TZM and Scarcity

Economics Economics Questions
1

Been reading up on TZM lately, trying to get some exposure to futurism, but trying to dissect the movement’s economic platform. I know the TZM has been discussed in these forums, but one thing stands out to as far as interesting economic questions go regarding scarcity.

This is their statement on Scarcity:

“The market system is driven, in part, by Scarcity. The less there is of something, the more money that can be generated in the short term. This sets up a propensity for corporations to limit availability and hence deny production abundance. It is simply against the very nature of what drives demand to create abundance. The Kimberly Diamond Mines in Africa have been documented in the past to burn diamonds in order to keep prices high. Diamonds are rare resources which take billions of years to be created. This is nothing but problematic. The world we live in should be based on the interest to generate an abundance for the world’s people, along with strategic preservation and streamlined methods to enable that abundance. This is a central reason why, as of 2010, there are over a billion people starving on the planet. It has nothing to do with an inability to produce food, and everything having to do with an inherent need to create/preserve scarcity for the sake of short term profits”

It seems to me that this arguement is based on a misunderstanding of the nature of scarcity, and the means of “creating abundance.” I’d appreciate a clearer version of why their view is flawed.

2

Ironically, these people would fail at business.

If what was most important was obtaining the highest price for an item and producing more that item causes the price of the items to decrease, then why ever produce more than one of anything? Why do diamond companies continue to dig for diamonds if producing each additional diamond causes the price to decrease.

3

I’ll give it a try. My comments in bold:

"The market system is driven, in part, by Scarcity.

This is true. If something is available in limitless supply, it would be free, like the air we breathe, and no one would be able to sell it

The less there is of something, the more money that can be generated in the short term.

This is not true. All the great millionaires and billionaires got rich by mass producing and selling cheaply to the masses. It is really a very economicaly ignorant statement to say otherwise.

Now there is one exception, according to von Mises. If someone has a monopoly, then, depending on the the numbers, he might maximize his profit by selling a little less at a higher price. But this is the exception rather than the rule. It is only possible if he need not fear competition if he raises his price, say if there is a law preventing others from competing.

This sets up a propensity for corporations to limit availability and hence deny production abundance.

No. If you are talking about a corporation, you are talking about a huge entity, meaning they have machinery set up to mass produce, meaning their business model is, like every other corporation, to sell as much as possible.

And let’s not forget if they limit “production abundance”, somebody else will step in and make money producing the rest.

It is simply against the very nature of what drives demand to create abundance.

A new law of nature revealed. Write it down, guys. Scarcity “drives” demand. People don’t want food because they are hungry, clothing because they are cold, and Iphones to have fun. They want these things only because they are scarce. Yeah right.

Now we might be able to interpret what he said a little differently, and it will make some kind of sense. What he is trying to say is that scarcity increases the price. Here the author has stumbled onto one galfof the law of supply and demand. The lower the supply, the higher the price.

But he forgot, or never understood in the first place, the other half of the law. The higher the price, the less people will actually buy the thing.

So now the corporation has to guess what will bring in the most money. Selling 10 gizmos at a high price [with one hand busily beating away competition the best it can, who will sell at a lower price to attract customers], or 1,000 gizmos at a low price. I’m not sure how the author knows that in every single case, there is more money to be made selling at the higher price to less people, especially since this flies in the face of the history of all rich companies, who got rich by constantly working themselves to the bone TRYING TO LOWER PRICES.

The Kimberly Diamond Mines in Africa have been documented in the past to burn diamonds in order to keep prices high.

Can you please link to the source of this story?

Diamonds are rare resources

Actaully, no. They were until about 1870, but since then they are not rare at all.

Humorous source: http://www.cracked.com/article_19367_6-companies-that-rigged-game-and-changed-world.html

Source for the humorous source: http://www.theatlantic.com/magazine/archive/1982/02/have-you-ever-tried-to-sell-a-diamond/4575/1/

which take billions of years to be created.

Actually, you can go to a store with a pile of ashes, and they will turn in into a diamond for you in one year. Source: http://www.reuters.com/article/2009/06/23/idUS213741+23-Jun-2009+PRN20090623

This may explain how every single year, 570 million carats [over a ton] are produced industrially every year. they are indistinguishable from diamonds dug out of the earth. Check wikipedia on “synthetic diamonds” and “diamond”.

This is nothing but problematic. The world we live in should be based on the interest to generate an abundance for the world’s people, along with strategic preservation and streamlined methods to enable that abundance.

Heis caught here between two contradictory ideologies. On the one hand, corpoartions are evil because the create artificial scarcity, he thinks. On the other, they are selling things at such a reckless pace that, for example, soon we will just run out of oil, he thinks. So the idea is to make a lot, but at the same time “strategically preserve” things by not making a lot.

Of course, he is wrong on both counts. Companies are hard at work doing exactly what he wants, generating an abundance, because that’s where the money is.

And when we start running out of things, their price will go up, preserving them.

This is a central reason why, as of 2010, there are over a billion people starving on the planet.

Not sure what he means by “this”. The Kimberly mines burning diamonds? His theory that scarcity “drives demand”?

But it doesn’t really matter. He has his facts wrong. There is plenty of food out there rigth nwo as we speak, and less and less people go hungry every year. Here is what wikipedia has to say on the subject:

Starvation statistics__Main articles: Malnutrition and Hunger

According to estimates by the FAO there were 925 million under- or malnourished people in the world in 2010.[9] This was a decrease from an estimate of 1023 million malnourished people in 2009.[10] In 2007, 923 million people were reported as being undernourished, an increase of 80 million since 1990-92.[11] It has also been recorded that the world already produces enough food to support the world’s population.

As the definitions of starving and malnourished people are different, the number of starving people is different from that of malnourished. Generally, much fewer people are starving, than are malnourished. The numbers here may provide some indication, but should not be quoted as a number of starving people.

The share of malnourished and of starving people in the world has been more or less continually decreasing for at least several centuries.[12] This is due to an increasing supply of food and to overall gains in economic efficiency. In 40 years, the share of malnourished people in the developing world has been more than halved. The share of starving people has decreased even faster. This improvement is expected to continue in the future.

Share of undernourished people in the developing world[[10]](http://en.wikipedia.org/wiki/Starvation#cite_note-state2010-9)[[13]](http://en.wikipedia.org/wiki/Starvation#cite_note-12)[[14]](http://en.wikipedia.org/wiki/Starvation#cite_note-13)37 %28 %20 %16 %17 %16 %

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It has nothing to do with an inability to produce food, and everything having to do with an inherent need to create/preserve scarcity for the sake of short term profits"

Sorry, you are wrong in so many ways. See above.

4

That’s the role of competition. When there are surmountable barriers to entry then when a company sees that another is making profit, it can enter the market for a new good by driving price down.

5

The only way that the market can make a profit through scarcity is by hedging its losses, I.E leaving a wide enough profit margin that any likely losses won’t drag it under, or by a monopoly price, which food certainly cannot be applied to. The free market destroys scarcity through its actions, based entirely upon the demands of the consumers. There is no way to destroy scarcity, but there are ways to divert scarcity from what people actually want.

6

I have tried to understand what their economic theory is. However the problem is that they themselves are not very clear. Reading the Zeitgeist activist orientation guide they skim over assertions about ‘‘exploitation’’, ‘‘cyclical consumption’’, & planned obsolescence. Before moving on. So it is really really hard to get a clear idea of their economic doctrine from their own official source materials. It does not help that they deny that economics is anything other then voodoo, or religion. I spent many pages explaining to Candy also known as Venus Project Challenge on youtube that until effective scarcity had been completely overcome, economics as the study of resource allocation under scarcity would be important. & that in such a world as we live in today they would end up with economic thinking when dealing with practical questions weather they like it or not. To be honest I do not think they have any systematic thinking on the subject, & what they have seem to be a half-arsed rehash of Marx.

"The market system is driven, in part, by Scarcity. The less there is of something, the more money that can be generated in the short term. This sets up a propensity for corporations to limit availability and hence deny production abundance. It is simply against the very nature of what drives demand to create abundance”

This quote misses the whole point of competition, if a firm creates ‘artificial scarcity’ in its product then it is inviting a competitor to fill the gap. Why they think that firms restricting supply in the short term is enough to claim that competition creates such massive inefficiency that can only be solved by abolition of the market I don’t know. Such behaviour will be ironed out in the long run. And any remainder is covered by conventional monopoly theory. Their ignorance of economics shows here.

There is also shades of Marx in this. They seem to imply like Marx that once market relations(what the Zeitgusters call the ‘‘money system’’) have been replaced with more direct productive relations the savings made in efficiency will allow abundance.

However when pressed about the practical impossibility of abolishing absolute scarcity, (especially in the short to medium run) they accept that a large part of this new ‘abundance’ will come from people voluntarily cutting down on their own demand now that the nasty dog eat dog of capitalist society is not socialising people to be greedy & horrid to each other.

So my understanding of their conception of scarcity is that in the short run they think they will decrease relative scarcity through a mix of Marxist style ‘rationalisation’ on the supply side & a decrease in peoples wants on the demand side. In the long run they have dreams of coming close to abolishing absolute scarcity(that is making everything a free good) through sci-fi style robots doing all the work, & a supercomputer doing all the thinking. And of course they think that this future would be quite close once the Venus project had been established across the globe, the idea being that whatever technology needed for this that did not exist now would quickly be discovered once people’s creativity was freed from the anti social effects of capitalist socialisation.

Why is this idea flawed? Well I think that a large book could be written picking the Zeitgeist ideology apart from many different angles. But what comes to mind for me.

The idea of the rationalisation of social production through removal of the ‘money system’ comes up against the Economic Calculation problem, & the related problem of what Mises calls the ‘intellectual division of labour’. While removing money relations would indeed do away with the costs of mediating production through trade and money, it would also do away with the answer to a far more basic problem. That of coordinating society. It would be like solving the problem of a stiff car steering wheel by removing it. Society is a complex spontaneous order, & it is not possible for the smartest big head/s or even a smart AI to consciously control it as well society could regulate itself. So the effect will be to increase scarcity not to diminish it.

As for people willingly decreasing their demands, they come up against a problem even if we assume they are right about psychology. Everyone who founds the ‘‘Resource based economy’’ will themselves be socialised under the ‘money system’. The hope of Fresco is that this can be educated out of people before hand, with a general change in the consciousness of mankind. This is a hopeless idea. According to his own logic he is in a catch 22 situation. People won’t reduce their consumption until they have become the 21st century equivalent of ‘new socialist man’. & they wont become that until people no longer have to compete for resources. Which of course can not be achieved until people are content with the ascetic life. Even with his false assumptions of people being a blank slate Fresco will still be fighting a constant battle against human nature.

And of course the final near conquest of absolute scarcity via robots & supercomputers relies on the first two assumptions about being able to reduce scarcity being correct.

7

Scarcity is necessary for action, and life itself. The desire to abolish/eliminate scarcity is the desire to eliminate/abolish (human) action, and with that, (human) life. Even if all material scarcity – as we know it today – was eliminated (food, goods, products, inter-stellar flight, teleportation, and sex free and at the push of a button) other forms of scarcity must evolve if there is to be action and life at all, if there are to be agents seeking to replace their current state of affairs with another state of greater satisfaction.

8

I don’t think TZM people use the same definition of “scarcity” that Austrians do. Hardly anyone does.

They mean ‘scarce’ in a purely relativistic sense, failing to appreciate, as usual, that they’re applying their own subjective utility function.

I have my doubts about De Beers destroying diamonds… Why would they mine them in the first place? Why not just hoard them?

It’s not easy to destroy a diamond… Of course there’s the myth that they’re basically indestructible, but it’s not true. Apparently it has to be heated to over 1455 degrees Fahrenheit in the presence of oxygen to break the carbon bonds, or else there’s a trick one can do - heat it to about 100 degrees, and then plunge it into liquid oxygen, which will cause it to sublimate and bond with the oxygen into carbon dioxide gas. (I’d like to see that, actually) Sounds like a hell of a waste compared to shoving them in a vault somewhere. Assuming that De Beers is in the business of making money, of course.

It’s a myth that synthetic diamonds are indistinguishable from natural diamonds, by the way. Natural diamonds are full of flaws, and have a much weaker crystalline structure as a result. :stuck_out_tongue: That’s right, OUR DIAMONDS ARE BETTER THAN YOURS, GOD!

Mind you, De Beers is an atrocious rent-seeking monopoly which can afford to do all sorts of things that would not be possible if the market for diamonds were even remotely free. They don’t call them blood diamonds purely because of Hollywood, after all. The Kimberly Process is a sad joke handing absolutely monopoly to De Beers, and the Oppenheimer family…

9

For some reason, this reminded me of the Buddhist concept of dukkha - typically translated as “suffering”, but could also be translated as “felt uneasiness”. Buddhism teaches that even existence itself is a form of dukkha.

10

This, this, this. Furthermore, they seem to feel like they have literally no choice but to buy X, and thus they have literally no choice but to buy X at the price offered. Anytime you hear them talking about “needs”, think “things that they feel they have literally no choice but to buy”.

11

All that elusive rhetoric is just distraction. The core of their argument is a rather simple theoretical fallacy: They simply assume that scarcity does not apply to their system, then they conclude that their system can overcome scarcity. Big deal. Once you assumed away scarcity any system can create abundance, the entire point of an economic system is to overcome scarcity. So there’s really no theory there, no economic plan. Their economic theories are not really designed to overcome scarcity, but rather to hide that they defined it away. Economically it’s communism^2.

12

See here.