The Relationship Between Economic Growth And Resource Scarcity

Whether economic growth can really solve the problem of scarcity will be explored in this essay. Perhaps it could be said that scarcity is an unsolvable issue that nothing in this world can completely eliminate. Scarcity is basically describing how human wants are infinite while resources are limited. It is a condition within humans, showing how people’s wants will essentially always be endless while resources will not be. Even if economic growth occurs due to an increase in factors of production, people’s desires for general goods would also increase and resources would decrease and therefore, the process would only repeat itself (Barnett, 2013, p. 104). The following paragraphs will expand more on the problem and explain why economic growth cannot, therefore, solve the problem of scarcity.

Basically, scarcity entails the incapacity to satisfy all our wants. This means that regardless of the economic growth, it would never be possible to satisfy all our wants hence scarcity remains present (Friedman, 2017, p. 29). For example, it wouldn’t be possible to satisfy all the needs of families and thousand people who would like to use public resources such as Ski the best slopes on Vail. Therefore, economic growth tends to allow for satisfaction of more wants but it does not eliminate scarcity. Furthermore, scarcity tends to be an abstract which denies the chances or potential for its elimination. It is a part of the human condition in the sense that human wants remain unlimited while on the other hand resources are limited in nature. For instance, no amount of economic growth will change the fact that petroleum products or resources are exhaustible. On the other hand, water remains an essential aspect for the organism’s survival but the supply of fresh water would always be limited hence it will remain a scarce commodity.

In addition, as the economy grows, the natural resources are depleted faster hence making these natural resources more limited or scarce over a period of time (Becker, 2017, p. 56). The customer, in this case, may not be aware of the limit in resources. As such, the only way that manufacturers use to communicate to the consumers that the raw materials for manufacturing a product are scarce is by raising the prices of such commodities. An increase in price results in a decline in the purchasing power of the consumer. As such fewer goods are allocated to each consumer hence balancing allocation and scarcity. This will also influences the consumer to make a choice in relation to scarce commodities.

Economic growth entails an increase in the number of goods and services produced by a country over a period of time as compared to what the country has been producing. Economic growth will occur when there is an increase in labour, land, technology and human capital. Despite the increase in production, there are no infinite resources hence economic growth does not eliminate choice and scarcity. Furthermore, the opportunity cost of producing a product X increases with an increase in the quantity of the commodity. An increase in production of a certain commodity will solve the problem of scarcity for a certain period of time but in the long run, human wants will always be scarce and such wants will keep on increasing over time since man is greedy and man’s wants are unlimited (Krautkraemer, 2012, p. 59). The problem of scarcity is contributed by the fact that the environment provides a limited amount of resources. From a broader perspective, this means that if the economic growth occurred as a result of an increase in factors of production, human wants will raise again and the menace of scarcity repeats itself.

In short, economic growth will only reduce scarcity but cannot fully solve the problem because as more goods are produced, the higher the demand for these goods and services. Scarcity means that we as a country have to decide on what to produce from the resources which are in limited supply. This, therefore, reflects a constant opportunity cost that is involved when coming up with an economic decision.

In economics terms “if resources are not necessarily finite, are resources therefore not scarce? (North, 1994, p. 359) Resources will always be scarce regardless of whether there is economic growth or not. A commodity is not scarce only if the commodity is fully and instantly available which means that a consumer will not have to make a choice in order to acquire the product. Such of these things that are not scarce include gravity and breathable air. For instance, salt was a precisions commodity once in ancient times such that it was used as a means of exchange and was used as a way of remuneration and paying of salaries at times. Today, the commodity is in abundant compared to then. However, the commodity still remains a scarce commodity just like it was back then. This means that salt is not costlessly or immediately available as every person who wants it must make an effort in order to acquire salt. This is a reflection that despite the increase in the production of salt, the commodity is still scarce and has an opportunity cost.

Economic growth occurs as a result of an increase in a nation’s production of services and goods. An increase in productivity as a result of investment in physical and human capital raises the standards of living and individual incomes. Other sources of increase in productivity include technological advances, innovation and education. Increase in disposable incomes reflects higher demand for such goods and services. With increasing demand, there is an increase in prices which means that consumers may have to neglect other goods and services in order to satisfy other goods. This, therefore, means that despite the growth in the economy scarcity still prevails. Generally, scarcity forces individuals to make a choice among different demanding alternatives. On the other, economic growth gives us more varieties from which we can choose from and enhance or results to improved standards of living. Institution arrangements and certain institutions enhance economic growth and improve human conditions through lengthening lives, reducing infant mortality, cutting the incidence of debilitating diseases, reducing hunger as well as improving environmental quality. However, despite these advancements, economic development does not eliminate scarcity (Smith, 2013, p. 202). This means that economic growth can only provide more alternatives to choose from but cannot fully eliminate scarcity.

In conclusion, scarcity entails how human wants are infinite while resources are limited. It is a condition within humans, showing how people’s wants will essentially always be endless while resources will not be. Economic growth, on the other hand, entails an increase in the gross domestic product and the nation’s production of goods and services. Regardless of the economic growth, it would never be possible to satisfy all our wants hence scarcity remains present. Generally, even if economic growth occurs due to an increase in factors of production, people’s desires for general goods would also increase and resources would decrease and therefore, the process would only repeat itself.

References

1. Barnett, H.J. and Morse, C., 2013. Scarcity and growth: The economics of natural resource availability. RFF Press.
2. Becker, G.S., 2017. Economic theory. Routledge.
3. Friedman, B.M., 2017. The moral consequences of economic growth. In Markets, Morals, and Religion (pp. 29-42). Routledge.
4. Krautkraemer, J.A., 2012. Economics of scarcity. Scarcity and Growth Revisited: Natural Resources and the Environment in the New Millenium, p.54.
5. North, D.C., 1994. Economic performance through time. The American economic review, 84(3), pp.359-368.
6. Smith, V.K., 2013. Scarcity and growth reconsidered. RFF Press.