Scarcity is an important concept. Not only is it the source of most human suffering, it is currently the engine of our entire economic system. We strive to overcome it, and yet paradoxically we have grown dependent on it.
On this site I have often talked about the difference between real and artificial scarcity. However, I have long suspected that this paradigm was missing something and a more complete model was needed. Drawing inspiration from Larry Lessig’s classic book Code and Other Laws of Cyberspace, I came up with the idea that scarcity has four principle causes:
Physical Laws – scarcity caused by the physical world (e.g. land, water, oil)
Positionality – scarcity caused by social competition for positional goods, or goods whose value arises from how much one has in relation to everyone else (e.g. original works of art, membership in exclusive groups, fame)
Architecture – scarcity caused by engineering or design (e.g. digital rights management, the number of seats on a plane)
Law – scarcity caused by government regulation (e.g. intellectual property, occupational licensing)
All four of these forces acting together limit the supply of available resources and thereby create scarcity in our lives.
Let’s say I want to attend a concert premiere, but tickets are extremely expensive and hard to come by. These concert tickets are scarce. This is because:
- Physical limits on land resources and acoustics science place an upper limit on the size of the theater.
- Positionality places a value on being among the first group of people to see this concert. By definition only one group of people can be the first, making a position in this group irreducibly scarce.
- The architecture of the theater dictates the number of seats available. In addition, walls and locked doors surrounding the theater make it difficult for me to sneak in without paying.
- Law means that even if I do successfully sneak inside I could be thrown out or even arrested.
Now imagine this is a virtual concert. We have just eliminated the issue of physical laws. Since physical constraints are no longer a concern, we now have the potential to make the theater as big as we want and everyone can have a front row seat.
However, this fact alone tells us very little about what will happen to the scarcity of the ticket. There is no reason why even a virtual concert ticket can’t still be scarce because of some combination of positionality, architecture, and law.
Thus when we say technology alleviates scarcity, primarily we are talking about the scarcity of physical laws. To the extent that technology trends are fairly predictable, so is the fate of this kind of scarcity.
The other three causes of scarcity are much more volatile. Positionality, architecture, and law are all culturally and not technologically determined. While it seems somewhat reasonable to guess that the scarcity of physical laws is on its way out (albeit never fast enough), the other three forms of scarcity may be here to stay.