Water can and ought to run freely: reflections on the notion of ‘scarcity’ in economics
Sajay Samuel & Jean Robert
and muscles out self-sufficiency. The dependence on money This dependence is only deepened by the constantly stimulated desire for commodities. Not only is the capacity of self-reliance thereby frustrated and disabled, people are also incited and trained to devalue independence from commodities. Perhaps being disabled by the dependence on commodities would be acceptable were cash to grow freely on trees. But the collision between insatiable desires and a finite purse leaves the consumer in a state of perpetual dissatisfaction. Thus, commodity-intensive societies produce an incurable dis-ease: the frustration of never having enough, of feeling needy; that peculiarly modern condition of scarcity. For instance, the poor woman who cannot afford to buy bottles of the water that she once obtained freely from a tap or a well experiences scarcity as does the rich man who cannot quench his thirst with Aquafina after becoming aware of Perrier. Both are equally dependent on market values. Yet he, being enslaved to commodities, has forgotten what she still acutely remembers: the propriety of using water that can and ought to run freely.1
Scarcity means ‘the insufficiency of supply; smallness of available quantity, number or amount, in proportion to need or demand’ (OED, emphasis added). As such, scarcity is a relational term. While the quantity of a thing is a necessary condition, excessive desire or demand is a sufficient condition for the experience of scarcity. The overflowing shelves and garbage heaps of commodity-intensive society are proof of the abundance of things. And, as scientists inform us, the total quantity of the stuff named H20 remains unchanged through the hydrological cycle, neither created nor destroyed. Yet, the perception of endemic scarcity intensifies in commodity-intensive society. This, we argue, is primarily due to the limitless desire for accumulation sparked and fed by the ideological commitments of the mainstream of economic science.
In this paper, we first contrast Aristotle with Adam Smith to bring this ideological ground into sharp relief.
As our contrastive reading of shows, Smith centres the study of political economy on exchange value. In doing so, he overturns the traditional understanding of ‘economics’ in two ways: he excises use-value from its purview and also legitimises vanity and greed. He understands and accepts that these vices drive the accumulation of wealth beyond use. Nevertheless, he masks their viciousness under the benign phrase ‘bettering our condition.’ In justifying limitless acquisitiveness or accumulation beyond use, mainstream economic thought produces scarcity. Second, we show that neo-classical economics no less than the classical economics of Adam Smith actively hides its acquisitive foundations to make it palatable. The utility theory of neo-classical economics hides the assumption of ‘more is better’ under mathematical robes. In both cases, unfettered desire or demand is taken-for-granted and fuels the spread of ineradicable scarcity. Third, though the spread of economic thought styles also spreads the ideology of more is better, we point out that the mathematical commitments of neo-classical economics requires it to be styled as a ‘science of scarcity’ in which scarcity is posited as quantitative constraints of athe limited quantity of time, means or money. By confusing finiteness (a question of quantities) with scarcity, mainstream economic science is blind to the fact that it helps produce the very problem it purports to solve. By now, ironically,
Yet, it is economic notions of demand, supply, production, consumption, allocation, distribution, and prices that suffuses the discourse on ‘water scarcity.’ The hegemony of economic terms reinforces the notion that water is a resource. Instead, as we argue in the conclusion to this paper, the urgent task in adequately grasping the question of scarcity in the context of water is to see first that water is a commons.
[a] From the Good to Values
For over two thousand years, ‘economics’ was a branch of politics or moral philosophy. From Xenophon’s Oikonomikos in the fourth century B.C., to Adam Smith’s teacher, Francis Hutchinson’s Short introduction to Moral Philosophy in 1742, oeconomics referred to the ethical art of running a household: of how to deal with food stores, the training towards virtue of women, children and servants. (Finley, 1985, pp17-21).2 What are now accepted as the subjects of economic science – trade and exchange, money, distribution and so on – traditionally belonged to the study of politics, understood as reflections on the highest good for man. To buttress this point, it is perhaps sufficient to note that all of Aristotle’s writings on ‘economics’ appear either in the Ethics or the Politics. The first lines of these works reveal the traditionally understood end of ethics and politics and a fortiori, the proper end of ‘economic’ matters.3 In the Aristotelian tradition that infused Western thinking on ‘economics’ until the early modern period, trade, barter and exchange are species of human activities practised within polities. Since both human actions and political arrangements strain naturally towards the good, ‘economic’ affairs are necessarily subject to considerations of the good.
Aristotle’s discussion of the arts of acquisition provides a clear explanation for why exchange relations ought to be subjected to ethics and politics. In his Politics, he distinguishes two kinds of acquisitive arts. The first is the art of acquisition oriented by natural needs and therefore a proper part of household management; oikonomia.4 The second, called ‘the art of wealth-getting’ or chrematistics, is exemplified by ‘retail trade.’ Retail trade or buying goods for the purpose of reselling them at a profit produces wealth solely through exchange.
Aristotle argued that activities ordered by profit-seeking were unfitting and unnatural because animated by the purpose of accumulating money for itself. Accordingly
to Aristotle, wealth-getting is perverse in two ways. First, the heterogeneity of human actions and of things is effaced when subjected to the reign of exchange. When purchased for the purpose of resale, a shoe is not qualitatively different from a table; both are rendered into commodities. Commodities subsume and bury that heterogeneity of things which is partly conferred by the distinct uses to which they are put. Similarly, as paid services, cooking is equated to gardening, both rendered homogenous as undifferentiated forms of ‘labour,’ which effaces the meaningfulness of human actions.5 Second and equally important Besides, for Aristotle, was the fact that the accumulation of money for itself is unchained from natural ends – those of needs or use. When purchased for resale, no quantity of shoes is enough. Shoes then become a cipher for money whose accumulation has no inherent end or principle of self-limitation. Unhinged from natural needs or use, accumulation leads to the fate of Midas – who starved to death while sitting on a hoard of coins. Therefore, for Aristotle, to live by exchange exhibits a derangement of reason: the retailer unreasonably forgets the distinction between merely living and living well.6 Politics and ethics were oriented by the good and implied reflections on the good life. The art of wealth-getting which aims at profit making, because inherently limitless, is destructive of ethics and politics. It is precisely for this reason that Aristotle censures getting wealth through exchange.
In his Inquiry into The Nature and Causes of the Wealth of Nations, Adam Smith turned the Aristotelian tradition on its head. Instead of grounding his inquiry on the questions of the good and the just, he legitimized
s the art of wealth-getting. It is this overturning that constitutes his lasting bequest to modern economics. To properly grasp his innovation therefore, one should begin by considering the stated purpose for undertaking the inquiry.
Smith defines ‘political economy’ as a science exclusively directed by two ends: to enable individuals and the state to acquire wealth.7 He thus legitimizes the acquisition of wealth and thereby frees acquisitiveness from ethico-political restraints. Despite the arrangement of words in Smith’s ‘political economy’, the principle of commercialism is not subservient in rank to that of politics. Instead, justice is reduced in status to a handmaiden of wealth-getting. The witness of Andrew Millar, an auditor of Smith’s lectures on jurisprudence is instructive in this regard.
“In the last part of his lectures he [Smith] examined those political regulations which are founded not upon the principle of justice, but that of expediency, and which are calculated to increase the riches, the power and the prosperity of a state … What he delivered on these subjects contained the substance of the work he afterwards published under the title of An Inquiry into the Nature and causes of the Wealth of Nations.” (cited in Cannan, 1904).
By placing economic science in the service of accumulating wealth, Smith stakes out its purpose. It is to achieve this end that he also restricts its subject matter to the determinants of market prices; to the sphere of exchange-value. He accepted Locke’s arguments: that labour is the foundation of property rights; that applying labour transforms the commons into private property; that money ignites the spirit of acquisitiveness; and that accumulation beyond use is just.8 Smith curtails his inquiry to exchange-value in full awareness of the contrasting ‘value-in-use’ and is perhaps the first who, in recognizing that traditional distinction, nevertheless rules out use-value as a legitimate subject of an inquiry on wealth.9
In this context, consider the distinction Smith draws between diamonds and water. He recognizes that water is useful but of little value in exchange, whereas diamonds are almost useless but nevertheless expensive (Smith 1895, Bk 1, Ch.2). Well before him, it was known that the most useful stuff for life is free and that superfluities could be expensive. I n the XVIIth century, for instance, Pufendorf still could write: “… those things are of the least account of Value without which Human Life is least able to subsist; and therefore not without the most singular Providence of Almighty God, Nature has been very bountiful in providing a plentiful store of those things. But the wanton Luxury of Mankind has set extravagant Rates upon many things which Humane life might very well be without, for instance upon Pearls and Jewels.” (Samuel Pufendorf, in Kauder, 1953, p650).
However, Smith does not follow this Aristotelian tradition in evaluating the propriety of value-in-exchange by value-in-use. He can therefore eschew s any ethical or moral judgment on the sphere of exchange-values, and instead focus the study of political economy on the sphere of the useless. Smith He could so “ignore” use-value by naturalizing perversity, that is, by ennobling the quest for wealth. He disavowed the Aristotelian ethico-political restrictions on exchange by explicitly enjoining men and states to acquire riches. For Aristotle, the retailer exhibits a derangement of reason. For Smith, every man is reasonable insofar as he lives as a retailer.10 For Aristotle, the retailer’s deranged acquisitiveness was unnatural because it suppressed or perverted his natural sociability. For Smith, man’s sociability was the outcome of his selfishness or self-interest, expressed in the natural propensity to truck, barter and exchange.11
And yet, though Smith recognized that the causes of wealth were rooted in unseemly passions or vices, he was chary to call them as such. Indeed, his earlier reflections on the moral sentiments can be read as
an attempt to rhetorically remove the sting of viciousness from vice. Smith recognized the a recognition that ‘avarice and ambition’ attend ed the endless ‘pursuit of wealth, power and pre-eminence’ as he did the ‘emulation which runs through all the different ranks of men.’ .He emphasized it was vanity, rooted in ‘the belief of our being the object of attention’ and ‘not the ease or the pleasure’ that drove men to ‘pursue riches and avoid poverty.’ (Smith, 1858, Part 8, Sec 2, Ch.3).
But, as he argued, ‘virtue consists not in any one affection but in the proper degree of all the affections’ and it is ‘sympathy’ or the ‘correspondent affection of the spectator’ that ‘is the natural and original measure of the proper degree [of virtue]’ (Smith, 1858, ibid). Yet in Smith, ‘sympathy’ is a neutral scientific term that cannot discriminate between good and bad.12
It is better understood as a physiological reaction to the dominant social prejudice of market societies. For Smith, men sympathize with those who ‘make a parade of their riches’. And men parade their riches to provoke the sympathy of others. Mutual sympathy is the glue bonding men to that ceaseless ‘toil and bustle’ necessary to acquire more than they need. Therefore, ‘sympathy’ is neither the compassion felt for the poor and downtrodden nor the fellow-feeling towards the sick and distressed. Instead, in Smith, ‘sympathy’ is the reward for vanity . in commercial society where unlimited acquisitiveness is the dominating value.
And if ‘sympathy’ was not neutral enough, Smith also introduces the more benign phrase ‘bettering our condition’ to better justify and legitimize the vainglorious pursuit of wealth.13
The continued importance of this phrase is underscored by the fact that it is as recognizable and acceptable today as when he first advanced it. For who now would deny the benign effort to ‘better one’s condition’? He argued that the desire to better our condition ‘comes with us from the womb and never leaves us till we go to the grave’ and that it excites a ‘uniform, constant and uninterrupted effort’ towards wealth-getting that fuels both public and private opulence.14 Thus, Smith legitimizes acquisitiveness by rephrasing it as a natural desire to better our condition, laying . Thus Smith lays the ideological scaffolding for modern economics. By making plausible exchange for the purpose of accumulation as the inevitable outcome of the natural propensity to truck and barter and towards sympathy, Smith clears the grounds for justifying commodity-intensive market society. By transforming the vice of vanity and envy into the natural desire to better our condition, he makes the causes of wealth palatable. He thus displaces the traditional reflections on ‘economics’ which began from considerations of the good. No pre-modern could think to hold in esteem that which was not estimable. Neither Aristotle nor the scholastics could conceive the accumulation of wealth for itself as good. Instead, Smith extricated ‘economics’ from its traditional moorings in ethics and politics to better accept the purpose of political economy as the accumulation of wealth. Yet, this also legitimizes the sufficient condition for scarcity, the limitless desire for acquisitions that exceeds both need and use.15
[a]Utility is not useful
Despite the many differences between classical and neo-classical economics, they share a common ideological ground. In this mainstream of economic science, use-value is ignored and unfettered acquisitiveness ennobled. Whereas Smith used the phrase ‘bettering our condition’ to mask
and make palatable the ignoble causes of wealth, neo-classical economics achieves the same result through its notion of utility. Utility is assumed to increase with the more one possesses, so that 3 chairs and 3 tables offer greater utility than 2 of each. The assumption that ‘more is better’ therefore throws mathematical clothes over the skeleton of unfettered desire.
Popularly enshrined as marking the ‘marginal revolution’ in economic thought, neoclassical economics is now considered the new and improved version of economic science. Broadly, the marginal revolution consisted of the discovery that the intensity of the desire for a thing determined, in fine, its value-in-exchange. The novelty of the utility theory of value supposedly lies in replacing the objective quantity of labour time with the purely subjective feeling of desire as the ground of exchange value. Yet,
inadequacy of this interpretation is proved by the fact that classical economists had already accepted the need or desire for a thing as a necessary though not sufficient condition of its exchange-value.16 Moreover, as Marx noted, “usefulness does not dangle midair…it is conditioned by the physical properties of the commodity…” (1954).
What is decisively new in neoclassical economics is that ‘utility’ becomes a place-holder for a mathematical construct.17 Already, in Bentham, utility had become the subject matter of an abstract principle subtending a ‘felicific calculus’. His ‘principle of utility’ allowed the calibration of individual pleasures and pains and the purported calculation of the greatest happiness for the greatest number.
Benthamite utilitarianism can see no difference between the usefulness of human remains to a vulture and its utility to an organ-harvesting company. Yet, it is no mere Benthamite abstraction that is affirmed by the marginal revolution in economics. Instead, when for example, Jevons asserts ‘value depends entirely on utility’, he reinterprets everyday experience and language to suit a mathematical function. It is well known that the invention of ‘diminishing marginal utility’ constitutes the real and lasting novelty of neoclassical economics, obtained by fitting economic thought to the structure of differential calculus. If a differentiable function is named ‘utility’ and its first derivative ‘marginal utility,’ then the quasi-concavity of that function is sufficient to establish ‘diminishing marginal utility’. Jevons is a good witness to the convolutions required in retrofitting ordinary experience to suit mathematical functions. He refers to water as an example to lend everyday credibility to his formulations but then strains ordinary credulity by suggesting that men drink water to the point of being sickened by it.18
Despite its overt mathematization, neo-classical economics shares the ideological conceit of unlimited acquisitiveness bequeathed to it by classical economics. Perhaps
Smith placed use-value in the blind spot of economics though he recognized usefulness as the first meaning of ‘value.’ Neoclassical economists identified ‘value’ with what was obtained in exchange and could no longer comprehend usefulness. Blind to what Smith had blinkered beyond economics, neoclassical economists could not imagine alternatives to market society.19 However, by legitimizing unfettered acquisitiveness prompted by vanity, whether through such rhetorical flourishes as ‘bettering our condition’ or mathematical obscurities as ‘utility’ and ‘indifference maps’, the mainstream of economic science propagates the sufficient condition of scarcity.
[a]Scarcity is not finiteness
Yet, the notion of scarcity as a universal and ineradicable condition was given scientific credence by XXth century economists. ‘Scarcity’, like ‘utility’, is a word deployed to make mathematical economics ordinarily comprehensible. Léon Walras was perhaps the most active in transferring the mathematics of energy physics to economics. Unsurprisingly, it is also he who most clearly formulated ‘scarcity’ as the indispensable source of economic value.20 Yet, the idea that scarcity defines ‘the raison d’être of economic science’ was not widely accepted until the 1930s, which is when mathematical formulations become central to it.21 As an endemic human condition justifying economics, scarcity usually shows up only in the popularization of economics in trade and text books. Indeed, it would not be a great exaggeration to suggest that it was Lionel Robbins who gave wide currency to the notion of ‘economics as a science of scarcity’ (See Fine, Toye and Luks, this volume, for further discussions of Robbins’ notion of economics and scarcity).22
The mathematics of constrained optimization is the kernel of XXth century economic theorizing.23 Consumers are said to maximize their utility subject to the constraint of income, producers are said to maximize their output given the quantity of capital and labour available, as Robinson Crusoe allocates his labour among tasks given the constraint of time. Without constraints, whether of time, money, or means, there is no economic problem. It is in the context of the mathematical technique of constrained maximization then, that ‘scarcity’ in economics must be understood. Specifically, ‘scarcity’ is to constraints as ‘marginal utility’ is to a differentiable and quasi-concave function. Modern economists rarely consider ‘scarcity’ a technical term and unlike ‘balance of payments’, or ‘n-person games’, scarcity does not usually appear in technical treatises on economics.24 @ Scarcity however is rhetorically convenient for popularizing economic science. It fuels that perception that economics deals with problems necessitated by the limited quantity of means, or money, or time (See Fine, this volume, for a discussion on the elusive nature of scarcity in economics.)
In contrast, when classical economists spoke of ‘scarcity’ they typically meant ‘rare,’ ‘little’ or ‘infrequent’ (see also Xenos, this volume). They did not imagine any scarcity in the case of producible goods. Ricardo’s reasoning seems persuasive: in distinguishing between two kinds of price, he notes that the ‘scarcity price’ is independent of the quantity of labour. Instead, such prices are applicable only to rare objects that are necessarily limited in number. The prices of such rarities are therefore determined by the competing desires of those who wanted to possess them. To the classical economist however, this ‘scarcity price’ was an exceptional phenomenon in the sphere of exchange and could not be used to explain the value of what was abundant. After all, the glut in manufactured goods was self-evident to them.25
Scarcity is an inherently relational concept. It refers to the dearth, the insufficiency of something; that is, the quantity of something in relation to the need, want or desire for it. Scarcity should be distinguished from finiteness, which is not a relational concept. Finiteness is an objective property of things independent of the needs or purposes of men. Obviously, finite quantities do not imply fixed quantities – the quantity of rainwater in the
This contrast between finiteness and scarcity is not sufficiently drawn either in economics or more generally.27 Scarcity is a relational measure of experience, inextricably binding the quantity of things to the purposes of men. It is a measure of the insufficiency of finite quantities and cannot itself be measured by number. In contrast, the finiteness of a thing can be measured in numbers.
For example, ‘X gallons’ is a quantitative measure of the finiteness or limitedness of water. Scarcity cannot be reduced to finiteness since finiteness is only a necessary but not sufficient condition of scarcity. That water is finite is a truism that does not imply that water is scarce. Despite the conceptual distinction between finiteness and scarcity, the latter has a strange connotative power. Typically, the phrase ‘X is scarce’ draws attention to the quantity of X while passing over the purposes for which it is insufficient. The phrase ‘water is scarce’ tends to mistakenly emphasize only the necessary but not sufficient condition that makes water scarce; it tends to reduce the experience of scarcity to the quantity of water.
Neoclassical economists are heirs to the classical economists insofar as they accept acquisitiveness as a natural condition. To popularize constrained maximization as the ‘science of scarcity’, they however foster a systematic confusion between finiteness and scarcity. The ‘scarcity’ they invoke is endemic and ineradicable. It is not caused by the unavailability of things.
After all, the landfills that have grown to the size of small hills are enough proof that modern societies waste more than previous generations have ever consumed or used. Instead, scarcity is now inexpungible because needs have proliferated into endless wants. Yet the tendency of ‘scarcity’ to be identified with limited quantities suggests otherwise. Perhaps the connotative power of ‘scarcity’ is a leftover from bygone days when needs were culturally bound and stable. Perhaps it is now actively maintained to prevent judgement on the appropriateness of wants and desires. In either case, the use of ‘scarcity’ today tends to reinforce the illusion that it is caused by the unavailability of things instead of the excessiveness of wants. And it is the mainstream of economic science since Adam Smith that has signally contributed to this illusion. On the one hand it legitimizes and propagates the sufficient condition of the experience of scarcity—insatiable desires; and on the other, proposes to solve the problems created by such limitless acquisitiveness.
Water is a commons
This dual dynamic of attempting to solve a problem with the same thought style that contributes to it, is painfully obvious in the case of the growing concern with ‘water scarcity.’ In the context of this discourse, water is considered a resource. Caught in the conceptual web of demand and supply, policymakers can only think of ways to increase the quantity or decrease the consumption of water resources. And, unsurprisingly, they focus on the price mechanism as a panacea. They want to price water so that the gifts of nature can be converted into private property. They want to price water to spur increases in supply by, for example, turning seawater into fresh water. They want to price water to restrict the effective demand for it. They propagate the reign of prices to transmute the needs of all into the wants of the few who can pay.28 In their rush to find efficient solutions to the problem of water scarcity, they have conveniently forgotten that commodities necessarily introduce scarcity into market society. For where cash is king, self-sufficiency and the commons are cast into exile. Under the rule of prices, the abundant can also be unaffordable. Moreover, prices may reduce the effective demand for Perrier and flush toilets but can also spark the envious desire for them
it.29 Unlike their predecessors, modern economists who propagate the price mechanism forget what Adam Smith knew: that vanity fuels the engine of commercial society.
That the unfettered spread of commodity-intensive society has led to the despoliation of the air, soil and water is obvious enough. That commodity-intensive society has produced a cornucopia of things the majority cannot afford is equally obvious. However, that commodity-intensive society induces scarcity by fuelling acquisitiveness is not sufficiently obvious. From its inception, economics has been chained to the ball of market exchange. Its proponents can only tout more markets as solutions to the very problems created by market society, that is, to create more scarcity pretending
in order to eradicate scarcity.
The question of scarcity today cannot be divorced from the question of the needs and wants of man. Addressing the question of needs and wants is pre-eminently a process of judging when something is too much or too little; of judging if and when needless wants have replaced useful needs. Is industrial farming counter-productive? Do dams damage? Are flush toilets and green lawns necessary? Are desalination technologies appropriate? These are questions of ethics and politics. They cannot be comprehended in the terms of an economic science, which was consciously established beyond ethics and politics. Blind to use-values while celebrating acquisitiveness, mainstream economics is of little help in thinking about the proposition that ‘water is scarce’. What it pretends to solve with one hand, it contributes to with the other. A discourse based on thinking about water as a resource, caught within the conceptual pincers of demand and supply, rife with ‘allocation’, ‘distribution’, ‘production’ and ‘consumption’ only obfuscates the modern experience of scarcity.
A way out of the mental prison of water as a resource is to recall that water was, until very recently, a commons. The contrast between water as a commons and as a resource was well exposed over the turn of the XIXth century. Aqua currit et debet currere; ‘water runs and ought to run’ ruled the judge in the Merritt v Parker case (1795,
think thing, and must of necessity continue to be common by the law of nature so I can only have a temporary, transient, usufructuary property therein”(cited in Shiva, 2002, p. 20). Historically, diverting or significantly obstructing the natural course of water was always judged illegal unless agreed to by all parties affected. Yet, a scarce hardly ten years later, the judges in the case of Palmer v Mulligan (1805,
To see water as a commons, again, requires attending to those who, like contemporaries in the
attached to economic styles of thinking. capable of producing sentences such as this ‘…and there were some mystical references to the infinite utility of subsistence’ (1950, p373). It calls for a revaluation of self-sufficiency and of living within natural thresholds, which for the Nobel Laureate, Herbert Simon, occurs only in fast-disappearing black zones of ‘autarky’ (1991, pp25–44).
1 The literature on the contrast between commodity-intensive society and its antithesis is extensive. For an orientation to this contrast that admits no synthesis, consult Illich, 1980. He rehabilitates the word ‘vernacular’ to indicate social arrangements, past and present, wherein the ‘the home-grown, home-bred and home-spun’ dominate the dependence on purchased goods and services. William Leiss (1988) coined the phrase ‘high-intensity market setting’ to refer to ‘a market economy in which there is a very large number of commodities available to a large number of people, and in which many commodities are the result of highly complex industrial production processes involving sophisticated scientific and technological knowledge’ (p7). The works of Karl Polanyi, (1944; Polanyi et al, 1957;
2 When Adam Smith wrote The Theory of Moral Sentiments (1858) some 17 years before publishing An Inquiry into the Nature and Causes of the Wealth of Nations, (1875) he still adhered to this traditional meaning of oeconomics.
3 The first sentence of the Nicomachean Ethics reads ‘Every art and every inquiry, and similarly every action and choice, is thought to aim at some good; and for this reason the good has rightly been declared to be that at which all things aim’ (Bk.1, 1094a1). Similarly, the first sentence of The Politics reads ‘Every state is a community of some kind, and every community is established with a view to some good; …[and] the state…aims…at the highest good’ (Bk.1, 1252a1).
4 ‘Of the art of acquisition then there is one kind which by nature is a part of the management of a household, in so far as the art of household management must either find ready to hand, or itself provide, such things necessary to life, and useful for the community of the family or the state, as can be stored. They are the elements of true riches; for the amount of property which is needed for a good life is not unlimited …’ (Aristotle, Politics, Bk.1, Ch.8, 1256b).
5 The Nichomacean Ethics contains Aristotle’s discussion on the (in)appropriateness of the commensurability entailed by exchange. See Scott Meikle (1995) for an outstanding treatment of the (un)resolved problem of commensurability that haunts modern economics. Hannah Arendt (1958) finely crafts the distinctions between ‘work’, ‘labour’ and ‘action.’
6 ‘The origin of this disposition (accumulation of coin for itself) in men is that they are intent upon living only, and not upon living well; and as their desires are unlimited, they also desire that the means of gratifying them should be without limit. … [Thus] some men turn every quality or art into a means of getting wealth; this they conceive to be the end, and to the promotion of the end they think all things must contribute’ (Aristotle, Politics, Bk.1, Ch.9, 1258a). ‘There are two sorts of wealth-getting, as I have said; one is a part of household management, the other is retail trade: the former necessary and honorable, while that which consists in exchange is justly censured; for it is unnatural, and a mode by which men gain from one another’ (Aristotle, Politics, Bk.1, Ch.10, 1258a & b).
7 “Political economy … proposes two distinct objects: first, to … enable [people] to provide a (plentiful) revenue or subsistence for themselves, and secondly, to supply the state or commonwealth with a revenue sufficient for the public services.” Though ‘political economy, [is] considered as a branch of the science of a statesman or legislator …its stated purpose is ‘to enrich both the people and the sovereign” (Smith, 1875, Bk.4, Introduction). The phrase ‘political economy’ was used by James Steuart Denham (1712-1780) in An Inquiry into the Principles of Political Economy (1767) but there refers to the paternalistic task of a prince. In its Smithian sense, the locution will run through Ricardo, Mill, and Jevons until
8 The importance of Locke to Smith is evident in his paean to property. “The property which every man has in his own labour, as it is the original foundation of all other property, so it is the most sacred and inviolable”, (Smith, 1875, Bk.1, Ch.10, Pt.2). For reasons of space, we do not offer detailed quotations from Locke to support our argument of Smith’s dependence on him. However, see John Locke, Concerning Civil Government, second
9 “… money has become in all civilized nations the universal instrument of commerce, by the intervention of which goods of all kinds are bought and sold, or exchanged for one another. What are the rules which men naturally observe in exchanging them either for money or one another, I shall now proceed to examine. These rules determine what may be called the relative or exchangeable value of goods.” “…The word value, it is to be observed, has two different meanings, and sometimes expresses the utility of some particular object, and sometimes the power of purchasing other goods which the possession of that object conveys. The one may be called ‘value in use’; the other, ‘value in exchange’ ” (Smith, 1875, Bk.1, Ch.4).
11 Thus, “we are not ready to suspect any person of being defective in selfishness” (Smith,
12 We are aware of the ‘Adam Smith Problem,’ usefully summarized by Leonidas Montes (2003, pp63–90). ‘The Problem as such, states that there is an irreconcilable difference or inconsistency between The Theory of Moral Sentiments, with its sympathy-based concept of human nature, and The Wealth of Nations, founded on an egoistic theory of self-interest’ (p66). We contend that since Smith’s ‘sympathy’ is evoked by the envious and the vain, the ‘Das Adam Smith Problem’ is not Adam Smith’s problem.
13 “It is because mankind are disposed to sympathize more entirely with our joy than with our sorrow, that we make parade of our riches, and conceal our poverty … Nay, it is chiefly from this regard to the sentiments of mankind, that we pursue riches and avoid poverty. For to what purpose is all the toil and bustle of this world? What is the end of avarice and ambition, of the pursuit of wealth, of power, and preheminence? Is it to supply the necessities of nature? The wages of the meanest labourer can supply them … If we examined his oeconomy with rigour, we should find that he spends a great part of them upon conveniencies, which may be regarded as superfluities, and that, upon extraordinary occasions, he can give something even to vanity and distinction … From whence, then, arises that emulation which runs through all the different ranks of men, and what are the advantages which we propose by that great purpose of human life which we call bettering our condition? To be observed, to be attended to, to be taken notice of with sympathy, complacency, and approbation, are all the advantages which we can propose to derive from it. It is the vanity, not the ease, or the pleasure, which interests us. But vanity is always founded upon the belief of our being the object of attention and approbation.” (Smith,
14 See his discussion on ‘bettering our condition’ in Smith, 1875, Bk.2, Ch.3. Here, in The Wealth of Nations he assumes what he argued for in Moral Sentiments: that avarice, ambition, and vanity can be reduced to ‘bettering our condition’.
15 How mimetic desire becomes acceptable because it is functional for commercial society can be read in the writings of Hobbes, Locke, Hume, Mandeville and Rousseau up to the classical economists. Desire is endlessly stoked and never satisfied when ‘I want what you have’. From Mandeville to Keynes the perception that vice produces wealth depends on seeing that desire unhinged from use – acquisitiveness – can never be satisfied. Social scientists lack such perception. For scarcity as rooted in mimetic desire consult Girard, 1976; Dumochel and Dupuy, 1979; Nicholas Xenos, 1989; Hans Achterhuis, 1993; Mandeville, 1924; Keynes, 1972.
16. David Ricardo clearly states the role of utility in classical economics. “Utility then is not the measure of exchangeable value, although it is absolutely essential to it. If a commodity were in no way useful – in other words, if it could in no way contribute to our gratification – it would be destitute of exchangeable value, however scarce it might be, or whatever quantity of labour might be necessary to procure it” in Principles of Political Economy and Taxation, 1817, Ch.1, Sec.1.
17 See Philip Mirowski, 1989, and its useful summary in Mirowski 1988, where he writes, “It is the second thesis of this paper that the hard core of neoclassical economic theory is the adoption of mid-nineteenth century physics as a rigid paradigm … [which] … explains the preference for techniques of constrained maximization over any other analytical technique.” (p24). More generally, he offers compelling evidence for the argument that ‘utility’ in neoclassical economics was identified with ‘potential energy’ in XIXth century physics. He emphasizes the futility of this attempted identification by noting that it is meaningless to speak of the sum of income and utility being conserved through market exchanges, as does the sum of kinetic and potential energy when a ball falls to the ground.
18 “Water, for instance, may be roughly described as the most useful of all substances. A quart of water per day has the high utility of saving a person from dying in a most distressing manner. Several gallons a day may possess much utility for such purposes as cooking and washing; but after an adequate supply is secured for these uses, any additional quantity is a matter of comparative indifference. All that we can say, then, is, that water, up to a certain quantity, is indispensable; that further quantities will have various degrees of utility; but that beyond a certain quantity the utility sinks gradually to zero; it may even become negative, that is to say, further supplies of the same substance may become inconvenient and hurtful’ (Jevons, 1988, Ch.3).
19 By the end of the XIXth century, value-in-use lost all meaning as noted by Alfred Marshall. “The word ‘value’ ”, says Adam Smith, “has two different meanings, and sometimes expresses the utility of some particular object and sometimes the power of purchasing other goods which the possession of that object conveys.” But experience has shown that it is not well to use the word in the former sense. The value, that is the exchange value, of one thing in terms of another at any place and time, is the amount of that second thing which can be got there and then in exchange for the first. Thus the term value is relative, and expresses the relation between two things at a particular place and time’ (Marshall, 1898, Bk.II, Ch.II).
20 The term or concept does not appear of any importance in Jevons or Marshall. Menger has the concept without the word. It was Léon Walras, perhaps the most mathematical of XIXth century economists, who is the outstanding exception. “Whether labour is all or part of social wealth is beside the point. In either case, why is labour worth anything? Why is it exchangeable? That is the question before us. Adam Smith neither asked nor answered it. Surely, if labour has value and is exchangeable, it is because it is both useful and limited in quantity, that is to say because it is scarce. Value therefore comes from scarcity. If there are things other than labour that are scarce, they will also have value and be exchangeable. So the theory which traces the origin of value to labour is a theory that is completely devoid of meaning rather than too narrow, entirely gratuitous rather than merely deficient.” (in Jolink, 1996) [emphasis added].
21 see Pearce, 1986, p379. The thorough-going mathematization of economic science is a XXth century phenomenon and tracks the spread of marginalism in economics. “In the 1930’s new uses for the marginal concept were introduced in the journals and the specialized literature.” (Howey, 1989, p.xxxii).
22 The much-quoted, and by our investigations the most-quoted statement, by Robbins to support the notion that economics is a science of scarcity appears in a trade book for non-technical readers. “We have been turned out of
23 “Optimizing, a catch-all term for maximizing, minimizing … lies at the heart of economic analysis. … Indeed, optimizing subject to constraints has been considered by many as defining the essential nature of economics” (Lancaster, 1968, pp9–10). To make constrained optimization meaningful in everyday language, he invokes the quotation from Robbins.
24 When a technical meaning is imposed, ‘scarcity’ becomes ordinarily meaningless as evident in the entry on ‘scarcity’ in Eatwell, Milgate and Newman, 1988. “But the meaning of scarcity within marginalist theory of distribution is very peculiar: it concerns only the relative quantities of the factors employed in production. We may say that a factor is scarce when increasing quantities of it applied to a given quantity of the other gives rise to decreasing returns.” [emphasis in original].
25 “There are some commodities, the value of which is determined by their scarcity alone. No labour can increase the quantity of such goods, and therefore their value cannot be lowered by an increased supply. Some rare statues and pictures, scarce books and coins, wines of a peculiar quality, which can be made only from grapes grown on a particular soil, of which there is a very limited quantity, are all of this description. Their value is wholly independent of the quantity of labour originally necessary to produce them, and varies with the varying wealth and inclinations of those who are desirous to possess them.” (Ricardo, 1821, p2).
26 Study Plato’s The Statesman for a decisive account of two kinds of measurement – the one ‘arithmetic’ (corresponding to finiteness) and the other ‘geometric’ (corresponding to scarcity). The philosophical implications and practical consequences of the distinction between these kinds of measurement have been well drawn out by Rosen, 1985.
27 Many papers in this volume emphasize the relational nature of ‘scarcity’. See the excellent paper in this volume by Jasveen Jairath who recognizes the importance of having a different word for quantitative measures of a thing. Obviously, we propose ‘finiteness’, as Fred Luks does explicitly and Nicholas Xenos implicitly, both in this volume. Accordingly, the debates on whether water scarcity is a ‘social construction’ or a ‘natural phenomenon’ are as fruitless as is the one on the supposed distinction between ‘absolute scarcity’ and ‘relative scarcity’. See the article by Lyla Mehta in this volume on the continued prevalence of such debates.
28 Papers in this volume provide ample evidence of the extent to which the idea of a market in water to reduce effective demand and increase supply dominates contemporary thinking on the topic. For an illustrative example in the burgeoning literature on water scarcity, see Saleth and Dinar, 2001, pp119–32. That scarcity and abundance are endemically viewed through the economic prism of demand and supply is perhaps most convincingly laid out in Gleick, 2004. The report is based on the unquestioned acceptance that water is an economic resource. Consequently, all its solutions to the problem of water can be clubbed under attempts that either increase water supply or manage the demand for it. See also Mehta 2003 for a critique of this.
29 Even the most ‘obvious’ economic law of an inverse relation between price and quantity demanded becomes dubious by slightly shaking one of the foundational assumptions of mathematical economics. See Stiglitz, 1987, pp1–48. He shows that changing the assumption of costless information upsets much of the neoclassical applecart. It is a matter of elementary logic that assumptions known to be false cannot lead to correct conclusions, except by accident.
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