[Market Economy Guide] What Is Scarcity?

Lapis Lazuli, a Pigment Material More Expensive Than Gold in Medieval Europe

…Once chemical pigments emerged after the 18th century, there was no longer any reason to pay a high price for it.

In Europe from the 14th to the 17th century, the gemstone that was unquestionably more expensive than gold was lapis lazuli. Also known as azure stone, lapis lazuli was used at the time as a raw material for making ultramarine pigment. In particular, lapis lazuli produced in the Sharshakh area of Badakhshan, Afghanistan, was traded at an even higher price because it was not only prized for its vivid and beautiful color but also extremely rare.

Scarcity Is a Relative Concept

When supply falls short of demand, the value of scarcity is added, and prices are bound to soar through the roof. To people at the time, lapis lazuli was a resource with a scarcity value greater than even gold or diamonds.

However, after the 18th century, the situation changed as the chemical industry developed. It became possible to produce ultramarine pigment artificially. Once ultramarine pigment could be made at low cost, there was no longer any reason for people to buy lapis lazuli at an expensive price. Naturally, demand for lapis lazuli plummeted, and although it remained rare, it was no longer a scarce resource.

As this shows, scarcity is a highly relative concept. As the case of lapis lazuli demonstrates, the value of scarcity cannot be judged simply by whether production volume is large or small. That is because scarcity is a value directly affected by human wants.

Humans of Desire and Passion

Everyone has desire for material things. When a new product comes out, people want to buy it, and when something owned by others looks impressive, they want to have it too. Desire is a perfectly natural human instinct, and everyone wants better things.

For example, think about when Samsung or Apple releases a new product. Many people routinely line up for hours on launch day to get their hands on the new product before anyone else. The most enthusiastic even show such passion that they do not hesitate to camp out overnight. For these people, the value of scarcity lies in being the “first to use” the new product.

Another example was the release of the limited edition of Blizzard’s game Diablo 3 in the United States in 2012. Diablo 3 was a hugely popular game series worldwide and a blockbuster title released 10 years after Diablo 2. Many Diablo fans went wild, and the various items included only in the limited edition became a major focus of attention. More than 500 people even lined up in front of the event venue starting the day before the release. That was because, for Diablo fans, the Diablo 3 limited edition was a scarce product unlike any other.

The Finiteness of Resources

Scarcity arises because not everyone can have as much as they want. No one in the world can have everything they want. No matter how wealthy a person may be, it is impossible to feel completely fulfilled. People always want more, so they constantly feel that something is lacking and remain dissatisfied.

In fact, the reason people cannot have everything they want is very simple. Human desires are infinite, while the resources that exist in reality are finite. How could finite resources ever satisfy infinite wants? The finiteness of resources inevitably gives rise to the problem of scarcity. And the problem of scarcity lies at the core of economic problems. After all, economics is the process of determining who will produce, consume, and distribute limited resources, and how.

■ Please remember

The finiteness of resources inevitably gives rise to the problem of scarcity. And the problem of scarcity lies at the core of economic problems. After all, economics is the process of determining who will produce, consume, and distribute limited resources, and how.

Sung-no Choi, President of the Center for Free Enterprise (CFE)

---

Original title: [시장경제 길라잡이] 희소성이란 무엇인가?

Author: Sung-no Choi

Date: 2020-06-15

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=column&pn=8&idx=22840