Scarcity and the debates around it

The concept of economics as a science of studying scarcity of resources and the allocation of them has become a premise of any economic research today. Modern economists rarely question this basic assumption. However, from a philosophy standpoint, posting of Reasonings from Challengers such as Buchanan against Robbin’s definition has never been stopped. In this essay, the writer will look at those arguments and try to understand if Robbins’ definition contains misdirection to economics study.


In Robbins’ (1932) essay, He first gives an example of a man on an isolated island. The man has to choose between income and leisure. Therefore, he has to economise. Because the time and the mean for achieving the ends are limited, not all of his wants can be fulfilled. Thus, it creates the problem of scarcity.

Robin’s isolated man is the first and simplest economic model. In this model, since human activity cannot be independent of time and specific resources, the total amount of outcome which a man can harvest is limited. Another critical assumption is that human will always have wants that exceed the income they receive. Combining these two together and the concept of economics as a subject which studies the allocation of time and resources to fulfil human’s needs and want has been created.


Robin’s theory of scarcity has become a cornerstone of modern economics since then. However, its status has been challenged by multiple critiques. Buchanan and his theory of catallactics are one of them. Buchanan (1964) does not entirely oppose the concept of scarcity. However, he would instead replace ‘theory of resource allocation’ with ‘the theory of markets’ in the centre of economics. He believes that Robins’ theory over-simplified the real image of economics activities. In Robbin’s vision, economics is a set of problems which is needed to be solved rather than a characteristic form of human activity. Buchanan, on the other hand, suggests that economics should always be a subject which studies human in their ordinary business of making a living. He uses the example of ‘society system’ which is commonly used in economics at that time and states that it is rather vague to think about economic problems on this scale. Instead, he insists on focusing on real entities that do exist in this world as the object of research. In this way, Buchanan embodies the target which economics studies- individuals, businesses, organisations, governments and the world.


Buchanan’s arguments free up economics from pure philosophy and give economics a role in the common world. That is a researcher and engineer in solving real issues inside human society. His points later were reviewed by Kirzner (1965).


Kirzner, in his essay, claims that Buchanan missed some elements in his arguments. Although Kirzner does not oppose the idea that moving economics from pure philosophy to social science would be appropriate for solving problems in the modern world. However, he believes that Buchanan misinterpreted the function of Robbins’ theory. The theory of scarcity is rather an observation of the assembly which all economic problems are raised and solved instead of a methodology of solving economic problems. Thus, its use of piloting all economic studies can not be replaced by an embodiment of itself.

Kirzner further argues that by adopting Buchanan’s view, people who study economics will suffer from losing the direction on their way of finding the truth. He listed two ways of viewing economics as a subject. One is a practical science which uses economics as a tool for understanding the real world. The other is a philosophy which tries to reveal the truth behind the representation of the real world. He stands for the later one as it will lead to a more significant outcome for humanity.


Judging by the evolution of economics, Kirzner’s view of economics did not receive enough acceptance of modern economists. Northrup (2014), in his essay, questions the relevance of the scarcity theory in an isolated system to the modern economy. Furtherly supporting his argument, he, like Buchanan, uses trading between individuals as an example. According to him, in the modern world, scarcity of a single human being is hard to achieve as he can always purchase the goods he needs from others. The only scarcity that has its reality is natural resources such as minerals and oil, but even that, for a single human, those resources are near unlimited. Thus, he opposes the concept of absolute scarcity and enhances the scarcity theory with relative scarcity that is all goods are scarce only by comparing the scarcity of other goods which exist.


Moreover, economists such as Xie (2019) starts to question the theoretical economics as a whole. This change in personal view on economics can be traced back to the 2008 financial crisis. He claims that theoretical economics, despite been developed for decades, has failed to find a satisfactory answer to what is the best solution for the crisis. He further calls the scarcity theory a Pseudo‑Proposition (a concept which is presented as meaningful but is actually meaningless). He supports his idea by pointing out that the two essential elements in scarcity theory – resource and desire are from two categories of subjective. Thus, they are non-comparable and non-interchangeable. He states that only by comparison on the basis of homogeneity can scientists correctly reflect the objective reality. For example, supply and demand, production and consumption. This kind of reasoning comes typically from economists who want the whole subject to become more of science just like physics, has become harder and harder to ignore by the mainstream economists.


It seems that modern economics will soon reach a choke point where theorists require it to be refined from the root and pragmatists ask to turn it over and change it into something new entirely. Until then, the scarcity theory will still remain to be the central hypothesis for any economic theory. Although I do think Robbins’ idea of a complete abstract model which is based on the reality in some degree can help people understanding the basics of economic activities, it should not be seen as absolute truth. The concept of some idea that is unchallengeable due to it has become the foundation of too many other theories is against the very bias belief of science. Buchanan ‘s arguments, despite its limitation, proved by history after it, has become a norm in today’s economic study.  Kirzner’s idea of economics as a pure philosophy which studies the very truth behind human activity remains to be a minority. It is not to say that the theoretical approaching is meaningless, as this will fall into the trap of nihilism, the exploration of concepts by the theorists did introduce new ways of thinking about economics. They represent various possibilities that could lead up to the truth. For now, it is hard to tell if Robbins’ theory has any misdirection on the study of economics, but even if it has, it is not because the theory is entirely wrong, but because how economists of later generation use it.


The writer would like to further talk about an emerging division of economics for this topic. For many years in the 20th century, behaviour economics was seen as a deviant child of mainstream economics. For the first time, behaviour economics questioned the rational choice theory and prove that in the real world, humans are irrational. The irrationality of the human being is not an outliner that occurs from accident, but a long-existing fact of human nature. The success of behavioural economics brought traditional theoretical economics into a new era of fact-checking. The impact of it on economics as a whole will be seen in the near future. If Scarcity theory requires a review and renovation, behavioural economics could be a perfect tool, not through debates and arguments, but through observations and experiments.


To conclude, Robbin’s theory on scarcity will likely continue to be one of the fundamental assumptions in modern economics. However, its status should be open to any challenge. Philosophy in the 21st century should continually be providing the very fundamental guideline to any scientific study.



















Robbins, L.  (1932). Economics and Political Economy. Retrieved from:


Buchanan, J, M. (1964). What Should Economists Do. Retrieved from:


Kirzner, I, M. (1965). What Economists Do. Retrieved from:


Northrup, B, M. (2014). A comment on scarcity. Retrieved from:


Xie, A. (2019). The Paradigm Crisis of Modern Mainstream Economics. Retrieve from:


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