September 24, 2021
The End of Scarcity
The history of humans is the history of scarcity. Competition for resources between and within societies makes up much of the story of our species. But what if this basic reality is coming to an end? Not today or tomorrow, but within the lifetimes of children just starting their school years? Is such a thing even possible?
One obvious fact of the last few decades is that vast numbers of people around the world have amassed a massive amount of wealth. For these lucky ones, they no longer have the issue of scarcity. They literally have more money than they can spend on themselves to satisfy all of their wants. This is obviously true for Bill Gates and the other several hundred billionaires and their families, but it is pretty much true for any family that has more than a few million dollars. You can only eat so much food, and after a certain size, a bigger house becomes just empty space. You can only drive one car at a time, and even fancy hotels are not home, and no one wants to live in one year-round. Some days even the richest just want to eat a turkey sandwich and watch television. At an income level of 500,000 dollars per year, most of us will run out of things to spend money on.
This leads to the next question, how soon will human societies reach that level of income? The US is currently at 65,000 dollars per person, while Switzerland is at 75,000 and Singapore is at 100,000. But these numbers are not static. Every year the economy grows and new technologies are invented or improved, while existing products become ever cheaper to produce. American living standards are doubling about every 40-50 years, which means by 2100 per capita income will reach 250,000 dollars, and for a family income will go above 500,000. At this point the vast majority of Americans will be able to meet all their wants without difficulty, as will most people in Europe, developed East Asia, Australia, and Canada.
Are these predictions somehow flawed, or relying on rosy scenarios that can’t possibly come true? There is the example provided by eminent British economist John Maynard Keynes, who is most famous for correctly diagnosing the economic problem of the Great Depression in the 1930’s, and how government spending was the solution. Keynesian economics remains the bedrock of economic analysis to this day.
During the depth of the Depression, when 25% of the US was unemployed, Keynes offered up a wildly optimistic view of the long run future. He argued that given the rate of economic growth, his grandchildren would only need to work 15 hours a week to meet their economic needs. This was considered outlandish at the time, but it turned out to be true. Now, most of us don’t work 15 hours a week, but back then people worked 50-60 hours a week and 50 weeks or more per year. Paid vacation was unheard of, and working on Saturday was still standard for many. Millions still did farm work, which was continuous, arduous, and mind-numbing. There was also no such thing as retirement, but on the other hand, few lived past the age of 70 anyway. Add that all up and an average person could expect to live to age 65 and work 110,000 hours.
Compare that to today. The average European works only 1,400 hours per year, which averages 27 hours per week, but then retires around age 60 and lives another 20 years doing no work at all. This amounts to about 56,000 hours of work spread across 60 adult years or about 18 hours a week. Keynes was in fact pretty much correct. We work more hours for some of our lives but then spend another large fraction retired and not working at all.
Americans work about 1,700 hours, 300 more than Europeans, but that reflects the fact that Americans want a higher material living standard with bigger cars and houses and toys and more expensive vacations. Europeans just prefer to work less and enjoy themselves.
What about poorer countries? Are they going to have the same outcomes? Eventually, but they are 50-100 years behind the richer countries. However, it is true that almost every country in Latin America, Asia, and the Middle East and North Africa has a higher living standard today than the US did in 1920. In the next hundred years those countries should equal and exceed the current American living standard. They don’t need to invent anything or develop new economic or business knowledge, just keep applying what’s out there and growing a few percent a year. Sub-Saharan Africa is the poorest region on Earth (along with a few other places like North Korea and Afghanistan), and so for them it may take even longer. But eventually they too will reach this unimaginable prosperity.
In the long run there is only one limit to human prosperity, and that is energy. With enough energy we can build cities in the Sahara and cool them with air conditioning and supply them with desalinated water (we already do that in Las Vegas and the Persian Gulf sheikhdoms). We can grow all the food we want with irrigation, we could even grow the food indoors with LED lighting and 24/7/365 growing seasons, even in Siberia. The immense drop in solar power costs, now cheaper than even coal and natural gas and getting cheaper, promises a future of electricity that is so cheap as to make all these things possible.
This has immense implications for civilization. If we truly overcome scarcity, if we live in a world of plenty for all, then wars become a thing of the past, like slavery has. People also will no longer migrate for economic reasons, just as Europeans stopped emigrating to the US after the postwar prosperity reshaped European societies in the 1950’s and 1960’s. It also will mean that we live in a world where everyone will want to be respected by their government and will demand the right to have a voice in choosing who rules them. This is the argument that Francis Fukuyama made 30 years ago when he claimed the fall of the Soviet Union meant the “End of History”. Not in the sense that significant events will no longer happen, of course they will. But in the sense that the biggest questions human have grappled with throughout history, namely what sort of economic and political system will we live by, and how will we get along with each other and manage our competition, will have been answered.
The end of scarcity also has great implications for the environment. If we can meet all of our material wants, then anything we are technologically capable of doing we can actually do. Cost is not an impediment in any real sense. This means concerns like preserving rain forests or switching to zero carbon energy system is a political choice, not an economic or technological problem. The babies being born this year in the most developed nations will live to see this world become reality.
