Saturday, September 8, 2007

Economics of Needs

One of the basic assumptions behind capitalism is that all people inherently seek to maximize their economic power (wealth). In capitalism, the goal of “the market” is to efficiently enable the creation and exchange of wealth, which is manifested as labor or capital (material resources). Translate “wealth” into “the ability to serve one’s needs” and this economic system can be seen as a cultural tool for matching people who want to give something (and have something to give) with those who want to get something (and have something else to give in return).

The “creation” of wealth occurs when someone wants something, but has nothing the person who has it would want in return. There is an incentive for either locating more resources (outside of the system shared by the two people) or reconfiguring existing resources (“adding value”) so that they appear to be something different or can be used in a different way. The ability to create wealth can itself be considered a type of resource to be traded, resulting in a need to create demand (cause people to want something new) that itself can be traded.

It is easy to see how the trade of both supply and demand creation capabilities can drive the exponential growth of an economy. Where natural resources are used, it will be accompanied by an exponential growth in consumption, the principal cause of the current resource crisis (another being the undervaluing of waste as a cost).

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