The marginalist revolution in the late nineteenth century marked the beginning of the end of classical political economy and the birth of what came to be known as neoclassical economics (Sandelin et al. 2002). All three pioneers of marginal utility theory—Carl Menger (1871), William Jevons (1888), Léon Walras (1954) —referred to scarcity as the starting point for economic analysis. Through the work of these pioneers, especially Menger’s, the centrality of scarcity became a core premise for the advancement of contemporary neoclassical economics (see Hayek 2004:19; Robbins 1998:277). As a result, virtually every neoclassical economic textbook refers to scarcity—even though the field of economics is becoming increasingly differentiated.
I have argued in my research that scarcity problems are, and will remain, an important sub-set of problems, but we need to include sufficiency and abundance problems as well (Daoud 2007, 2010, 2011a, 2011b, 2015, 2017). Under scarcity, economics will give us insights about how people optimize their behavior to get as much as possible out of their limited resources. Neoclassical economics is mainly interested in what we can call allocation problems under a scarcity assumption. If actor A has a set of resources R, that is scarce in relation to fulfilling a set of wants W. Neoclassical economics tells us that a rational actor will optimize his or her resources in such a way that person can derive as much utility U as possible given the circumstances. These types of problems are central to many social science issues—they face governments allocating a limited budget to a myriad of popular demands, they face the individual in deciding if he or she should go to university or take a job. As social scientist, we need to keep analyzing these situations.
What is problematic with the neoclassical view, however, can be summarized in three points. First, this assumption is often postulated to be empirically valid without further investigation. It is stipulated to be valid in most cases of which economics is applied to, and rarely confirmed (Samuelson and Nordhaus 2001). A situation might be characterized by scarcity, but we know that even famines can arise when food is sufficient (Daoud 2017; Sen 1981). What is the real validity of a piece of research if its core assumptions do not hold when checked against reality?
Second, when we see the world from a scarcity perspective, we are led to ignore sufficiency and abundance problems (Daoud 2011b; Dugger and Peach 2009; Galbraith 1958). Many events or processes are not cases of scarcity. For example, unemployment is an abundance of labor power. Some would say, but is not unemployment rather a case of scarcity of jobs? No, not if we follow the original definition of scarcity, laid out by Menger, Robbins or Malthus for that matter (Daoud 2007, 2010). Labour power is a factor of production. A job, which is essnetially a position is a specification to perform a particular task—when the task if done by a worker, it satisfies fulfilling a want or need (Dugger and Peach 2009:41). The social world is filled with other abundance or sufficiency examples: consumer society with its cornucopia of goods and services (Offer 2006); post-scarcity society and emancipator reasoning (Bookchin 1971); technological development (e.g. 3D-printers, automated machines, artificial intelligence) that leads to exponentially higher levels of productivity (Söderberg and Daoud 2012).
Third, postulating leads us to ignore how scarcity problems became scarcity problems in the first place. What if scarcity is created? What if actor B has the instruments to manipulate actor A’s resources R to stay scarce? It would be more rational for actor A to engage in a power struggle with B, freeing one’s self from this artificial scarcity. In many settings, actors strive to achieve abundance or sufficiency in order to free themselves from the turmoil of scarcity (Keynes 1972). Even Adam Smith writes that ‘…the object of police [politics or governance] in general is the proper means of introducing plenty and abundance into the country, that is, the cheapness of goods of all sorts’ (Smith 1982:333). However, endowments or resources do not just appear as free gifts of nature or society. Capital owners control, for example, the supply of cars or housing. Even if demand exceeds supply, someone has to make the final call to produce more cars. Similarly, the supply of fish is not only controlled by the fishing industry but also by some natural seasonal cycles affecting the scarcity or abundance of fish. So even in functioning markets, individuals or groups may have vested interest in supplying more or less of some good or service. This is largely what political economy is about. (Panayotakis 2011, 2012).
In summary, the approach I am advancing shows that the fundamental problem of neoclassical economics lies within the set of socio-economic problems (Daoud 2011a). Under scarcity, economics informs us that agents will instrumentally choose the strategy to maximize their utility, making (allocating) the most out of their resources. What I have argued in several papers is that this is only one useful strategy among several; agents might reduce scarcity, inflate it, or create it. As such, the research agenda of Scarcity, Abundance and Sufficiency subsumes the allocation problem within a super-set of problems. Recalibrating socio-economic inquiry to research the dynamics of scarcity, abundance, and sufficiency will cast not only new light on old problems, but lead us to discover new problems that traditionally have been reserved for neoclassical economists. I invite you to explore these problems with me.
References
Bookchin, Murray. 1971. Post-Scarcity Anarchism. San Francisco, California: Ramparts Press.
Daoud, Adel. 2007. “(Quasi)Scarcity and Global Hunger.” Journal of Critical Realism 6(2):199–225.
Daoud, Adel. 2010. “Robbins and Malthus on Scarcity, Abundance, and Sufficiency.” American Journal of Economics and Sociology 69(4):1206–29.
Daoud, Adel. 2011a. Scarcity, Abundance, and Sufficiency: Contributions to Social and Econoimc Theory. Gothenburg: Gothenburg Studies in Sociology, Department of Sociology & Geson Hyltetryck.
Daoud, Adel. 2011b. “The Modus Vivendi of Material Simplicity: Counteracting Scarcity via the Deflation of Wants.” Review of Social Economy 69(3):275–305.
Daoud, Adel. 2015. “Scarcity and Artificial Scarcity.” in The Wiley Blackwell Encyclopedia of Consumption and Consumer Studies. John Wiley & Sons, Ltd.
Daoud, Adel. 2017. “A Framework for Synthesizing the Malthusian and Senian Approaches: Exemplified by the 1943 Bengal Famine.” Cambridge Journal of Economics.
Dugger, William M. and James T. Peach. 2009. Economic Abundance : An Introduction. Armonk, N.Y.: M.E. Sharpe.
Galbraith, John Kenneth. 1958. The Affluent Society. London: Hamish Hamilton.
Hayek, Friedrich August von. 2004. “Introduction.” in Principles of economics, edited by J. Dingwall, B. F. Hoselitz, and B. F. Hoselitz. Grove City, PA: Ludwig von Mises Institute and Libertarian Press.
Jevons, William Stanley. 1888. The Theory of Political Economy. 3rd ed. London: Macmillan. Retrieved (http://oll.libertyfund.org/title/625 on 2008-10-08).
Keynes, John Maynard. 1972. “The Economic Possibilities for Our Grandchildren.” Pp. 321–32 in The collected writings of John Maynard Keynes. Vol. 9, Essays in persuasion. London, New York: Macmillan ; Cambridge U.P. for the Royal economic society.
Menger, Carl. 1871. Principles of Economics. Grove City, PA: Libertarian Press; Ludwig von Mises Institute.
Offer, Avner. 2006. The Challenge of Affluence: Self-Control and Well-Being in the United States and Britain since 1950. Oxford: Oxford University Press.
Panayotakis, Costas. 2011. Remaking Scarcity: From Capitalist Inefficiency to Economic Democracy. London : Winnipeg : New York: Pluto Press.
Panayotakis, Costas. 2012. “Scarcity, Capitalism and the Promise of Economic Democracy.” International Journal of Pluralism and Economics Education 3(1):104–11.
Robbins, Lionel Robbins. 1998. A History of Economic Thought the LSE Lectures. Princeton, N.J.: Princeton University Press.
Samuelson, Paul Anthony and William D. Nordhaus. 2001. Economics. 17. Boston: McGraw-Hill.
Sandelin, Bo, Richard Wundrak, and Hans-Michael Trautwein. 2002. A Short History of Economic Thought. 1. Stockholm: SNS förl.
Sen, Amartya Kumar. 1981. Poverty and Famines: An Essay on Entitlement and Deprivation. Oxford: Clarendon.
Smith, Adam. 1982. Lectures On Jurisprudence. Indianapolis: Liberty Fund.
Söderberg, Johan and Adel Daoud. 2012. “Atoms Want to Be Free Too! Expanding the Critique of Intellectual Property to Physical Goods.” tripleC: Communication, Capitalism & Critique. Open Access Journal for a Global Sustainable Information Society 10(1):66–76.
Walras, Léon. 1954. Elements of Pure Economics or the Theory of Social Wealth. Homewood, Ill.: Irwin for The American Economic Association and The Royal Economic Society.
Adel DaoudAdel Daoud is Research Fellow in Political Economy, Centre for Business Research, Judge Business School, University of Cambridge, the U.K.
Photo: Johan Söderberg & Adel Daoud
Developing Economics 
Man seeks to satisfy his needs with the least exertion.
Man’s needs are unlimited.
Two opposing axioms by Henry George, which are fundamental to any proper economics thinking.
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Brilliant!
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George continues to show in his classic and seminal book “Progress and Poverty” how speculation in land values makes the national economy unstable and unable to uniformly progress and that it creates poverty in an technologically well-developed nation. He proposes to tax land values as a single tax instead of earnings, purchases, capital gains etc. here’s why:
Socially Just Taxation and Its Effects (17 listed)
Our present complicated system for taxation is unfair and has many faults. The biggest problem is to arrange it on a socially just basis. Many companies employ their workers in various ways and pay them diversely. Since these companies are registered in different countries for a number of categories, the determination the criterion for a just tax system becomes impossible, particularly if based on a fair measure of human work-activity. So why try when there is a better means available, which is really a true and socially just method?
Adam Smith (“Wealth of Nations”, 1776) says that land is one of the 3 factors of production (the other 2 being labor and durable capital goods). The usefulness of land is in the price that tenants pay as rent, for access rights to the particular site in question. Land is often considered as being a form of capital, since it is traded similarly to other durable capital goods items. However it is not actually man-made, so rightly it does not fall within this category. The land was originally a gift of nature (if not of God) for which all people should be free to share in its use. But its site-value greatly depends on location and is related to the community density in that region, as well as the natural resources such as rivers, minerals, animals or plants of specific use or beauty, when or after it is possible to reach them. Consequently, most of the land value is created by man within his society and therefore its advantage should logically and ethically be returned to the community for its general use, as explained by Martin Adams (in “LAND”, 2015).
However, due to our existing laws, land is owned and formally registered and its value is traded, even though it can’t be moved to another place, like other kinds of capital goods. This right of ownership gives the landlord a big advantage over the rest of the community because he determines how it may be used, or if it is to be held out of use, until the city grows and the site becomes more valuable. Thus speculation in land values is encouraged by the law, in treating a site of land as personal or private property—as if it were an item of capital goods, although it is not (Mason Gaffney and Fred Harrison: “The Corruption of Economics”, 2005).
Regarding taxation and local community spending, the municipal taxes we pay are partly used for improving the infrastructure. This means that the land becomes more useful and valuable without the landlord doing anything—he/she will always benefit from our present tax regime. This also applies when the status of unused land is upgraded and it becomes fit for community development. Then when this news is leaked, after landlords and banks corruptly pay for this information, speculation in land values is rife. There are many advantages if the land values were taxed instead of the many different kinds of production-based activities such as earnings, purchases, capital gains, home and foreign company investments, etc., (with all their regulations, complications and loop-holes). The only people due to lose from this are those who exploit the growing values of the land over the past years, when “mere” land ownership confers a financial benefit, without the owner doing a scrap of work. Consequently, for a truly socially just kind of taxation to apply there can only be one method–Land-Value Taxation.
Consider how land becomes valuable. New settlers in a region begin to specialize and this improves their efficiency in producing specific goods. The central land is the most valuable due to easy availability and least transport needed. This distribution in land values is created by the community and (after an initial start), not by the natural resources. As the city expands, speculators in land values will deliberately hold potentially useful sites out of use, until planning and development have permitted their values to grow. Meanwhile there is fierce competition for access to the most suitable sites for housing, agriculture and manufacturing industries. The limited availability of useful land means that the high rents paid by tenants make their residence more costly and the provision of goods and services more expensive. It also creates unemployment, causing wages to be lowered by the monopolists, who control the big producing organizations, and whose land was already obtained when it was cheap. Consequently this basic structure of our current macroeconomics system, works to limit opportunity and to create poverty, see above reference.
The most basic cause of our continuing poverty is the lack of properly paid work and the reason for this is the lack of opportunity of access to the land on which the work must be done. The useful land is monopolized by a landlord who either holds it out of use (for speculation in its rising value), or charges the tenant heavily for its right of access. In the case when the landlord is also the producer, he/she has a monopolistic control of the land and of the produce too, and can charge more for this access right than what an entrepreneur, who seeks greater opportunity, normally would be able to afford.
A wise and sensible government would recognize that this problem derives from lack of opportunity to work and earn. It can be solved by the use of a tax system which encourages the proper use of land and which stops penalizing everything and everybody else. Such a tax system was proposed 136 years ago by Henry George, a (North) American economist, but somehow most macro-economists seem never to have heard of him, in common with a whole lot of other experts. (I would guess that they don’t want to know, which is worse!) In “Progress and Poverty” 1879, Henry George proposed a single tax on land values without other kinds of tax on produce, services, capital gains etc. This regime of land value tax (LVT) has 17 features which benefit almost everyone in the economy, except for landlords and banks, who/which do nothing productive and find that land dominance has its own reward.
17 Aspects of LVT Affecting Government, Land Owners, Communities and Ethics
Four Aspects for Government:
1. LVT, adds to the national income as do other taxation systems, but it replaces them.
2. The cost of collecting the LVT is less than for all of the production-related taxes–tax avoidance becomes impossible because the sites are visible to all.
3. Consumers pay less for their purchases due to lower production costs (see below). This creates greater satisfaction with the management of national affairs.
4. The national economy stabilizes—it no longer experiences the 18 year business boom/bust cycle, due to periodic speculation in land values (see below).
Six Aspects Affecting Land Owners:
5. LVT is progressive–owners of the most potentially productive sites pay the most tax.
6. The land owner pays his LVT regardless of how his site is used. A large proportion of the ground-rent from tenants becomes the LVT, with the result that land has less sales-value but a significant “rental”-value (even when it is not used).
7. LVT stops speculation in land prices and the withholding of land from proper use is not worthwhile.
8. The introduction of LVT initially reduces the sales price of sites, even though their rental value can still grow over a longer term. As more sites become available, the competition for them is less fierce.
9. With LVT, land owners are unable to pass the tax on to their tenants as rent hikes, due to the reduced competition for access to the additional sites that come into use.
10. With LVT, land prices will initially drop. Speculators in land values will want to foreclose on their mortgages and withdraw their money for reinvestment. Therefore LVT should be introduced gradually, to allow these speculators sufficient time to transfer their money to company-shares etc., and simultaneously to meet the increased demand for produce (see below).
Three Aspects Regarding Communities:
11. With LVT, there is an incentive to use land for production or residence, rather than it being unused.
12. With LVT, greater working opportunities exist due to cheaper land and a greater number of available sites. Consumer goods become cheaper too, because entrepreneurs have less difficulty in starting-up their businesses and because they pay less ground-rent–demand grows, unemployment decreases.
13. Investment money is withdrawn from land and placed in durable capital goods. This means more advances in technology and cheaper goods too.
Four Aspects About Ethics:
14. The collection of taxes from productive effort and commerce is socially unjust. LVT replaces this extortion by gathering the surplus rental income, which comes without any exertion from the land owner or by the banks– LVT is a natural system of national income-gathering.
15. Bribery and corruption on information about land cease. Before, this was due to the leaking of news of municipal plans for housing and industrial development, causing shock-waves in local land prices (and municipal workers’ and lawyers’ bank balances).
16. The improved use of the more central land reduces the environmental damage due to a) unused sites being dumping-grounds, and b) the smaller amount of fossil-fuel use, when traveling between home and workplace.
17. Because the LVT eliminates the advantage that landlords currently hold over our society, LVT provides a greater equality of opportunity to earn a living. Entrepreneurs can operate in a natural way– to provide more jobs. Then earnings will correspond to the value that the labor puts into the product or service. Consequently, after LVT has been properly introduced it will eliminate poverty and improve business ethics.
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[…] Advancing a Research Agenda of Scarcity, Abundance, and Sufficiency (av Adel Daoud, University of Cambridge) […]
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Reblogged this on Radical Political Economy.
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[…] has been said about what’s going wrong in development economics – on this blog (for example by Adel Daoud, Ingrid H. Kvangraven, or Jacob Assa) and elsewhere (for example by Angus Deaton, Dani Rodrik, and […]
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Thank you so much for showing us a new picture and the other side of the picture by pointing towards the abundance of resources. I, especially found the unemployment example more convincing and vigorous for challenging the scarcity of neoclassical economists. Classical Economics and neoclassical theories must be challenged and the loopholes in these theories must be corrected. Thank you
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