The economic reality of limited resources, known often as scarcity, promotes creativity. On the surface, that statement might seem problematic. We might conclude that limited resources would mean limited productivity. For example, if we only owned one tree, we could conceivably cut down the tree and use it for firewood to cook our last harvest from that tree. In such a scenario, limited resources would have caused our demise.
However, if creativity were applied to the above illustration, we could gather the seed from our tree to plant a forest and still cut down the original tree to build a barn to house the increase of the forest. Creativity finds ways to maximize limited resources. Creativity discovers future potential within a resource. Creativity finds a new market for an old resource with the hope of releasing economic prosperity instead of existing with the old or languishing monetary reward.
All economists acknowledge the principle of scarcity. They also acknowledge that creativity overturns the law of scarcity by the invention of something new with which to fill the market and meet a demand. Each new product decreases lack and advances productivity. Products, goods, and services drive the markets and prosperity.
Because resources are limited, creativity does not come at zero price. Ingenuity carries a price tag. That price tag might come in the cost of an education, in the overhead of failed attempts, in the expenditures incurred by production, or at the expense of forfeited wages from other employment opportunities. There are no free lunches and no free capital in the economic land of scarcity.
Creativity requires risk. Security seekers will choose to live in the land of limited resources rather than take a chance. New developments demand that risks be taken. Creators forfeit present comfort for future proliferation. Therefore, creators must be allowed to reap the market reward of their labors. Without the hope of future increase and economic compensation, an individual and a society would not have the incentive to break from scarcity.
Theft robs the creative individual from the rewards of his chance taking and creative labors. Theft seeks to redistribute the wealth earned by the entrepreneur to the one who elected to co-exist with scarcity at zero price to his own security. Person to person theft threatens the businessman’s gain, but laws and insurances provide a pathway to recover what was stolen.
However, communal theft or laws drafted by the collective populace to steal the reward of the capitalist and industrialist not only steal prosperity but are outside of the protective barrier of law suits and insurance coverage. Excessive and disproportionate taxation, legislated redistribution of wealth through entitlement programs, and government intervention in the market that askew the indicators of profit and loss reduce the earned reward of the risk taker. Not only is reward stolen, but also motivation is stifled. To steal the innovator’s incentive through legislative theft is to shut down productivity. Reduce the creation of new capital and the nation will be reduced to scarcity. In such a scenario, the economists of scarcity are self-fulfilling prophets.
Principle – Prosperity is built on five pillars or foundations: faith, relationships, limits, stewardship skills, and sound organizational structures.
For more information on the author, Dr. Patti Amsden, go to: www.pattiamsden.org
