We Can’t Have Everything, So We Have To Choose
This is part 3 of answering the question: What do people act, choose, and change?
One Takeaway
Scarcity forces choices. Economics begins with understanding how we prioritize what matters most when we can’t have it all.
What is Scarcity?
At the core of economics lies another undeniable truth: we can’t have everything that we want. There are never enough resources, time, money, or energy, to satisfy all our desires. This is scarcity. It’s a basic fact of reality and it makes choice necessary.
Scarcity means that when we use something for one purpose, we give up the chance to use it for something else. Every decision we make involves a trade-off. Scarcity forces us to choose.
For example, consider a farmer deciding whether to plant soybeans or corn on his land. The farmer cannot use the land for both crops at the same time. The farmer must choose one.
What is a Good?
When we talk about things people choose between, we call them goods. A good is anything that someone believes can help them achieve an end—whether that’s staying warm, enjoying a meal, relaxing, or earning money. Goods aren’t defined by what they are, but by how someone values them.
But not everything useful is a good. For something to be a good, it must be both useful and scarce. That’s why air, while essential to life, usually isn’t a good in economic terms. As of this moment here on Earth, we don’t need to choose how to use it. It’s freely available (at least in most places).
Economics focuses on things that are scarce and worth choosing between.
How Do We Deal with Scarcity?
Because we can’t have everything, we have to prioritize. This process of weighing costs, benefits, and trade-offs, is called economizing. We constantly make decisions about how to use our time, money, energy, and attention to achieve the outcomes we want.
This isn’t limited to money. It applies to all resources. Time is scarce. Energy is scarce, even mental focus and attention is scarce.
Why This Matters
Scarcity might seem obvious, but it’s another reason why economics exists. Without scarcity:
Prices wouldn’t exist. We wouldn’t need to compare or prioritize goods.
Trade-offs wouldn’t exist. We wouldn’t need to choose between options.
Competition wouldn’t exist. There’d be no struggle over limited resources.
Policy would be easy. There’d be no limits or consequences to weigh.
We wouldn’t need to pay much attention to our choices if we lived in a magical world without scarcity. It’d be great if we lived in that world, but we don’t. In our world policies have trade offs, every decision you make has a cost, and every time we use a resource it means it isn’t used on something else.
Scarcity Doesn’t Guarantee Value
Just because something is scarce doesn’t mean it’s valuable. Scarcity matters only when something is also useful or desired. You could own the only crate of VHS tapes in the world, but that doesn’t mean anyone wants them. Value comes from scarcity and purpose, both how useful something is and how much people want it.
The Bottom Line
We can’t do everything, have everything, or be everywhere, so we have to choose. Goods are the things we believe can help us achieve our goals. When we recognize scarcity as an undeniable starting point, we begin to see how every decision shapes the world around us.