Difference between revisions of "Artificial scarcity"
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'''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]]. | '''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, [[Software license agreement|license agreement]]s, 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 more 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 distribution would exist. | + | 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, [[Software license agreement|license agreement]]s, 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 more software. [[Technocracy|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 distribution 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.]] | ||
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== Responses to artificial scarcity == | == Responses to artificial scarcity == | ||
| − | + | The term 'artificial scarcity' is used by [[Technocracy Incorporated]] to point out one aspect of productive inefficiency in the [[Technocratic views of the Price system|price system]].<ref> http://www.technocracy.org/Archives/I%20Am%20The%20Price%20System-r.HTM I Am The Price System R. B. Langan 1944 Published in:Great Lakes Technocrat March/April 1944, No. 66</ref> Technocracy advocates predict that a technologically advanced state is capable of producing an abundance of consumer goods, depending on that areas resource base.<ref>http://ecen.com/eee9/ecoterme.htm Economy and Thermodynamics</ref> Technocrats point out empirical evidence; even though the productive capacity may exist to feed everyone in a given resource base area, we under produce, we throw away, or we misallocate because there is no way to sell an abundance, and a conflict between scientific reality and economic tradition stifles the possibility for abundance within the context of a given resource base and land area. A price system only creates opportunities for scarce products, whereas a method of [[Energy Accounting]] according to this idea, would make consumables available to all in a [[Technate]].<ref>http://www.eoearth.org/article/Biophysical_economics</ref> | |
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| + | Standard free market responses to this assert that artificial scarcities are necessary to promote the development of goods in the first place. 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 (and if it didn't, there would be other cheap versions of that digital information being offered by other sellers). Another fair example is the drug industry. Production of drugs is fairly cheap 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. Typically drug companies have profit margins much higher than this investment, but the high payoff also attracts many companies to compete, increasing the pace of drug development. A feature of many free market 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. This creates a situation of accelerated economic growth and high economic payout for all levels of consumers, but also promotes a large rich-poor divide. | ||
== See also == | == See also == | ||
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*[[Post scarcity]] | *[[Post scarcity]] | ||
*[[Technocratic views of the Price system]] | *[[Technocratic views of the Price system]] | ||
| + | *[[Wealth, Virtual Wealth and Debt]] | ||
==References== | ==References== | ||