Scarcity and the human economic problem

John Maynard Keynes

In 1930, with the Western World mired in the Great Depression, John Maynard Keynes wrote an essay, titled Economic Possibilities for our Grandchildren, in which he forecast that one day, the economic problem which had concerned the human race since its beginning would be solved.   He wrote that “assuming no important wars, and no important increase in population” we could be in sight of a solution by 2030.  Of course no one except possibly Adolf Hitler could have foreseen World War II.  In addition, the population of the world has increased since 1930.  However, Keynes’ point about scarcity, that the human economic problem could be solved, bears consideration.

Keynes believed that revolutionary technical improvements would create the condition for continued advances in the material condition of peoples’ lives.  He also believed that when those continuing technical developments improved the human condition to a certain point, the human moral condition would change.  The large majority of us would have a “purposeness” in which we would be “more concerned with the remote future results of our actions than with their own quality or their immediate effects on our own environment.”  Basically, Keynes believed that the great majority of people would no longer strive to accumulate wealth; in fact we would return to traditional conditions of virtue where “avarice is a vice, the extraction of usury is a misdemeanor, and the love of money is detestable… we shall once more value ends above means and prefer the good to the useful.”

Keynes did not think scarcity would be a problem, because he believed that innovations would solve any problems of scarcity that appeared.  Looking back at the last 80 years, The Green Revolution is an example of a predicted scarcity that was overcome with technical innovations.  Mark Sagoff, in his 1997 essay “Do We Consume Too Much,” considered again the question of scarcity; he too believed that the human capacity for innovation was infinite.  As an example, he shows how the farm fishing of salmon and tilapia makes up for disappearing fisheries in our oceans.

Sagoff structures his argument about what he considers three main misconceptions: that we are running out of raw materials, food and timber, and energy.  He describes how economists disproved Keynes’ main proposition, that accumulation would no longer improve well-being, – because they discovered that human wants are insatiable.  Sagoff doesn’t buy that, but he does believe that “as long as the debate over sustainability is framed in terms of physical limits to growth rather than the moral purpose, mainstream economic theory will have the better of the argument.”

Now mainstream economic theory does treat scarcity as something to be solved with innovation.  We do commonly substitute one resource for another; however, during the economic downturn, it has become common to see people break into vacant homes to steal copper, a resource that is becoming scarce.  The other problem with unending mineral wealth and energy supply is that over time, the Energy Returned on Energy Invested (EROEI) of oil, copper, and other resources has gradually diminished; the disaster in the Gulf of Mexico shows that obtaining oil from the ocean bottom is a technical feat, but also inherently expensive, difficult, and dangerous.  With China and India building their respective Middle Classes, the scarcity of resources will only become more apparent.  Technology will certainly help; alternative energy will expand, and new forms of efficiency will be discovered.

The problem, of course, with that reliance on technology is that humans also rely on the Earth’s biosphere to support our growth and development.  Global Warming will make it more and more difficult for human civilization to prosper, unless we change our habits.  Sagoff wrote that “we consume too much when consumption becomes an end itself and makes us lose affection and reverence for the natural world.”  Unfortunately, affection and reverence will not do the job.  Consumption is an end to itself, at least in Western Society.  The moral dreams of Keynes seem quaint today.  Certainly, when we consider the sustainability of our communities, we do echo the “purposeness” that Keynes imagined.  However, we also invent new technologies that require more and more energy consumption, like the iPhone.  The excessive consumption that Sagoff saw in 1997 will go on unabated, largely, until scarcity becomes apparent to human society at large.  When gas prices went up above $4/gallon, people adjusted their consumption habits; some even bought ultra-efficient vehicles.

Of course, when you look at science fiction, with stories set in the distant future, humans typically have discovered some sort of energy source that allows them to travel light years through space.  You could call it unobtanium.  In our time, cold fusion was that unobtanium.  Of course, the “discovery” of cold fusion” in the late 1970s turned out to be incorrect.  I don’t discount the potential for innovations that would solve the problems of scarcity that I see on the horizon.  In fact, after reading Keynes and Sagoff’s essays, I don’t doubt that the world will turn out completely different than I am imagining it 50 or even 100 years from now.  However, I am skeptical that our voracious consumption will ever abate; as such, I see scarcity as a continual dilemma for human society.

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