Artificial scarcity is an economic term describing the scarcity of items even though the technology and production capacity exists to create an abundance. In economic terms, most non-rival goods (cable television, digital media) are artificially scarce, as one person's use does not diminish use by another. U.S. Economic Calendar Economics at the Open Directory Project Economics textbooks on Wikibooks The Economists Economics A-Z Daily analysis of economics in the news (UK focus) Institutions and organizations Bureau of Labor Statistics - from the American Labor Department Center for Economic and Policy Research (USA) National Bureau... Scarcity is a central concept in economics. ...

An example of artificial scarcity is often used when describing copyrighted, or closed-source, computer software. Any software application can be easily duplicated billions of times over for a relatively cheap production price (an initial investment in a computer, an internet connection, and any power consumption costs). On the margin, the price of copying software is next to nothing, costing only a small amount of power and a fraction of a second. Things like serial numbers, license agreements, and intellectual property rights ensure that production is artificially lowered in order for business to gain a monetary benefit, thus giving those in the software and digital arts business their livelihood. Technocrats argue that if the price system were removed, there would be no personal incentive to artificially create scarcity in products, and thus something similar to the open source model of distributions would exist. Copyright symbol. ... It has been suggested that this article or section be merged into proprietary software. ... Intellectual property, or IP, refers to a legal entitlement which sometimes attaches to the expressed form of an idea, or to some other intangible subject matter. ... A price system is any social system whatsoever that effects its distribution of goods and services by means of a system of trade or commerce based on commodity valuation and employing any form of debt tokens, or money. ... In economics, an incentive in anything that provides a motive for a particular course of action — that counts as a reason for preferring one choice to the alternatives. ...

PPF's

Most economists stress the trade-off that occurs when producing goods. The following graphic shows the economic anomaly, as current economics deals only with allocating scarce resources, not abundant ones. If we want more leather boots, we'll have to give up producing running shoes because our resources are limited. This trade-off is illustrated by a move from P1 to P2 in the Production Possibilities graph on the left. Image File history File links Ppfofdigitalinformation. ... Image File history File links Ppfofdigitalinformation. ...

With computer software, no trade-off occurs (at least not one of significant value). To produce more of a certain piece of digital information, we need not to trade-off the production of other things, like shoes and boots. In essence, problems of artificial scarcity usually arise when a good that was once scarce becomes abundant due to extreme productivity and technologic progress.

The need for Artificial Scarcity

Price system economics requires that profit has to be made for every activity performed. Demand has to exceed supply in order for a profit to be made. If scarcity is allowed to reach zero, the economic model fails. If natural scarcity no longer exists scarcity has to be created to ensure function of the system.

Economic tools to promote Artificial Scarcity

• Price floor - This discourages access to a resource (creating scarcity and profits) and waste is produced.
• Price ceiling - Discourages production while encouraging consumpution of a resource (two way creation of scarcity).
• Subsidies
• Cartels

Reasons that these tools are used is to prevent market failure, preserve profits for producers, or reducing costs for a certain group. A Price floor is a government-imposed limit on how low a price can be charged for a product. ... A Price Ceiling is a government-imposed limit on how high a price can be charged on a product. ... A subsidy is generally a monetary grant given by government in support of an activity regarded as being in the public interest. ... A cartel is a group of producers whose goal it is to fix prices, to limit supply and to limit competition. ... In economics, market failure is a situation in which markets do not efficiently organize production or allocate goods and services to consumers (for example, a failure to allocate goods in a way some see as socially or morally preferable). ...

Responses to Artificial Scarcity

• The term is used by the Technocratic movement[1] to point out one flaw of productive inefficiency in the price system and takes the above example of digital information in microcosm. The movement claims that a technologically advanced state is capable of producing an abundance of virtually everything. Technocrats point out empirical evidence; even though the productive capacity exists to feed everyone in the world, we underproduce, we throw away, or we misallocate because there is no way to sell an abundance. They state that a conflict between scientific reality and economic tradition stiffles the possibility for abundance. A price system only creates opportunities for scarce products.
  • Article explaining technocratic beliefs of current economy

The technocratic movement was a social movement most popular during the 1920s and 1930s, which advocated the optimization of the welfare of human beings by means of scientific analysis. ... A price system is any social system whatsoever that effects its distribution of goods and services by means of a system of trade or commerce based on commodity valuation and employing any form of debt tokens, or money. ...

See Also

Scarcity Scarcity is a central concept in economics. ...

External links

• Artificial Scarcity, Garbage Collection and the Long Tail
• The Problems of Scarcity & Abundance