Dan Nixon — Mind over matter: is scarcity as much about psychology as it is economics?

Conventional economics is based on "unlimited wants" and "scarce resources." This is the key fundamental of markets. The most intrinsically valuable goods are vital goods like air and water, but, so far, they have not been scarce and therefore are free goods with a market value of zero other than in conditions in which they are scarce, like water in a desert or potable water in a crisis.

Scarce goods are "satisficers." A satisficer yield enough satisfaction to meet the threshold of desire, desire being divided into needs and wants. Enough satisfiers are required to meet needs as a bare minimum, with "need" being defined both individually and locally as well as with respect to human needs. 

Conventional economic theory is base not on satisficing but rather on maximizing. Economists assume that rational agent seek to maximize their utility rather than simply to reach the threshold of satisfaction.

Barry Schwartz addressed this contrast between satisficing and maximizing in The Paradox of Choice: Why More Is Less. It is also the basis of "Buddhist economics" put forward in E. F. Schumacher's Small Is Beautiful.

Perennial wisdom has taught that contentment is the basis of happiness and that pursuing wants in excess of needs leads to less happiness as wants increase. 

But a modern consumer economy is based not only on satisfying needs but also wants. Moreover, needs are not distinguished from wants in a market economy and rationing by income and price leads to large numbers of people with unmet needs and a significant group at the top of the pyramid with lavish wants satisfied.

The push for ever-increasing growth has led to the manufacture of artificial wants through advertising an marketing, for example. 

Dan Nixon wonders whether modern society is founded on a set of principles that lead to less satisfaction through emphasis on maximization rather then satisficing, and whether this would be changed by a shift in emphasis in the approach to economics.

Barry Schwartz and E. F. Schumacher would agree.

However, perennial wisdom would caution that economics is not the most important factor. The real problem is lack of awareness about where genuine happiness is found. It is to be found within oneself as one's true nature and among others as the appreciation of the unity of beings that manifests in the heart as love. What is needed is a "conversion of the heart" based on wisdom. This requires a shift in the level of collective consciousness based "spiritual regeneration" as coming to see things rightly.

Bank Underground — The Blog of the Bank of England
Mind over matter: is scarcity as much about psychology as it is economics?

Dan Nixon, Stakeholder Communication & Strategy Division at the Bank of England.