Sequence summary: This is a series of 18 articles on the most fundamental concepts of economics: scarcity, opportunity cost, marginalism, and self-interest. These are the atoms, molecules, cells, the core things you need to have a grip on to move on with the science, and, if all goes well, we will move on, but first it is absolutely vital to get a strong grasp of the fundamentals. Though these are basic concepts, they are not easy to understand. If you want evidence of this, open a newspaper....

 

 

Thank goodness this wasn't a restaurant where you had to order only one thing and you never found out what all the other things on the menu tasted like. Harry hated that, it was like a torture chamber for anyone with a spark of curiosity: Find out about only one of the mysteries on this list, ha ha ha!

                -HPMOR

A simple way to understand scarcity is to imagine you're trying to fit all your sand into a hole, but the hole is too small for all the sand to fit into.

It is, of course, possible to make the hole deeper or wider. It's also possible to compress the sand. However, either task can only be accomplished with the help of a mysterious element called "technology." The thing is, economists don't know what this element looks like or how to find it. Sometimes we look at all the people putting sand into holes and notice that the hole is bigger or the sand is more compressed, and we conclude "technology" must have happened. But it's not something we can predict or count on. So how are you going to get all of your sand into this hole?

You're not. Look, I don't know what's so special about this sand, and I don't know why you have to get it into this hole, but I know not all of it's going in. And that means if you want any of it to go in, you must leave some of it out.

That's scarcity: you must give up something to get anything.

It won't fit. Don't try to force it - it won't fit. And that means you're going to have to make a choice.

"Hold on," you say. "I don't really care which sand goes into the hole and which stays out here."

"Okay, okay, but this is economic sand. It's representative."

"Of what?"

"Take a closer look."

You give the sky (being uncertain of where this voice is coming from) a skeptical look, but you grudgingly crouch and inspect the sand (which stretches for miles around you). To your surprise, each grain is different from the rest. And, when you look really closely, each is a tiny, tiny gem, a reflection of something.

In some you see familiar faces. Others, you know just by looking, taste like chocolate, and smell like flowers, and feel like accomplishment, and smell like chlorine, a memory....

You pick up one. It is a pounding bass that sets your whole body vibrating. You drop it before your heart bursts out your chest.

It was your favorite techno remix of classical music.

Your are rubbing between your fingers the feeling of being curled up on the couch on a rainy night with your best friend watching a movie when a voice coughs.

"It's my values," you say, getting quickly to your feet.

"It's representative, like I said."

You look around. The sand seems to stretch on endlessly in all directions.

"There's a lot of it."

"Aren't you a marvelous creature? And to think it all fits between the sides of your skull."

"Some of it's out of reach."

"That's one of the problems, yes. And if the hole were big enough, all the sand, though it stretches on endlessly, would nevertheless fall into the hole."

"Can we abstract away from that, please? This is all a bit much."

"Certainly."

You open your eyes (though they hadn't been closed) and look around. Now you are in an empty room, the walls grey. There is a ball of sand that you know is made of all the sand from before, yet it is small and light enough to hold in your hands. There is no door. There is the hole, same as it ever was, only now you do not, you do not want to leave even a single grain of sand without.

"Can't I put some of it in, then take it out and put the rest in?"

"This hole, too, is an economic hole. It's representative."

You stare until it clicks. "Choice. There's no going back."

"Yep. The instant you fill the hole, it closes. And now you must make a choice."

Only so much will fit in...which means you have to leave some out. Take your time.

It's tough, but finally you separate the grains of sand you want to keep the most from the less important ones. The remaining sand will fit into the hole.

Notice something - once you've removed enough sand to fit the rest into the hole, there's no reason to remove any more. You only want to remove the minimum necessary to fit the sand into the hole.

So you remove the sand, and you pile the rest into the hole, and the hole closes, and then you suffocate to death in this doorless room....

So what's up with that hole, anyway? Notice how the fact that you couldn't fit all the sand into the hole forced you to make a choice. You could have removed this grain or that grain or made all the grains a little smaller. Or you could have thrown the sand down in despair and wept. But if you did that, you wouldn't have gotten any of the sand into the hole, so you did the smart thing, made a choice, and forwent some sand.

And what happens then? Why, the hole closes, and you can't go back and choose something different.

That's scarcity. You can't get everything, which means you have to give up something, which means you have to make a choice, and you can never go back, not entirely.

 

 

Next: defining scarcity....