux, and Audacity are all examples of new development without scarcity. Additionally, plenty of copyrighted works have been created under the [[Creative Commons]]. Many works which have been created without scarcity can be watched for free on YouTube, or viewed on various blogs and websites. | There have been plenty of examples however where the development of goods was present without artificial scarcity, particularly with the [[free software movement]]. Free software like Firefox, Linux, and Audacity are all examples of new development without scarcity. Additionally, plenty of copyrighted works have been created under the [[Creative Commons]]. Many works which have been created without scarcity can be watched for free on YouTube, or viewed on various blogs and websites. | ||