Formalization of the Context "Scarcity"

Claudio Gutierrez

The first step of my indirect criticism of literalistic economic methodology is now complete. Let us try to build up the second step, the one that has to do with the possible description of the tools of economic analysis with no independent reference to the concept of "scarcity". In this argument I shall be contending again with the literalistic position. For one thing, I will be attempting to show that what "scarcity" stands for can be better understood as belonging in the non formal side of theory, the field of the assumptions. Secondly, as a precipitate of that discussion, we will be establishing that a logically strict definition of economics with the intervention of "scarcity" is not possible and that, perhaps, a definition of economics in general is not possible at all. In provision for the latter we are refraining from trying to accomplish an alternative "definition" and are aiming simply to a "description," not of economics generally, but only of "economic tools of analysis".

Let us begin by restating the literalistic definition of economics as an object for examination:

Economics is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses. (ROBBINS 32, p. 15).

There are two parts to this statement: the reference to scarcity with respect to means, and the reference to alternative uses. As it was hinted in the last section, we are happy with the second part. Our task is only to show that the first part is not formally independent of the second part, at least in what is not confinable to the non formal assumptions.

Let us now take the concept of "scarcity" and try to explicate it. First of all, let us suppose that its meaning is coincident with the meaning of "limitation," so that when one says "scarce means" he is saying only "limited means". Then one can wonder whether to say that resources are scarce is not the same as saying that the data of the problem must be somehow given, so that one has to consider the resources in fixed quantities. NOTE 1 Is it not the case that the goods the economic point of view considers interesting are goods that are first of all possible? But, if they are possible, then they are also somehow given. Their limitation is not, so to speak, internal to the problem, but rather a very general condition for all problem-solving, i.e., the requirement that one must have some premises in order to decide an equation. If the goods are impossible to obtain, I do not care about them; if they are possible, then they are given. Is there something in between? Yes! They may be possible relative to the relinquishing of some other possible (in the same sense) goods. But this special sense of "limited" is precisely the explication of the normal sense of "scarce" that seems relevant to economic considerations. What it all amounts to is that the meaning of economic "scarcity" is totally dependent on the concept, more amenable to formalization and hence clearer of "substitution". Something is scarce if it is affected by competing ends, that is, if its different units are subjectively differentiated and capable of taking the place of one another in the event of deficient provision, as explained in the last chapter. Scarcity appears as "relative limitation"–or, if you wish, as the need of equilibrium determination of a substitution system.

Let us now recall what is normally understood by "definition" in the logical sense. To take a classical formula, a definition is always intended per genus proximum et differentiam specificam. In the case under study the former seems to be "the use of scarce means" whereas the latter "for alternative uses". If one poses the problem in these terms, it becomes apparent that something is wrong with this definition, since the term "scarce" seems to be hopelessly dependent on the term "alternative uses". So, either the term "scarce" has not the intended meaning at all–which is difficult to substantiate–or else the definition incurs a very peculiar kind of circularity, i.e., not circularity between definiens and definiendum, but rather circularity between genus and differentia. NOTE 2 The upshot of this is, to my mind, that a strict logical definition is not possible in this matter, and that the ones in existence, like Robbins', should be understood "mythologically," i.e., as expressing in a quasi formal way some unformalizable truth, in this case the more-than-logical nature of the economic point of view. In sum, the problem of definition of economics seems not to be independent, but on the contrary seems to be utterly dependent upon the problem of the theory of economic value. NOTE 3

Moreover, a literal interpretation of the definition of economics can be misleading on several accounts. In the first place, many problems take into consideration "scarce resources" not as objective data, as it were, but rather in relation to the solution, right or wrong, of the economic puzzle itself. In many particular instances the resources are "abundant" for the purposes at hand, for example the making of a chair out of a particular board of wood, provided you solve the problem rightly. If you do not, then, but only then, you will have scarce resources. In this borderline case you really cannot say at the beginning whether you are faced with scarcity or with abundance. NOTE 4 The question is further complicated by the fact that the votaries of the literalistic conception tend to negate that an abundant means is a resource, by definition of what a resource is. Therefore, one is led into the confusion of not knowing at the beginning whether one has resources at all or not. The chair-board puzzle becomes in this way a rather embarrassing question for the scarcity definition of economics. As an objection, one could be reminded on the point that the economic aspect is always related to the case of more than one end. True, but remember what the nature of my problem is. I am trying to stress the fact that it is precisely that property of economic matter which is fundamental. My argument is precisely that scarcity is scarcity only with respect to ends. Accordingly, we can modify our puzzle and talk, for example, about the chair-table-board problem. Here the question will be that table and chair are both competing for the use of the board and, it could be said, it is here where scarcity begins to be important. But wait. This is relative limitation of resources, in the sense explained above, and this is nothing different from the principle of substitution itself. "Scarcity" is here a subordinate non separate concept. It could not even be thought of without the simultaneous intervention of the concept of "alternative uses". The whole problem of allocation is the problem of how much I desire or value anything with respect to all other things that enter into consideration.

Again, it is even possible to conceive of a problem of allocation in the utopian case of unlimited resources (or means). If time comes at all into the picture, not in the sense of actual duration but rather of priority of accomplishment, then one could still be interested in deciding by economic calculation what to do next. NOTE 5 If this is accepted, then one would be able to say that the economic problem is one of deciding what the state of a (modelic) system of substitution will be, how the facts of wanting and the facts of producing will have to be coordinated for equilibrium to exist within the system. There are here several logical possibilities of combination:

• One could have a moving level of fixed (at each level) resources and a moving level of fixed wants;
• one could have fixed resources and fixed wants (board puzzle);
• the obvious combinations of these extreme cases.

Of course, some of these possibilities are uninteresting or irrelevant, especially for particular cases. But it is convenient to describe them all in order to recognize the crucial importance of the concept of substitution in the models and the method of economic analyzes.

Robbins has said: "The exchange relationship is a technical incident, a technical incident indeed which gives rise to nearly all the interesting complications, but still . . . subsidiary to the main fact of scarcity" (ROBBINS 32, p. 19). I would rather like to say that substitution is the general characteristic of economic subject-matter, the interesting complications arising in regard to the incident of scarcity.

Finally, let us consider another argument employed in the defense of the scarcity definition of economics, namely, the presence of scarcity in all problems of human action and human choice. The fact that one has always to choose, that is, to renounce all but one alternative in every action situation, is seen as a proof of the all-important character of the concept of scarcity to practical reasoning. However, this argument can well backfire. This universality of the term means that "scarcity" is a vague and ambiguous concept and it is very plausible that when it is applied to "all problems of human action" it is being taken in a different sense from the sense in which it can be relevant for the definition of economics. In the former sense it means the fact of givenness of the objective conditions with which the chooser is confronted. There must be a quantitatively singular, objective, and concrete configuration in order for a person having to choose. One may represent that situation with the letter "Y" as the figure of a bifurcation of roads. One can even be confronted with a choice between wholly incompatible alternatives, like marriage and celibacy, and many other ultimate decisions. This is a most general assumption in practical reasoning. Yes! But the sense of scarcity that is relevant to economics is not that kind of scarcity. It is scarcity as progressively more valuable leftover, and in ultimate decisions there cannot be leftover whatsoever! Ultimate decisions are ultimate because of their implying a commitment of the whole person of the chooser, hence–an incapability of gradual or partial realization. This being the case, it is logically impossible to treat both ultimate alternatives as parts of a single equilibrium system of competitive or relative realization. They require, by their very nature, each to be considered as a whole system in itself. In other words, ultimate alternatives are not divisible and they are not substitutable in the economic sense. "Scarcity" is a poor synonym for the metaphysical concept of "contingency". On the other hand, existential choice cannot be calculated, only phenomenologically described. Two senses of "scarcity" are to be distinguished and only one is relevant to economics, the one dependent on the concept of "substitution," Two senses of "choice" should be distinguished, "existential choice" and "economic choice". We will do well to leave the first alone lest we make a theology out of economics.