Economics: When there is no scarcity

This is a though provoking video: Economics theory is based on the idea that wants (demand) exceeds supply. Stated another way, we tend to want more than we can afford – we do not have the resources to acquire everything we may desire. But today we are, for a great many, and for many of life’s necessities, living in a post scarcity world. Once we have fulfilled our basic “wants” we have the luxury of being tricked by marketing into wanting even more (basically, a fake want designed to increase demand).

Maslov’s Hierarchy of Needs tries to explain human motivation in terms of fulfilling the basics, like food and water, first, at the bottom of his pyramid. Above that we seek shelter and safety, then peer support, self esteem and finally self actualization.

The reality of life today is that life is actually quite good – compared to the past. (Poverty is at a global low point, for example. Literacy is at a historical high point, and so on, in spite of the daily dose of fear mongering news media.) In effect, for most people, the goods and services of daily life are not scarce. We enter a world of post-scarcity economics for much of our daily needs.

Most people (yes, there are definitely exceptions) in modern economies have fulfilled the bottom 3 tiers of the Hierarchy of Needs. At this point, our wants become warped. Few people need digital watches (to quote Douglas Adam’s comments about the 1970s) – or for that matter smart phones or any number of other goods and services.

Since we do not really need a lot of “stuff”, marketing tricks us in to wanting things we don’t need. So we acquire more.[1] Because many of our basic wants are satisfied, we create new “wants”. Some “wants” are not goods or services – we have the luxury of time so we build ourselves up (top of the pyramid) by running marathons and ultramarathons or spending time at the gym or the hair salon to look good.

At some point, many people are persuaded to want things they cannot afford today – so lenders step into loan money to acquire stuff (you probably don’t really need). This can be loans for cars, homes, or consumer loans for vacations and home improvement, or accumulation of credit card debt to acquire “stuff” we believe improves our self-esteem (catching up or exceeding those in our peer group). As satirist JP Sears says, “Tesla – pretend to save the environment while looking rich” 🙂

Eventually, our loan payments cause us to cut back on spending on other things. As collective debt loads become too high, economic activity slows down and we enter a recession.

Post scarcity economics means we have the means to be persuaded (by marketing) to acquire stuff we probably don’t need and a ready supply of lenders to enable us to buy it today (versus saving our money).

A small observation: When we choose to purchase an item X, it is not so much a decision to buy X as it is a decision that we are not going to buy Y (and A, B and C too!) Few people think of purchase decisions this way though. But we should be asking ourselves, if I buy X, what product Y am I choosing not to buy? If we did this, we’d balance our spending – and wants – a lot better.

We see this effect at work in government spending. Legislators are constantly asked to spend more money on government programs (let’s call them X). But seldom is anyone simultaneously suggesting what projects (call them Y) we should not be funding in order to fund X. The solution is to buy X – and Y – and just borrow more money.

Keep this in mind the next time you “want” something (X) and ask yourself, what will I give up (Y) to buy X? Most people never ask this question and buy stuff they probably cannot afford. Spending decisions are about choosing between things X and Y, but most people view spending decisions as deciding whether to buy X1, X2 and X3.

[1] Getting tricked in to wanting and buying more is made possible by intense surveillance of our lives both on and offline. As Walmart says

“[W]e have a lot of data and we can gather even more data. [I]f you win their most frequently purchased items, you get the opportunity to serve impulse items online and in-store, and our focus is in driving that sweet spot,” he said.

https://www.marketwatch.com/story/walmart-could-run-into-privacy-issues-in-its-efforts-to-get-personal-with-consumers-analysts-say-2020-02-19?mod=home-page

Businesses are using multiple tricks to manipulate you in to wanting more than you need.