Let's consider energy of our Sun for an example. The Sun will be able to give us lots of energy for millions of years (and even its annual energy output is enormous), it's practically unlimited energy. We would have practically unlimited supply of solar energy if we built Dyson sphere. Yet there is limited amount of solar energy that we can collect, save and distribute due to our limited technologies, limited resources and other considerations (like we can't just replace all forests with solar panels, it will be huge blow to our ecology). We can't increase supply of solar energy to satisfy global total demand for energy.

Given this situation, can we say that in our current situation solar energy is a scarce resource? And if yes, then can we generalize this conclusion from this particular example to any case where we have limited supply of unlimited resource?

UPDATE: from comments:"you don’t need any other price than zero for this check, you need to check if at price 0 D>S". Now it seems to make sense.

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    $\begingroup$ Solar energy is an unlimited resource; electricity generated from solar energy is a scarce resource. There is unlimited oxygen in the oceans, but not in a form humans can use. There is enough water in the world to clean ourselves and yet families bathe in a single bucket of water. "Resource" is defined by space, form and time. $\endgroup$ – WorldGov Feb 2 '20 at 9:27

Economists view everything people want, strive for, or can’t achieve effortlessly as scarce (you can read this nice article at EconLib). Under such broad definition virtually everything is scarce as anything requires at least some minuscule amounts of effort.

However, if you want it is possible to narrow this definition down and be more specific as in most models a scarcity can be checked and defined by looking whether at zero price there is still excess demand or not - if there is equilibrium then price must be positive, and we would say that this indicates scarcity.

Breathable atmosphere on land and outside extremely polluted city under such definition would not be considered scarce because supply is so high that at 0 price all demand is completely satisfied, but if you need some breathable atmosphere for scuba diving or in those cities where they sell oxygen tanks, or in space breathable atmosphere would be scarce because supply there is not large enough so that the equilibrium price is 0 and all demand is satisfied (there is no excess demand).

Now we can try to apply this to your example of Dyson sphere. First, I doubt this sphere will just pop out into existence and it will require no maintenance. There will be very likely exorbitant fixed and maintenance costs of such structure. Since the energy output will depend on how well the sphere is maintained I doubt it is even feasible to say equilibrium price of energy could ever be driven to zero as the supply depends on marginal costs which won’t be zero in that case.

Second, let’s say that as a thought experiment that marginal costs of operating the sphere are 0, it would still not be enough. Sun gives out a lot of energy approximately (rounding up) $4 (10^{26})$ joules per second or wats. Now that is a large amount of energy but to build a Dyson sphere or Dyson Swarm (a more realistic version of the concept) you have to be at least type II civilization on Kardashev scale and such civilization would also have insatiable lust for more and more energy. Before I became economist I was studying astrophysics. We did not discussed Dyson sphere or swarm much but when it was brought up during break/after class discussions etc. it was always in context of being necessary to satisfy the needs of type II civilization which will probably want to run some ancestor simulations, or for building kugelblitz black holes that could serve as engines for starships or do other stuff that requires unfathomable amounts of energy. So even with output of whole start being collected such civilization would most likely still have such exorbitant demands for energy that it would still be expensive and price would be nowhere near zero, and there would be huge excess demand even at zero price.

This being said assuming that such civilization would only need small fraction of the energy, and Dyson sphere/swarm would have no marginal costs, so everyone’s demand is satisfied (at zero price there is no excess demand) then you could argue energy ceases to be scarce. Also you can use the general definitions and this example to generalize this for any good/service.

  • $\begingroup$ You gave an interesting model for scarcity, but it's based on assumption that there exists market for the good in the first place. But what if there is no market for this good? Maybe nobody is willing to sell it (like nobody is willing to sell Egyptian pyramids), maybe non-market mechanism are used for distribution of said good (like conception/adoption of a child, acquisition of best friends, or maybe there is moneyless planned economy where everything is distributed from "above"), or it's something so rare/unique that you must find/make it yourself. $\endgroup$ – user161005 Feb 2 '20 at 15:23
  • $\begingroup$ @user161005 your question was about scarcity. Unique rare objects are scarce by definition. Also market in economics does not mean necessary free market. A market is a place where supply and demand meets. Planned economies have they own markets they are just not free to set any price they want. You can use exactly the same check in planned economy by asking is there at 0 price set by government excess demand? That can be in principle checked. Also markets (even free markets) do not require any money. Barter market economy is completely possible (inefficient but possible) $\endgroup$ – 1muflon1 Feb 2 '20 at 15:38
  • $\begingroup$ Adoption or similar interactions do not occur at formal markets but you can still model them as markets for purposes of checking scarcity in there(from economic perspective as philosophy or sociology can define scarcity differently). There is still demand and supply in these “non-market” interactions, there is demand for adopting children and supply of children to be adopted - the price is just set artificially to 0 (or whatever is the fee for adoption) again you can check if there is excess demand. Oxygen is also not sold at “formal” markets but I used it as a valid example for this test. $\endgroup$ – 1muflon1 Feb 2 '20 at 15:47
  • $\begingroup$ Also, of course as I mentioned in my answer this check would help you in most situations we want to model/examine scarcity. Also since we are in economic SE let me reemphasize this would be scarcity from economic point of view. Sociology, psychology or moral philosophy might define it differently, and hence such check for scarcity might not be useful in looking at non-economic interactions. $\endgroup$ – 1muflon1 Feb 2 '20 at 15:53
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    $\begingroup$ You can also apply that test for this market. Plug 0 for price and check if D>S. If we plug 0 we see demand is 1 and supply is 0 hence the good is scarce. Regarding the last question you don’t need any other price than zero for this check, you need to check if at price 0 D>S. However, if that’s true then equilibrium price (D=S) must be positive (that’s what I meant in my answer sorry if that confused you). Furthermore, even if good is never sold at 0 which is price you actually have to check - you can always estimate demand function using econometrics. That’s it’s own issue but it’s possible $\endgroup$ – 1muflon1 Feb 2 '20 at 16:46

One way to look at it is that "scarcity" applies when any critical input in the supply chain from raw material to consumer is constrained in such a way that supply cannot be ramped up to meet demand in the short-run. Especially in the context of energy, the supply chain is simplified as "upstream" (resource extraction), "midstream" (refinement and transport), and "downstream" (consumption and value-add).

In your solar example, this is simple - yes, there is essentially limitless energy, but our ability to use that limitless energy is constrained by the relative scarcity of materials needed to design, develop, and deploy solar energy infrastructure. There are upstream (solar panels' efficiency limits and reliance on scarce minerals), midstream (intermittency/grid challenges), and downstream (marketing, political and economic realities) constraints that produce a condition of scarcity.

If your aim is to be specific, you would generally not say that "solar energy" is scarce. But, you might say that "electricity produced from solar energy" is scarce. In a useful conversation, you might choose one of the above challenges to discuss in detail.


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