Scarcity in Economics: Why Choices Matter

Last updated on: October 4, 2011 at 7:00 am by Tim

Scarcity in Economics: Why Choices Matter 2011-10-04T07:00:57-05:00 Tim

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Your alarm goes off – it’s 6:30 in the morning. You’re faced with a decision: do I hit snooze a few times and get up at 7:00, or should I start the day now?
Your bonus check comes in at work. Should you pay down debt, or buy a few more groceries?
Your boss needs a few shifts covered. Do you stay late or go home and enjoy your evening?
You live in a third world country. Do you use clean water for drinking or do you water your crops for food later?

We’re constantly making choices. In fact, choice is the cornerstone of economics, and at the end of every choice is a scarce resource. Your time, money, labor, and everything you own is affected by scarcity. There is just never enough to satisfy all our wants.

Scarcity in Economics

The concept of scarcity is easy to see when we put it in such simple terms. Even children know the basic idea of scarcity. Think about when you were a kid. “Mom, can we get this!!” How many times did you ask to add a candy bar or toy to the cart when you went to the store with your mom? Most of the time, there wasn’t enough money to get all the kids toys and candy bars each time we went to the store. That’s scarcity at work! Eventually, we learned to save our own money and bought toys and candy ourselves – learning the value of scarcity first hand!

Economics is no different today than when we were kids. We are limited by time, money, location, and energy. Sometimes we don’t have any input on how much of a resource we are given (like time) but how we allocate those resources is the very definition of economics.

Scarcity in Society

Scarcity doesn’t just affect us on a personal level. Every business, government, and society is affected by the constraints of scarcity. Think about oil. Sure, we can go to the gas station and fill up today, but we can’t expect to use oil the way we do today forever. It’s a scarce resource and will run out one day. Can that take hundreds or thousands of years? Possibly, but the concept still holds true.

There’s a reason why Proverbs 24:33-34 says, “A little sleep, a little slumber, a little folding of the hands to rest and poverty will come on you like a thief and scarcity like an armed man.” You only have so much money, so much energy and so much time. Use it wisely.

What helps you to make better decisions with your money, energy and time?

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