Chris has a Master's degree in engineering and uses his knowledge to write about a variety of topics from an analytical perspective.
Many of the tribulations in this world can be traced back to the basic problem of scarcity. Scarcity is a fundamental economics problem that is a key piece to understanding how economies work. Essentially, scarcity means that there are a limited number of resources available to supply our virtually unlimited demand for goods and services in our society. A finite number of resources is a limiting factor in any economy. When resources are scarce, it forces an economy to move towards one of three courses: technological advancement & innovation, specialization, and war.
1. Technological Advancement & Innovation
Scarcity of resources, especially ones that are in high demand, can cause technological advancement. For example, when certain raw materials become necessary for a high-demand product, technologies will emerge to attempt to meet those demands. These new technologies will either help increase the supply by finding more sources of the material or decrease the demand for a resource by changing the product to use less material (or an alternative material) or by adjusting the manufacturing process.
Petroleum is one example where scarcity has helped to create technological advancement. The demand for crude oil paved the way for newer oil exploration techniques and better and more efficient drilling equipment. As demand grew stronger still, oil prices began to rise and fuel efficiency became a key component of vehicle design. The cars of today, among other things, are significantly more fuel efficient than those of just 30 or 40 years ago. As more countries become industrialized, the increased demand for crude oil will fuel further technological advancements. The demand for crude oil created hundreds of thousands of new businesses that could capitalize on the industry either directly or indirectly.
2. Economic Specialization
Resource scarcity is a key component for economic specialization among countries, cities, and regions. Because the allocation of resources on this planet is not homogeneous, some countries (or states, cities, etc.) will have more resources than others. Saudi Arabia, for example, has a very large stock of crude oil compared to most other countries. Their large supply, coupled with an extremely large demand, has allowed them to specialize in the area of oil production and export. By specialization in one critical area, the country can become really adept at mining and processing the resources. This can increase competition in the marketplace while also increasing profits from selling to others. Countries can easily become very rich when the natural resources they have are wanted/needed by the rest of the world.
3. Scarcity Can Often Result in Wars
Many wars have been fought over the scarcity of resources. When a country becomes dependant on a particular resource that it does not have much of, international tensions can rise. The exporting country may see opportunities to use the resource as a tool to get the importing country to do as they desire. Dependant countries may have little choice when deciding whether to cooperate or not, even if it would go against the values of the country. This could be a major source of unrest for the importing county. Other issues can arise when an exporting country decides to cut production of a resource or is the victim of a major natural disaster. In the case of crude oil, a major cut to production could cripple the United States and many other Westernized countries. Many experts cite gasoline prices as a key index of the health or potential health of our economy.
In the past, many wars have been fought over natural resources. In some cases, the impetus for war was the need for land. Holding land can help secure a variety of in-ground natural resources, preserve areas for agricultural production, or to secure an area for a military advantage. More recently, wars were fought for the control of crude oil. As we've seen, in a world dependent on oil, those countries that own the resources can have unprecedented control on global affairs.
In the future, wars may be fought about other resources as well. For example, clean water is a dwindling resource that could become the source of military actions if countries don't find a way to innovate and find water to support their citizens. Another resource that is become increasingly scarce is lithium. Lithium is needed to make batteries to support almost all of our modern technology included electric vehicles.
We live a finite world. Our ever growing population and globalization is only limited by the scarcity of our resources and our spirit to innovate. When lithium to fuel batteries becomes impossible to find, a new technology (and thus resource) will arise to replace it. When a country realizes it is sitting on a vast stockpile of that new and useful resource, it will specialize in its production. And finally, when that resource becomes so precious and vital for our survival, wars may be fought over it. Resource limitations have and will continue to be a force of technological advancement, specialization, and war for the rest of humanity.
This content reflects the personal opinions of the author. It is accurate and true to the best of the author’s knowledge and should not be substituted for impartial fact or advice in legal, political, or personal matters.
© 2011 Christopher Wanamaker
Christopher Wanamaker (author) from Arizona on August 10, 2012:
Thanks. I did have fun writing this article.
Gamerelated from California on August 10, 2012:
This is an interesting article. I have a degree in Economics so I can appreciate this. Good work on making Economics interesting.