Scarcity; R. Shannon

Russell Shannon OUR economics professor enters the classroom. Walking over to the lec tern, he opens his notes, smiles at the students and utters a single word: ((Scarcity." No, it is not the name ofa disco hit sung by the Bee Gees. No, it is not engraved on his childhood sled. No, it is not the secret word, so a duck will not descend and deliver one hundred dollars-as it used to do on Groucho Marx's TV program, uyou Bet Your Life." Our professor simply calls attention to the core of his course. Scarcity confronts people from Maine to Miami, from Connecticut to California. In fact, Canadians, Professor Shannon is a professor in the Depart ment of Economics, College of Industrial Manage ment and Textile Science, Clemson University. Cubans, Colombians, Czechoslova kians, Cambodians, and Chinese all share the same fate. Such different peoples may choose to deal with scarcity in different ways. But scar city is a pervasive, universal prob lem that no one can duck. Just like air, scarcity is everywhere.

What is scarcity all about? ((I'm glad you asked," our professor re plies, ((because I plan to tell you anyway." As he points out, scarcity comprises two integral and conflict ing aspects-unlimited human wants and limited resources. ((From those facts," he says, ((we must con clude that happiness is elusive. We cannot satisfy all our desires. We all are always forced to choose. That's why we call economics (dismaL'" What should we choose? How 3 4 THE FREEMAN January should we go about making choices? First we must understand the un derlying essence of scarcity. Then the answers to those questions sim ply leap out at us. Consider your own wants. What would appear on a list of all the things you'd really like to have? Probably food, clothes, books, travel; perhaps football, flowers, furniture, friends. But the list will go on and on, and if tomorrow or on another day you're told to make a list again, it very likely will be longer still.

Remember when you were a child--.;...20, 30, 40 or more years ago-and someone asked about your Christmas wish? Probably you sought a doll or a watch, perhaps a new suit, a train, or a bike. Yet for many modern children, no single sleigh can convey all they say they seek. Now, only a plethora will please! Recall reacting to your first big paycheck? Your income had sud denly risen-from a measly weekly allowance to several thousand dol lars a year. You may have won dered, How will I ever spend it all? Yet·by now~h, how you wish you could earn more! George Stigler once wrote in reference to Thomas Malthus that ((he did not deny categorically the insatiability of human wants, nor has any married economist since his time ... " Our list of wants is unlimited indeed-and always expanding. But there's more to such lists than length. There's also variety. Each individual's wants are different. Suppose you ask each member of a group for a list of wants. Com pare their lists when they're done.

There may be many common items -hamburgers, shirts, movie tickets, books. But each person's list will be unique. Some will want mayon naise, button-downs, HAlien," and Overload. Others prefer ketchup, tee-shirts, uHair," and Zen and the Art of Motorcycle Maintenance. Cer tain items may appear but once. Just like fingerprints and snow flakes, no two lists of human wants are ever apt to be alike. Roger J. Williams on Individual Variations The basis of this incredible diver sity of wants was explored not long ago by Roger J. Williams, a chemist at the University of Texas. His arti cle is reprinted in a book called Essays on Individuality; edited by Felix Morley, it was recently repub lished by the Liberty Press of In dianapolis. Williams notes, for example, that in normal people the length of the small iritestine may vary from 11 feet to almost 30 feet. Thyroid glands range from 9 to 50 grams in weight. Our bones and even our di gestive juices are enormously var ied. An orange may not always be sweet, and there is no such thing, 1980 SCARCITY 5 Williams maintains, as an ~~aver age" anatomy.

Shakespeare said it in Hamlet: ~~What a piece of work is a man! ... how infinite in faculty!" He knew, too, that our human and material wants are both infinite and infi nitely varied. We can admire the bard for both his rhymes and his ability to reason. But our economics professor makes us pause. ~~In the face of all these diverse wants," he says again, ~~we are confronted with a sad, stark fact. We simply cannot do or have everything. Our workers, our land, our factories, and our equipment are insufficient. Our transportation and communication systems now span the globe, but still they are in adequate. Our days are too short and too few. Andrew Marvell la ments, ~Had we but world enough, and time!' But we have not. So we must choose." But wJw should choose? What is the most efficient way of deciding what is best? Should we let •.. our choices be made primarily on an individual basis, in the ~~market," as we are inclined to do here? Or should we have instead a centralized coordinating committee of some sort to make our crucial choices?

Surely a committee could not comprehend the vast variety of human wants. It would inevitably ig nore individual idiosyncrasies. Would it be better if we all ate and dressed alike and if all our homes looked just the same? What if all our clothes were brown, if houses all were brick, and if the only vegetable allowed were broccoli? Some people might like it that way, but they ignore certain crucial matters. For one, in those countries where centralized choice prevails such as Russia and China-the gen eral standards of living are much lower than ours. Opportunities are fewer. Environmental problems arise. Life is more apt to be drab. The Results of Choice Why does permitting more scope for individual choice produce better results? Reconsider our resources. Although they truly are limited, they too are varied. More impor tantly, like our wants they can ex pand! Roger Williams also notes the range of human options. Muscular differences such as those in the thumb, he says, permit, promote, or prevent a wide range of activity from brain surgery to watch making to pocket picking. Someone with ex cellent potential for developing a great voice may end up singing grand opera-or yodeling! Talk about resource variety!

But also notice resource expan sion. For one example, our farmers have become so productive that now one farmer in America feeds about 60 people. Only 4 per cent of our 6 THE FREEMAN January population directly works at raising crops. It surely hasn't always been that way. In .fact, in most parts of the world, it isn't that way even now. In many places, a majority of people work at farming, because one farmer feeds far fewer people. In some places, the Malthusian specter of starvation still stalks the land. The Expansion of Resources Wilfred Beckerman, an Oxford economist, offers a similarly dra matic example of resource expan sion in his book, Two Cheers for the Affluent Society. Once upon a time, Beckerman says, aluminum articles were produced only for the very rich. Now we use aluminum to make common wrappers and throwaway articles. Aluminum has gone from treasure to trash. ~~Or," says our own economics pro fessor, ~~take natural gas. Ip 1955 our gas reserves were reported to be 22.5 trillion cubic feet. In the same year, we used up 9 trillion cubic feet.

Simple arithmetic tells us that, at that rate, there won't be any left at all to heat our homes this winter. And yet, despite that frigid forecast, in 1976 we used 20 trillion cubic feet, and our remaining supplies were 216 trillion cubic feet. Where on earth did we get all that gas?" Of course, no dinosaurs have died recently. The gas has been there all along. But gas as an economic re source is not only a physical but also a mental matter. It is a function of man's mind. For example, we dis cover unknown supplies under ground-such as in Alaska. We also develop new methods of extraction -such as by forcing steam into the ground. And we devise better meth ods of resource utilization-such as the new automobile engines which greatly improve gasoline mileage. ~~Knowledge," Erich Zimmerman once wrote, ~~is truly the mother of all other resources." It is in the fer tile womb of his mind that man cre ates resources.

~~Perhaps this may seem to be a bit out of line for an economist," our professor says, ~~but let me remind you of the first great act of Creation. It is reported to us in Genesis, and you surely recall the ultimate achievement of that act-the cre ation of man himself. {(What is the nature of man? We are given a clue by the writer of Genesis, who tells us God created man ~in his own image.' Of course, we are surely not the same as God; we have merely a ~likeness.' Man cannot create a whole universe. But just as God spun one with his great power and inordinate abilities, so too with this ~likeness' man can create and expand his resources. When he does, he can better satisfy his diverse and growing wants." Jacob Bronowski approaches the same matter from a different but equally striking perspective in The 1980 SCARCITY 7 Ascent of Man. Like nature herself, Bronowski says, ~~Man has become an architect of his environment ...

His method has been selective and probing: an intellectual approach in which action depends on under standing." The wonder and magnifi cence of man's creative abilities can thus emerge from the views oftheol ogy and science as well as econom ics. The Market Mechanism What, then, is the social mechanism most conducive to the development of man's abilities and resources? Certainly an open and free market has much to recommend it. After all, no government guid ance was needed when timber ran out in the late Middle Ages and man switched to coal for power. Simi larly, when we pursued the pros pects of Petroleum a century ago as whale oil became increasingly scarce, no representative of a De partment of Energy hovered over Edwin Drake at Titusville. ~~Far too much of what our gov ernment does," the economics pro fessor says, ~~is simply restrictive. Too often governmental policies dis courage competition, hamper change, fix prices, limit imports,· re quire licenses, stipulate procedures, and reduce options. The minds and moti ves of men are too often cramped, encumbered, and confined.

Look at what has happened as a result: our rate of economic growth is now so slow we envy the snail." We should remember, our economist might well add, that man can not only create; he can also deploy. Given the resource capabilities man now has, he must decide how best to utilize them. But no single man can perceive all the available options. Though admira bly well-intentioned, in his limited individual knowledge, he's bound at times to err. Our former Energy Secretary, James Schlesinger, clearly demon strates that fact. By all accounts the man is well-educated, highly in formed, and hardworking. Yet, while Energy Secretary, he pre vented oil companies from buying oil on the spot market. Then he required them to devote more refmery capacity to assuring adequate fuel supplies for the winter several months away. Left alone, what would the giant petroleum companies have done? For them, the secret word is profit.

For us, the tragedy is that they have not been allowed to pursue it. For some of these giants, there would have been ample incentive to pro vide more winter fuel. But others might have seen better prosPect for profit in producing motor fuel. With the decision makers both numerous and dispersed, last summer's gas pains would surely have been less severe.

8 THE FREEMAN January The problems inherent in gov ernment guidance emerge even more starkly in the government ef forts to distribute diesel fuel. At first, farmers were given priority. That seems to be a sensible decision, since food is essential for all, regard less of race, creed, sex, or financial status. Without adequate fuel for farmers, what would we eat? Yet, Meg Cox reported in the Wall Street Journal for May 25, 1979, a remarkable but largely unremarked development in farming. Some farmers now simply skip plowing and plant ((right on top of the previ ous year's crop." There are some difficulties involved in this technique, but those farmers who can manage it require only about one gallon of fuel per acre-instead of the 5 to 7 gallons needed for ordinary tillage. That's a fuel saving of at least 80 per cent! Quite obviously, then, the demand for fuel by at least some farmers can respond to rising prices and limited availability. Given such an incen tive, some farmers surely would have gotten by with less. What then? More diesel fuel would have been available for truckers. Its price would not have been so high. The truckers' strike might not have oc curred. We might have been spared the terror of snipers aiming at our highways. And the food that farmers grew might not have been left to decay in the fields. We paid a high price, indeed, for permitting economic decisions to become more centralized.

Competing to Serve Allowing for free and open compe tition seems to be both a surer and a safer way to satisfy the diverse wants of man. In fact, many of our farmers' crops were saved-because the railroads came to their rescue. In the nick of time, removal of regu lations by the Interstate Commerce Commission allowed trains to transport produce across the land on the ((Salad Bowl Express." Here is a striking testimony to the marvels of the free market. Man's capacity to consume may be infinite. Given time, his capabilities to produce may be similarly bound less. But the knowledge of one man has limits. It was the presumption that he knew everything-eating the fruit of the tree of know ledge that deprived man of the bounty of Eden. Even now, our arrogant belief that all know ledge and wisdom can reside in a single individual-or in a handful of government officials-is denying us the bounty we might well create.

((What should we do?" our econom ics professor asks. ((First of all, let's recognize the enormous range and diversity of our individual wants. Then recall the tremendous innova tive achievements of the people in our past-our Franklins, our Edi1980 SCARCITY 9 sons, our Wright brothers, our Bor dens, our Swifts, our Sears, our Woolworths, and our Walgreens. Then restore and renew the system that evoked their efforts so that once again we might emulate their achievements. ((Ifwe are determined to approach the energy crisis and the other prob lems of scarcity in the most creative and constructive way, then we will cut back the constraints imposed by government. We will grant people the power to pursue their own pref erences. We will allow an open sys tem of free markets. If we will only do that, then scarcity will be less oppressive, our horizons will expand with a multitude of new oppor tunities, and our future will be much brighter."