Counter visits from more than 160  countries and 1400 universities (details)

The political economy of development
This academic site promotes excellence in teaching and researching economics and development, and the advancing of describing, understanding, explaining and theorizing.
About us- Castellano- Français - Dedication
Home- Themes- Reports- Statistics/Search- Lecture notes/News- People's Century- Puro Chile- Mapuche

World indicators on the environmentWorld Energy Statistics - Time SeriesEconomic inequality

Notes on economic theory: assuming scarcity
by Róbinson Rojas Sandford (1996)

Economic theory is the name given to the more general and abstract
parts of economics, the principles. These principles will be
consistent with the ideological stance of the theorist. Thus,
in modern times, economic theory deals with the principles
explaining variations of what we know as the capitalist system
of production, the most modern organization of production in
social stratified societies, in societies whose structures are
based neither on egalitarian relationships nor on collaborative
patterns of social organizations. Economic theory has become a
tool to "justify" the capitalist system not to analyse it.

The mechanics of price relations or of markets need a general
explanation of the organization of production and distribution
insofar as this is actually worked out and controlled through 
what is defined as competitive buying and selling--which would
largely be true even in a planned or bureaucratic socialistic 

BUSINESS FLUCTUATIONS, and other economic elements have been 
introduced and continually reconsidered from a variety of 
viewpoints. But all of them are based upon the assumption that
there are not enough resources to meet the needs of the whole
population. There is always a situation of "overpopulation", that
is. From the latter, then, the notion of "rationing" scarce
resources, or, better, "allocate" scarce resources. Thus, the capitalist
market appears as an "efficient" tool for allocating
scarce resources, making possible to produce for those who can
afford the price of goods and services.

Economic theory, as a theory customized to justify the market system,
must make fundamental assumptions which create a logical chain based
on those assumptions. Because of the above, such a logical chain
will remain logical only if the user of it agrees with the concept
that the market system is a natural law  and not just a stage
in the human quest for fairer forms of social organizations.
The most basic assumption of the prevalent customized economic
theory is the so called principle of "scarcity":

 "The perpetual problem of scarcity forcing people to make
  choices is the basis for the definition of ECONOMICS.
 "Economics is the study of how society chooses to allocate
  its scarce resources to the production of goods and services in order
  to satisfy unlimited wants. You may be surprised by this definition
  of economics. People often think economics means studying supply
  and demand, the stock market, money and banking. In fact, there are 
  many ways one could define economics, but economists accept the 
  definition given here because it includes the link between SCARCITY
  and CHOICES." (I. B. Tucker, III, "Survey of Economics", 
  West Publishing Co., 1995)
  "What exactly is the subject that the economists from Smith to Marx
to the present generation have analyzed? Here are a few definitions
of economics:
  * Economics asks WHAT goods are produced, HOW these goods are
    produced, and FOR WHOM they are produced.
  * Economics analyzes movements in the overall economy -trends in
    prices, output, unemployment, and foreign trade. Once such trends
    are understood, economics helps develop the policies by which
    governments can improve the performance of the economy.
  * Economics is the study of commerce among nations. It helps
    explain why nations export some goods and import others, and
    analyzes the effects of putting economic barriers at national
  * Economics is the science of choice. It studies how people choose
    to use scarce or limited productive resources (labour, equipment,
    technical knowledge), to produce various commodities (such as
    wheat, overcoats, concerts, and missiles), and to distribute
    these goods for consumption.
  * Economics is the study of money, banking, capital, and wealth.

  "The list is a good one, yet you could extend it many times over.
  But if we boil down all these definitions, we find a common theme:
  ECONOMICS is the study of how societies use SCARCE RESOURCES to
  produce valuable commodities and distribute them among different
  people." (P. A. Samuelson & W. D. Nordhaus, "Economics",
  McGraw-Hill, 1992)

Market economists agree on that SCARCITY is the condition that human
wants are forever greater than the available supply of time, goods,
and resources. This so-called "economic science" assumes that
whatever the size of the population there is always overpopulation!

Given the above, is easy to see how the notion of "opportunity cost" 
is created to justify the concept of "profits", which is described 
as the "fair reward" to the "risk" taken by owners of resources 
when deciding to produce A instead of producing B, and that decision
being the outcome of choosing under the constraint of scarcity of
resources. The latter making possible to justify high levels
of unemployment as the "necessary price" (or right price) to pay for
"efficient" (profit maximizing) production. Therefore, suddenly, we 
find ourselves in a system of production where profits maximization and
employment maximization appear to be in contradiction. From here follows
that those members of society who live on profits and those who live
on waged-salaried employment will tend to have different points of view 
about the social effects of market system of production.

Moreover, prices appear as the necessary condition for 
distributing scarce resources, goods and time, and, therefore, only 
those who can afford the price can obtain the resources. This barbaric 
way of marginalizing groups of human beings from enjoying goods and 
resources is disguised with the notion that the market will indicate 
the "right" price for goods and services, reflecting a voluntary
agreement between suppliers and consumers, which, of course, is neither 
voluntary nor an agreement. It is, basically, the "right price" and the
"right quantity" for suppliers (more of this in the rest of the articles
in this section of The Róbinson Rojas Archive)
===============================rrojas research unit 1996