Scarcity resource allocation

Scarcity means that resource allocation decisions cannot be avoided. If this is accepted, then it is clear that the basis on which these decisions are made should be explicit. Although economists do not claim to have the only - or even necessarily the best - answer for all choices that need to be made, at least economic criteria are explicit and hence open for criticism and debate. 

The proceeding chapters give wimess of an overwhelming scientific development. Antiviral intervention has become a standard, and the worldwide availability of this innovation is perceived as a humanitarian matter of course with a value of its own. However, such an important therapy progress has to be seen in competition with other allocations of scarce funds. Health care resources are Umited - in one country more than in another, but in principle funds invested to antiretroviral intervention will not be available for prevention of HIV/AIDS or for the cure of other diseases. This fundamental scarcity calls for a rational utilization of existing resources and a scientific calculation of the socio-economic impact of antiretroviral intervention. 

Note simultaneous application of permit and tax systems EPA allocated allowances to seven major domestic producers of CFCs and halons, but imposed tax on production to soak up the rents created by the regulation induced scarcity (Source Tietenberg, T. 2000. Environmental and Natural Resource Economics, 5th ed). 

Moreover, the wider the market, the higher the number of players, and therefore the more competitive the market. This point is important because uncompetitive markets allocate scarce resources inefficiently. For instance, if electricity companies cartelize they will restrict investment in new power plants to keep prices high. The cartel s interest is similar to a monopoly s interest, that is, to create, not reduce, scarcity. 

What Darwin calls economizing, might now be called fitness optimization, an efficient allocation of resources that increases the organism s chance of success in the face of competition and scarcity. Care must be taken, though, with the terminology. Nature, through evolution, does not strictly optimize. Optimization implies a conscious evaluation of a range of options followed by the selection of the one which best accomplishes an objective. Nature does not perform a predictive... 

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