Tackling the problem of scarcity

 Anyone starting out in Economics will almost certainly tackle this issue right from the start: it's completely fundamental to the way economists think. Ben Cahill may have helped you with a starter activity on this topic, and I've included a few more links that may help you link to the topic of specialisation and the division of labour: our main way of tackling the problem.

I've been spending some time with students wondering if scarcity will always be a problem. There is a category of items - free goods - to which scarcity doesn't apply. We are used to the idea that nature's stock of resources is under heavy attack (and there's lots of evidence to support that scary thought). But the future might be brighter than we often suppose, and we might shortly face such abundance that we no longer need economics. I look forward to the day! It hasn't arrived yet, and as the quote at the start of this blog shows, politicians often seek to distract us from fundamental choices we need to make as a society.

From the start of the human story we've been using specialisation and the division of labour to get much more out of our limited stock of resources. Here's a good quote by Adam Smith, the most famous of the classical economists, who saw the division of labour in action in a pin factory in the early years of industrialisation:

“A workman not educated to this business…could scarce…make one pin in a day, and certainly could not make twenty. But the way in which this business is now carried on,…it is divided into a number of branches…One man draws out the wire, another straightens it, a third cuts it, a forth points, a fifth grinds it at the top for receiving the head; to make the head requires two or three distinct operations; to put it on is a peculiar business, to whiten the pins is another; it is even a trade by itself to put them in the paper.” Outside the pin factory, one worker working alone could have made 20 pins. Ten workers could therefore make 200. In the pin factory, workers were making 48,000 pins a day. How was this possible?

The answer is clearly by dividing up the job into separate sub tasks, then getting individuals to specialise in particular tasks. Workers can gain skills in a narrow range of tasks. These skills can then become highly sophisticated. Specialist workers can have the specialised tools for the job. Time is saved by not wasting time switching between tasks. Workers can even develop an interest or aptitude in their work. There are some obvious problems to this approach too!

Economics is sometimes called the dismal science because of the problem of scarcity and choice. If you want a great upbeat clip showing how we use specialisation the division of labour to achieve a high standard of living, then try this video. A while ago the economics blog also dug out this great clip of a Formula 1 pit stop as a terrific - and exciting - example of the process in action today.

There's also worksheet on scarcity and choice here, perhaps for when you get a bit further into your course.