The problems of Scarcity & Abundance

By : Jim Pinto,
San Diego, CA.
USA

What do traffic jams, obesity and spam have in common? They are all problems caused by abundance. By achieving abundance, technology destroys the natural checks and balances of scarcity. An abundance of automation has caused a scarcity of jobs. Off shore outsourcing is responsible for just 15% of recent job losses.

This article was published by:

Automation.com, October 2004

Automation has already had a big impact on productivity. Indeed, most of the so-called "jobless recovery" has been caused by the increased effectiveness of automation, which reduces headcount. Off shore outsourcing is responsible for just 15% of recent job losses.

The problems of abundance

What do traffic jams, obesity and spam have in common? They are all problems caused by abundance. By achieving abundance, technology destroys the natural checks and balances of scarcity.

The technology guru George Gilder has long postulated: "Every economic era is based on a key abundance and a key scarcity." Interestingly enough, many of our current problems are centered on these recurring anomalies. Every new abundance brings its matching scarcities.

The human body was designed to survive on scarcity, and it developed over tends of thousands of years. When food was abundant, it was stored as fat to protect against future scarcity. We are now surrounded by an excess of food, and the body still stores energy as fat for lean days - which no longer arrive. Hence, the obesity epidemic.

The automobile made it possible for humans to travel twenty times faster, reducing natural constraints. When it's so easy to travel independently, everyone does it, and causes traffic jams.

The speed and negligible cost of e-mail delivers an abundance of potential customers to anyone with a computer. The huge amount of aggravating spam in your mailbox is a direct result of wide availability of the technology.

There are lots of other examples. People have always copied music, but in limited quantities because copying an audio tape took time, was relatively expensive and the quality wasn't the same. Today, a CD can be copied easily and cheaply, and the quality is the same no matter how many times it's copied. So, digital music is a cheap commodity – and yet, the music industry continues to expect to sell it as if it were a scarce resource.

Technology has enabled effortless, inexpensive communication with anyone in the world. It also means that sending work to the other side of the world is much easier, and the cost is greatly reduced. Work is now geographically neutral, so almost any white-collar work is being displaced. Joblessness in one place is simply caused by an abundance of equivalent resources elsewhere.

When technology creates abundance, it brings problems which are invulnerable to simplistic solutions. Like genies let loose from the bottle, the new problems are almost impossible to control. Traffic congestion cannot be solved by artificially reducing the speed of traffic, or increasing the cost of driving – through taxation. Obesity cannot be reduced by making food more expensive or less available. Spam cannot be eliminated by making it difficult and costly to send e-mail. The ratios of abundance are too great to be overcome by artificial restrictions.

Any technology which creates abundance poses problems for any process which existed to benefit from scarcity. The beneficial abundances caused by technology usually bring unpleasant societal side-effects. Then we complain about the very things that were previously benefits.

Technology thrives by turning scarcity into abundance

Think about this: scarcity=high price, abundance=low price. New businesses start to provide new alternatives for high priced scarcities. Indeed, their very existence is to provide goods or services cheaper or faster or better. And proprietary technology advantage brings success – higher margins and profits – which are the very things that business strive for. And patent protection is developed to prevent others from copying, which would minimize the advantage.

As technology advances, competitive offerings become cheaper and faster and better. As competition appears, proprietary advantages dwindle and, unless new benefits are developed, prices and profits quickly decline.

Mainframe computers declined till mini-computers came along, in turn displaced by PCs. PLCs were expensive and highly profitable till the technology became widely available and they are now cheap commodities. Huge distributed control systems (DCS) were displaced by PC-based software and SCADA systems. Technology companies must invest heavily and consistently to stay ahead. When they lose their proprietary edge they are left with few alternatives, other than service offerings to satisfy their old customer base.

Regulations & taxes to restrict abundance

Abundances continue to expand till the opposing scarcity brings backlash – rules and regulations to artificially restrict the abundance. Perhaps the only way to stop spam is by charging for email. Can food be regulated to stop overeating?

How about tobacco? How much tobacco tax will stop smoking? When it became clear that smoking caused cancer, a warning was required to be printed on every cigarette packet; but that didn't stop smokers. Tobacco companies have paid heavy penalties, which they simply add that to the cost of cigarettes, and their stock rides high, bolstered by billions of dollars of "reserves". And today, as part of their penalty, they are required to sponsor advertising that warns about the dangers of smoking, and offers addiction antidotes.

As we get softer and flabbier, there is an abundance of pills, potions, equipment and exercises telling us how to lose weight easily, quickly, safely "in just minutes a day!" Have you seen the proliferation of pill commercials on TV? In spite of tight FDA regulations, there are pills for virtually anything and everything. There are some people who actually take several pills, several times a day, without considering possible dangerous reactions. And the pharmaceutical companies manipulate prices through federal regulations.

Artificial restrictions to create scarcity

There are many who manipulate the rules of abundance to cause scarcity. For example, diamonds are found in abundance in nature. But, for over 200 years, the diamond cartel has stifled, by any means necessary, the flow of diamonds from sources not under its control. Today there are synthetic diamonds, with differences that are impossible to distinguish; indeed, they are better than natural diamonds. But the diamond cartel still manipulates the market, to create the "scarcity".

Another major example is Oil, once thought to be available in abundance and hence a cheap commodity. But, the owners of abundant resources quickly realized that they could restrict supplies to create artificially inflated prices – the fundamental reason for the existence of OPEC. What will the price of gasoline need to be before traffic is reduced? At what levels of scarcity will alternative energy systems come into play?

The cyclic problems of "scarcity and abundance" are deep rooted in the human condition, in human society. Look around you, and you’ll find the causes and effects around you, everywhere.