Home > New vs. Old Paradigm > Normative foundations of scarcity

Normative foundations of scarcity

from Asad Zaman and the WEA Pedagogical Blog

In my paper of this name (which has been published in Real-World Economics Review, issue no. 61, 26 September 2012, pp. 22-39), I show that the apparently objective concept of scarcity is built on THREE normative assumptions. This argument destroys one of the basic ideas strongly argued in most conventional texts, that economics is a POSITIVE study of facts of our economic existence, and does not involve value judgement. The three normative pillars on which scarcity stands as the fundamental principle of economics are the following:

ONE: Private Property.
This is a cultural norm. For example, the Cherokee constitution states that the lands of the Cherokee Nations shall remain common property. If there is a cultural norm of sharing public resources, then the issue of scarcity would not arise (or at least, would be much less frequent). Anthropologists have shown that there is no starvation in subsistence societies because of strong norms of sharing. If the society as a whole has enough food, then EVERYBODY will get to eat. Note the violent contrast with the private property norm. In conventional economics, the Pareto principle embodies the normative idea that the right to property takes precedence over the right to life. If a poor man is starving, the rich man is NOT obligated to provide for him.

TWO: Consumer Sovereignty
Economists argue the we SHOULD not question consumer preferences as to where they come from and whether they are legitimate. Also, economists argue that we SHOULD design an economic system which fulfills ALL preferences (to the extent possible). Obviously if we differentiate between legitimate demands, and idle desires, scarcity would be much reduced. As Gandhi said, there is enough for everyone’s need, but not enough for everyone’s greed. The noxious NORMATIVE idea that the right of the super-rich to private jets trumps the right of the poor hungry child to bread is what leads to scarcity becoming the foundation of economics. If we change our norms to advocate and encourage simple lifestyles, and also consider the goal of an economic system to be that of taking care of the NEEDS of ALL, instead of maximizing the wealth of the wealthy. the problem of scarcity would not arise.  read more

  1. chdwr
    September 22, 2014 at 4:03 pm

    Completely agree. The anatomy of equilibrium both individually and systemically is adjustment of parameters. If the macro-economic problem is actually a continuous scarcity of individual incomes in ratio to costs/prices, as I suggest, then a policy adjustment both to individual incomes (increase) and prices (decrease) is called for.This would resolve the scarcity situation for the individual and be the perfect means of economic democracy. Likewise, the rational adult and ethical reaction to the finitude of the planet’s resources is reasonable restraint on personal consumption (reduction) and (more) contemplation of what the truly happy mental life is composed of, namely confidence, hope, love and a sense of grace.

    Economics, philosophy and psychology are all intertwined.

  2. September 22, 2014 at 4:25 pm

    Agree with all of this ! But nothing new here or in any of the sources cited in the longer paper. As a non-economist using a multi-disciplinary systems perspective all this was obvious ! But economists usually stay within their own narrow box , even Thomas Piketty ! I have written eleven books and over 200 articles beginning in the Harvard Business Review and Financial Analysts Journal in the 1960s and 1970s , but I was never been able to engage any economist , except notably the late Kenneth Boulding and Robert Heilbroner , both personal friends and mentors ! My latest 56-page e-book ,MAPPING THE GLOBAL TRANSITOIN TO THE SOLAR AGE ” ( London, 2014 ) is freely downloadable from our home page , co-published by the Institute of Chartered Accountants of England and Wales http://www.icaew.com and Tomorrow’s Company

  3. Macrocompassion
    September 23, 2014 at 11:39 am

    1. Man seeks to satisfy his desires with the least exertion.
    2. Man’s desires are unlimited.

    These two axioms for the definition of economics were penned by Henry George in his seminal book “Progress and Poverty” in 1879. They are in contradiction and so is the nature of all macroeconomic concepts, two opposing effects are always involved.

  4. September 23, 2014 at 4:36 pm

    In my paper I have shown that each of the three normative assumptions is just that — an agreement or a social norm. One can propose quite reasonable alternatives to each of the three — indeed, the three assumption are all quite ridiculous, and conflict with widely held social norms.

    As a proof of my claims, I have proposed three alternative social norms for each the three pillars of scarcity. I have shown that each of the nine possibilities leads to an entirely different fundamental principle for economics. This serves to demonstrate the arbitrariness of the normative assumptions of modern economic theory.

    One simple solution to the scarcity problem is to focus on needs instead of wants. NEEDS are limited, while desires are not. Needs can be satiated while desires only increase when they are fulfilled. People ARE willing to work to satisfy their own needs. Indeed, most people have enough COMPASSION that they are willing to work to help fulfill other peoples needs (but not necessary to fulfill idle desires of others). So just making a distinction between needs and wants would be enough to replace the fundamental problem of economics from “scarcity” to distribution. It can be shown there is enough to fulfill basic needs of everyone, so there is no scarcity at the level of needs. The problem is that the wealthy have resources far in excess of their needs, and do not recognize any rights of the poor to this excess. Currently prevalent capitalist norms put the right of the wealthy to their property ABOVE the right of the hungry to food. This normative decision leads to the current state of affairs. The solution must be to change these norms — we must prioritized basic needs and recognize this right as taking precedence over the right to property. The battle must be fought on normative grounds. I don’t think this is widely recognized. Just like the idea that economics is a set of normative propositions is not at all acceptable to most economists.

  5. September 24, 2014 at 1:15 pm

    Comments—

    1. I think Asad’s view that it not ‘widely recognized’ that ‘the battle must be fought on normative grounds’ i think depends on your point of view and also state of mind. I think just about everyone instinctively recognizes this, but in A. Sen’s terms people have ‘menu dependence’ in their utility functions (the same issue arises when dealing with opportunity costs as its called). An internet group of which i am marginally a member (IOPS , connected with Znet and parecon, essentially advocates for the things Asad lists, and there are many many similar ones (altruists international etc.)). They want people to ‘organize, hold meetings, go to demos, etc. ‘ on this cause (as do all the others). They wouldn’t mind a donation or help with their website as well, or to promote and sell their books. I told one person from India over the net that IOPS won’t fly in India now (its BJP zone now) and he responded ‘IOPS is fully functioning in India, we have over 60 members ‘ (in a country of over 1 billion). So Asad’s views are not unique or new—-they go back at least 200 years. Adam Smith, Keynes, etc. thought ‘greed’ and material consumption was not the only human motivation.

    I am a member of a philosophy discussion group, and one topic we have variations on are what amount of inequality is ok, what ethical rules should operate in a market democracy, etc. After the discussion we go to a restaurant, and there always homeless people begging and sleeping on the street. People basically ignore them and go get a nice meal and a few beers. (I often give some change. Often my bills are paid by someone else without me even knowing since I often look like a bit of a wreck and tattered. eg one time the night before i decided to go for a midnite swim (it was 90 degrees) and missed the trail and ended up hanging upside down on the side of a cliff for half the nite, since i couldnt see how to get upright). Poverty and consumption are sort of ‘elephants in the room’—people don’t want to talk about it (though i asked hiow peope about the homeles—it was basically ignored as a question. The homeless of course i know ill take the money they get from begging and go straight to buy liquor or drugs also).

    There is no accepted view of what ‘needs’ versus ‘idle wants’ are. A friend of mine went to the Ivory Coast, which is like many African countries largely poor. It also has perhaps the biggest and most splendorous Catholic church in the world, outside of the Vatican (which itself is quite well appointed, with some of their religious people living in multi million dollar accomadations (and some making money by using the Vatican bank account as their personal hedge fund, even as they preach against poverty and vice). In my town we have many nice churches, which don’t pay taxes, and often are closed most of the time (and their preachers have free rent, use of a car, etc.) . My own view is basically, since i’m into science, to a large extent these places should be converted into community and education centers, maybe have a beds or rooms for the homeless etc. But the preachers have a ‘need’ to express their spirituality and explain to their congregations, in a theatrical way on Sunday, how God told him to tell them they are going to hell unless they repent (and tithe) and the congregations lap it up typically and come back for more ( a sort iof s&m relationship, which ends up with a nice pain to pleasure buzz when at the end people are ‘forgiven’ if they drop money in the plate or come to ‘confess’ since everyone likes lewd stories and besides —-‘oh thank you) . I’m into music, and the type I play is often extremely unpopular, since people prefer ‘happy, pretty’ songs with nice innofensive lyrics (god and country, falling in love etc.) and also classical type pyrotechnics they can be impressed by (just as they baroque cathedrals). They don’t want to hear any minor chords, or simple to the point concepts (just as economists and scientists often want the most complex math formalism possible to say ‘people want to exert less as possible to get the most they can’.
    They think y music is an ‘idle desire’ and what i need is maybe a ‘real job’ (fixing up their house, running their computer, taking care of people they don’t feel like taking care of, etc.) My view is often ‘well let the house fall down on your TV’.

    Do we need the internet? Electricity? Nuclear power? Cars? religion? music? math? Wilderness? Because of menu dependence people don’t have the same norms. For example, to have the web it has been done in a very capitalistic way, creating vast inequality. But then people in africa in poverty, or banglades, can often get a cheap cell phone and even education.

    In my view alot of greed (unless its a need) is for people to keep repeating ‘malignant platitudes’ (eg selling their new book on inequality which noone (who had their head in the sand) was aware of or promoting cooperation (meaning you volunteer for them so they get what they want which is to do well by doing good and helping others also eventually get what they want). They want to lead the struggle, but don’t use the ‘ghandian tactic’ (which he imperfectly followed) of saying ‘there go my people, i am their leader, so i must follow them’.

    p.s. Henry George’s 2 principles i don’t think are inconsistant in the commonly viewed sense—he is describing optimization under constraints—because he had a 3rd major view, which was that land was finite, and property laws are ‘normative’ (eg proudhon).

  6. September 24, 2014 at 2:39 pm

    I am confused by these remarks. On the one hand — “everyone instinctively recognizes this” — that the battle must be fought on normative grounds. {1: Everyone knows what I am saying is true}
    Also, in practice there are only 60 people in a country of a billion who are advocating the things that I say.{2. Very Very few people actually agree with what I say}

    And finally, needs cannot be distinguished from wants — so {3. What I am saying is not really true}

    All three statements seem to be in conflict with each other and so it is not clear what Ishi is saying.

  7. September 24, 2014 at 4:16 pm

    I am surprised that my comment was actually posted. But here is my response—-

    1. the idea i gave that (point 1) ‘everyone knows’ that what Asad is saying is true, combined with (point 2) only 60 people in a country of 1 billion explicitly endorse this —–

    (aside) (and i’ve slept on the streets of mumbai, hitchiked to Ladack, etc. —did what i could do on my 2$ in spending money (i actually lied about how much money i had to get in—they said i had to have 1000$,, so i said i had 2000 (true if measured in 1/1000 of a dollar—good to go!!! (coming back through JFK in NYC was sortuh similar; at least i didnt get locked up), plus selling my camera, pack, etc. visited benares (ghats and heroin) , taj mahal, hiked the himalayas , met quantum physicists, stayed on the lake in kashmir etc.)

    ———- is that not everyone says what they know is true (or false). they may have ‘dought’ or not trust their own opinion; and they may not express this openly. (some of my IOPS correspondants who are from India said people do agree with IOPS but vote BJP for pragmatic reasons—some is an anti-Congress party vote.(Agroup i went to yesterday had people who had dropped their religion—they went along for awhile, and then openly disagreed—and they got a whole lot of problems for dissenting. (Like that girl in Pakistan who was hurt badly for advocating womens and girl’s education).

    Regarding point 3 that the idea that ‘noone really can in general distinguish needs from wants’ are in conflict with points 1 and 2 was my point—i gave the example of the ‘elephant in the room’ (which is a concept, if you are in pakistan, according to your address, you may not know, since i am in usa); its also called ‘cognitive dissonance’.
    there is also some old social psychological examples in which if you have 20 people in a group, and 19 say something like 1+1=3, the last person will agree (even if they don’t believe it at first).
    And since that one person may have a ‘minor disagreement’ with the 19 over the sum of 2 1’s, if they agree with all the other policies , they go along to get along, or ‘don’t sweat the small stuff’.

    Do you have some generally accepted or ‘true’ statements distinguishing ‘needs ‘ from ‘wants’?
    ‘one man’s trash is another man’s valued treasures’.

    Sometimes a sortuh friend of my mine (a fundamentalist christian) told me you have to ‘get the pick out of your eye before you telling someone they are blind to reality’. Your needs may not be the same as everyone else’s (and equally subjective, based on what you see on the menu in your restaurant).

    I personally don’t think this is a good way of thinking about things. One can think of ‘dialectic’, duality (eg your needs are a function of your wants which are a function of your needs—highly nonlinear like general relativity (source terms on both sides of the equation, and each includes the other source term), or ‘democracy of particles (geoffrey chew).)

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