BOE Wonders If Scarcity Is Just a Figment of Your ImaginationBy
Once basic needs are met, scarcity might just be subjective
New economic thinking could alter the definition of prosperity
One Bank of England economist reckons the classical economic concept of scarcity could all be in our heads.
Rather than having consumption constrained by the finite resources of our environment, scarcity could be something that is only present at a psychological level, once basic needs have been met, said a post published on the BOE’s Bank Underground blog on Tuesday.
“Scarcity construed as a subjective sense of ‘not having enough’ opens the door to an interesting possibility,” said Dan Nixon, an economist at the BOE, who wrote the post. “At a psychological level, scarcity could be absent entirely. We could call this condition an ‘abundance’ mindset.”
Those who live “in the moment,” take a more mindful approach to life, and optimists are more likely to believe that they have enough; thus do not urge to consume more. By comparison, those who pursue money and possessions report lower well-being, perhaps because their desires are insatiable, the post said.
The Bank of England has been searching for new paradigms and better models to understand economics. Last month, Chief Economist Andy Haldane said that the profession was a “methodological mono-culture” that borrowed too little from other disciplines, citing economists’ dubious record of forecasting economic performance as evidence.
Moving away from traditional models of the rational and self-interested individual could lead to “richer, more realistic economic theories” and “wider debates about what we mean by prosperity and how much is enough,” Nixon said.
In a blog post published in April, Nixon wrote that encouraging a “less is more” perspective based on the Buddhism-rooted concept of mindfulness might help people to reach a level of happiness that consumer-based societies struggle to achieve.