Philip Sadler CBE

Futurist, Author, Speaker

Futurist
Author
Speaker

The economics of abundance

15/07/2010

The term ‘the economics of abundance’ is not new. It is, for example, the title of a 1935 book by the American economist Stuart Chase. Also the concept is implicit in the writings of Marx and the American economist Henry George. It is now becoming a lively topic, the subject of an increasing number of learned articles and amateurs’ blogs. The reason for this increase is, of course, that primarily as a result of productivity growth, more and more goods and services are becoming abundant; at least they are becoming abundant in the developed world.
Abundance and scarcity are relative terms. Some things and will remain absolutely scarce, such as the statue of David, but in the everyday world of economic behaviour things are subject to degrees of scarcity or abundance. Between the hours of 8 a.m. and 6 p.m. parking places in London are relatively scarce and are priced accordingly , obeying the laws of the market so as to balance supply and demand. Too high a price and people will leave their cars at home. Too low a price and the streets will be choked with cars seeking parking places. However, between the hours of 2 a.m. and 4.am. parking slots are relatively abundant, to the extent that the market mechanism does not apply and the places are free.
Abundance and scarcity exist side by side. In China there is an abundance of labour but a scarcity of brain surgeons.
As goods and services of many kinds become more and more abundant the price set by the operation of the market approaches zero. This sounds like good news for the consumer but can be very bad interest news for producers. How is it possible to make an honest profit selling things which cannot generate a profit margin? This can be bad news for the consumer too as, for example, farmers find it is no longer economic to rear sheep and turn to other ways of earning a living thus restoring lamb cutlets to a state of relative scarcity. These problems are dealt with in a number of ways. For example , while millions of people suffer hunger, crop prices are maintained by subsidies paid to farmers not to produce. Cartels such as OPEC restrict production. Patent law and copyright are used to create artificial scarcity, while expensive advertising campaigns to support famous brands create the illusion of scarcity.
As productivity continues to grow, however, such tactics become less and less sustainable. Market forces have to cope with abundance of supply and business models have to adapt. This adaptive process is well under way and can be illustrated in practice in such diverse fields as free internet services supported by advertising, free mobile phones supported by service contracts, free newspapers’ and near-free aircraft seats.


The main issue, however, is that falling real prices encourage the consumption (and waste) of goods and raw materials in ways which are unlikely to be sustainable unless there are radical changes in the energy and resource base of the economy
In the final analysis the whole market system will have to adapt. The economics of abundance will displace the economics of scarcity. As it does so the opportunity to exploit abundance to alleviate poverty, locally and globally could be grasped.