RSA Animate – The Secret Powers of Time

Professor Philip Zimbardo conveys how our individual perspectives of time affect our work, health and well-being. Time influences who we are as a person, how we view relationships and how we act in the world.

The Soul of Economies: The Power of Philosophies to Transform Economic Life by Denise Breton & Christopher Largent ~ Part 2

The Basics of Economic Systems
According to which premise we choose, we define the fundamentals of economic life. Our economic premises and assumptions—whether of scarcity or of anti-scarcity—give rise to basic economic strategies.

Scarcity-based economies build strategies around the possession of material goods, which traditional economic theories categorize into land, labor, and capital. What counts is how much real estate we own, how much money we have, and how many hours we work. Economic strategies involve trading our countables to increase our net value.

The ideal for many, though attained by few, is to own enough land and capital so that we don’t have to sell our labor. In other words, we work to buy back our time from economic society, so that economic worries no longer dictate our choices.

With inflation and the insecurity of modern economies, however, the price of economic freedom goes up, and the period of indenture increases. Philosopher John Locke’s insistence that people possess their own labor becomes an illusion. Instead, we lease our labor from the economy with an option to buy, though we never seem to collect enough assets to complete the purchase. The economy turns into a company town like those of the early 20th century, in which the company—in this case, the economy—owns us, and all we do is get “another day older and deeper in debt.”

The danger with this strategy is that it tends economies toward feudalism. By making freedom cost more, scarcity-economies reduce societies to two classes: the few in power and the many who are economically disenfranchised. Both groups go to their graves burdened by money. Both shortchange themselves because of the economic model.

For example, since the decisions of both rich and poor are limited by fears about scarcity, their talents in other areas go untapped. How many Leonardos, Mozarts, or Einsteins have come and gone undeveloped, because money matters took precedence in their lives? The poor don’t have time for frills such as education, while the privileged often push aside their talents in order to acquire wealth. They get hooked on getting more, long after their needs are met. In scarcity-based economies, money-concerns make it hard for people to pursue their life’s calling. Individual gifts go to waste.

Applying capitalist or socialist terms to such economies doesn’t make them less feudal or less wasteful of human talents. In fact, scarcity-based economies develop precisely the economic imbalances that both Adam Smith and Karl Marx railed against.

Unfortunately, Smith and Marx didn’t challenge the scarcity-premise but focused on different ways of distributing goods. In practice, however, distribution strategies haven’t prevented the economic poles from widening, since they don’t challenge the premise that causes the gap. The root assumption that scarcity rules economies remained unquestioned.

Economies Based On Creativity and Knowledge
If, in contrast to scarcity, economies build on creativity and know-how, they focus less on things and more on how we manage things. Our economic roles shift from possessors to stewards, from consumers to managers. Fixed quantities of things no longer dictate our actions. “Energy and materials are limiting factors,” Boulding writes, “not creative or formative factors.”2 The “limiting factors” pose economic challenges; the “creative or formative factors” meet those challenges.

Because we can be creative whether we own things or not, ownership isn’t the primary concern. Not that we should stop owning what we need to live and work. Historically, as private ownership became possible for more people, it increased economic independence from kings, states, aristocracies, and plutocracies.

But the strategy of owning as much as possible misses the economic mark. The game of Monopoly isn’t a model of how economies work but an analysis of how they fail. The Depression of the ’30s inspired Monopoly’s creator to invent the game to show where inflated ownerships lead. Monopoly ends when one player dominates the board, having caused the rest to go bankrupt. No further exchange can occur when all but one player is broke. The more economies resemble Monopoly, the closer they are to a breakdown. No more game.

By contrast, successful economies keep exchange going, enhancing it wherever possible. The more players participate, the more diverse the system. The stronger and better all the players are, the more each has to offer. Exchange increases. The whole system is enriched.

By establishing a system of exchange, economies link problems with solutions, needs with know-how. What counts isn’t so much the things available—the fixed stock of billiard balls – but the process of creativity and the flow of knowledge. How does the process work?

a) What’s common to all. In the first place, know-how gives everyone equal access to an economy’s main source of wealth. We can all cultivate knowledge and work with it creatively. The system in turn protects what each of us has to offer and then explores ways to enhance this primary resource.

For instance, knowledge-based economies depend on education. Education becomes top priority, even if it means paying people to go to school, as many companies are now doing. What’s more, education isn’t limited to business, math, and the sciences. Creativity blossoms the more we rediscover our home in the realm of ideas. Ideas spark our imagination. They also give us reasons to care—beyond the reason to make money.

Not that making money is wrong, it’s just inadequate to meet today’s economic challenges. The money-reason hasn’t, for instance, made top executives care about the environment, the quality of life, or the welfare of future generations. Yet these factors are central to good household management.

Fortunately, there are disciplines that inspire creativity and caring on wider levels. Religion, philosophy, literature, history, and the arts touch us where balance sheets can’t. By enlarging our minds, these disciplines enlarge our worlds, making us enduringly rich, as Viktor Frankl discovered even in concentration camps. The happy byproduct is that they also extend our economies’ resources. The more we explore our potential on intellectual and spiritual levels, the more insight and creativity we bring to how we manage our households.

With the information age, then, creativity and knowledge provide a basis for economic equality. Knowledge is our common inheritance. There’s plenty of it, and it’s becoming increasingly accessible to us all.

b) What’s different. But complete equality is achieved only when all differences disappear, which is neither possible nor desirable. Each of us cannot know all there is to know in exactly the same way. Neither would we want to. Economic systems thrive on a diversity of interests and talents, otherwise there would be no reason for exchange.

Which is precisely what we have. Each of us cultivates knowledge differently. No two of us have identical ways of digesting the information available. Even if we did, two people can use the same knowledge quite differently. As Plato noted in the Republic, each person focuses the totality of knowledge in a unique way; each citizen expresses the whole republic through unique skills and talents. Or, as in the philosopher G. W. Leibniz’s theory of monads, each person develops an individualized view of the whole—a distinct window on the world.

Diversity is great for economies. The more diverse a system, the more possibilities it includes for developing new levels of order. By increasing order, diverse systems become more flexible. They include more options for responding to stress. If one method doesn’t work, we have a backup, and more backups behind that. By increasing an economy’s power to overcome scarcity, diversity increases an economy’s chances of survival.

Investors are well aware of the uses of diversity. If we spread our risk by putting money in different places, we’re less vulnerable if any one of them fails. Our whole future doesn’t depend on the success of one venture.

Communities also know something about diversity. A one-company town can become a ghost town overnight if the main employer pulls out. The more businesses a community nurtures, the more stable and secure its economy.

Diversity, therefore, constitutes the second fundamental factor of knowledge-based economies.

The diversity that individuals bring to economies gives economies their strength and durability.

The effect of the first two factors – knowledge and diversity – is that economies free everyone to be creative. The fact that we each don’t have to grow our own food, for example, frees us to put our energies elsewhere according to our abilities and interests. By developing our talents, we can offer something to the system that’s uniquely ours.

c) Systems of exchange. But it’s no fun developing individual talents without ways to exchange them. We want to share our abilities as well as to draw on the abilities of others. There’s “a propensity in human nature to exchange,” Adam Smith wrote, a “disposition to barter.”3

Exchange brings economies alive. What’s the use of diversity if we can’t move it around? Economies exist precisely to provide an efficient system through which knowledge can flow. What bees do for flowers, economies do for us. They cross-pollinate our creative abilities, so that something new is always cropping up.

All this cross-pollinating makes economic exchange synergetic. Through exchange, diversity increases diversity. Knowledge, skill, and creativity feed each other to yield possibilities greater than what individuals alone could produce. By exchanging ideas as well as goods and services, economies jump to new levels of prosperity.

By contrast, hoarding, the opposite of exchange, chokes economies. Hoarding works on the fort-premise: acquiring as much as possible provides an illusion of security apart from the system. Even though the system might collapse, at least our private fort will stand.

But the fort-strategy works against economies. The more we hoard, the less exchange occurs and the weaker the entire system becomes. Nor does the strategy achieve the security imagined. If the system fails, the fort hasn’t much future either.

Healthy economies establish security as a function of the whole system. If the system is diverse and exchange ongoing, then the economy is both flexible enough to weather storms and rich enough to provide opportunities for everyone. Security lies in the integral system of exchange, not in fragmenting the system with forts.

d) Mutual benefit. Why should we enter into economic exchange? Because it benefits us to do so. But the benefit isn’t one-sided. Exchange depends on mutual benefit, a concept that Adam Smith adapted from Plato. Either both sides gain, or there’s no exchange. No one freely enters into a relation in which all the benefit goes to the other party.

For this reason, win-win is the only practical and realistic economic strategy. In fact, it’s what we do all the time. Day to day, we don’t demand benefits from others without offering benefits in return. The concept of reciprocity goes to the bone. If others get more than we do, we feel cheated. If we get more than they do, we worry that they feel cheated, in which case we’d lose the chance to do business with them in the future. In the end, we strive for a balance. We want fairness – mutual benefit.4

When reciprocity prevails, economies are better off. Mutual benefit increases prosperity on all sides. It builds trust. If we’re not afraid of being ripped off, we do business freely. Trust makes exchange flow, so that the entire system becomes more secure.

The opposite strategy (win-lose) encourages subtle and blatant forms of stealing, plenty of which are legal. Win-lose strategies follow from the premise of scarcity. After all, given limited resources, we can’t all win. Some people and nations must simply go without (as long as it’s not us). But win-lose strategies don’t build economies. Who agrees to such an arrangement? Once burned, who subjects themselves to it again? Who does business with someone who’s out to bilk us? We’ll do it only if we’re forced to – if we have no other choice.

Because win-lose strategies aren’t a form of mutually beneficial exchange, they aren’t intrinsic to economies. Nor are they practical. Quite the reverse. They foster practices that endanger economies. Without contributing anything in return, win-lose strategies siphon off the prosperity that win-win economies produce without contributing anything in return. They drain economies, until we reach the end of the game.

When win-lose practices dominate an economy, we stop trusting both the economy and each other. We all suffer. When exchange isn’t for mutual benefit, we stop exchanging. The game ends.

But the loss to the economy is even greater. Win-lose strategies give us an excuse to abandon our creativity. We lose sight of our powers as givers and only develop our roles as takers. The economy loses more than what’s siphoned out of it. Once again, individual knowledge and talents go to waste.

Two Systems: Which One?
The premises of scarcity on one hand and of creativity on the other set up two contrasting economic systems.

From the scarcity premise, strategies develop that, first, make limited material resources the starting-point.

Second, what passes for diversity are different uses of labor, which depend on how land and capital are distributed – who owns what. Instead of developing individual talents (which diversity does), mere division of labor traps us in dead-end jobs, determined by our place in the economic hierarchy. Creativity isn’t nurtured but squelched; diversity isn’t increased but diminished.

Third, we manipulate the division of land, labor, and capital to own as much as possible. Acquiring is the name of the game, since hoarding secures our private interests.

Fourth, to increase our ownership of limited resources, we struggle to win out over others. Our gain is another’s loss, and vice versa. The system makes us feel and act like thieves, whether we want to or not. It brings out the lowest passions in us and rewards them.

But does this model really work? In his critique of it, the third-century philosopher Porphyry wrote:

“In the light of unlimited desires, even the greatest wealth is but poverty… No fool is satisfied with what he possesses; he rather mourns what he has not… Many have attained wealth, and yet not found release from their troubles but have exchanged them for greater ones. Wherefore philosophers say that nothing is so necessary as to know thoroughly what is unnecessary… [Otherwise] while the pile of wealth is growing bigger, life is growing wretched.”5

Fortunately, there are other models for economies and other strategies for acting in them. From the premises of knowledge and creativity, a system develops that, first, includes everyone. Creativity belongs to us all. It comes with being human. Moreover, the knowledge we need to be creative is universally available. And it isn’t scarce. As a resource, it’s unlimited in its potential for growth.

Second, diversity increases as we work creatively. The more we diversify our talents, the stronger our economies grow, which frees us to diversify our talents further.

Third, we interact with the economy not to maximize ownership but to exchange the best we have for the best others have. To keep exchange going, we bring it our best.

Fourth, we do this so that all may benefit. Either we all win, or we all lose. To paraphrase John Donne, every loss to a person or nation diminishes us, while every gain increases us. It’s great prose because it reveals a great truth. It’s how economies work as systems—something more than Monopoly players driving each other out of business.

2. Kenneth Boulding, Evolutionary Economics (Beverly Hills and London: Sage Publications, 1981), 45.
3. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (reprint, New York: The Modem Library, 1937), 13, 16.
4. The win-win model is gaining acceptance in the literature appearing on business in bookstores and libraries. For instance, there’s Ross R. Reck and Brian G. Long’s Win-Win Negotiator (NY: Simon & Schuster, 1985) as well as Lucy Beale and Rick Fields’ The Win/Win Way (NY: Harcourt Brace Jovanovich, 1987). In The Strategy of the Dolphin (NY: William Morrow, 1988), Dudley Lynch and Paul L. Kordis buy win-win as the basic goal but warn that the win-win can’t be achieved superficially, otherwise neither side benefits. But then, that’s not real win-win.
5. Porphyry, Porphyry’s Letter to His Wife Marcella Concerning the Life of Philosophy and the Ascent to the Gods, Alice Zimmern, trans. (Grand Rapids: Phanes Press, 1986), 55-56.

This article is the second installment of a four-part series.

Adapted from Denise Breton and Christopher Largent, The Soul of Economies: Spiritual Evolution Goes to the Marketplace, (Idea House)

The Soul of Economies: The Power of Philosophies to Transform Economic Life by Denise Breton & Christopher Largent ~ Part 1

I. Is Greed Good?
The line goes something like this: economies don’t have anything to do with religion or philosophy, because they’re just self-interest in action. Selfish passions run the show. We don’t go to economies for wisdom but for profit. When we get near economies, we don’t think. We just want.

Which is great: wants keep economies going. In the real world, “greed is good”—a line in the movie Wall Street taken from an Ivan Boesky speech. According to the Boesky-view, without the perpetual motion of greed, economies would stagnate. In other words, without wants pushing us, we’d just sit on our tails.

Yet there’s a hitch. Greed starts the race to buy up available goods—the real-life game of Monopoly. Driven by greed, we turn economies into wars for acquisitions. The result? As in the board game, a few win by sending the bill to everyone else. Rents go up, as do taxes, fees, and costs. Economies managed like Monopoly boards eat away at the middle of economic society, until only the poles remain: the super-privileged and the super-poor. Which then is it? Is greed good for economies, or a danger to them?

Expecting economists alone to answer this question is asking too much, because the question involves more than what supply/demand curves can chart. It’s not even a question for economic theory. Greed can take over any system, and it doesn’t matter whether the system is capitalist, communist, or socialist.

In the end, how we deal with greed goes beyond economic theories. It even goes beyond moral issues. The issue is philosophical. Is Boesky’s message to the graduating students correct? Does his philosophy—his map—describe economic reality? If it does, then it won’t cut any ice to say that we shouldn’t be greedy on moral grounds. What works carries the day.

Selfishness vs. “Enlightened Self-interest”
Adam Smith didn’t think Boesky-maps work at all. However much they may describe a certain side of human nature, they don’t get at the heart of economies. Not that Smith wasn’t keenly aware of greed in economies. Writing first as a moral philosopher, Smith wrestled with the question of what regulates the passions, greed in particular. He figured something must check greed; otherwise he didn’t see how civilization could have survived. Only after tackling the philosophical question in his first book did he publish the second, The Wealth of Nations, the work that inaugurated modem economics.

Given his background in moral philosophy as well as his experiences in 18th century Scotland, Smith knew how destructive selfish ambitions could be. Letting greed take over economies wasn’t an option. He had seen “selfish merchants” do this, and he knew it didn’t work. But he was practical as well. The passions can’t be controlled by superficial means. One group telling another what desires they should or shouldn’t have, he argued, won’t work. Wagging fingers alone can’t hold greed in check.

Instead of denying the passions, Smith sought to yoke them to constructive goals. Specifically, his “invisible hand” operated on each individual’s self-interest, which, if sufficiently enlightened, can’t be separated from the interests of the entire economy, that is, the collective good.

Smith appealed to something philosophical, namely, to our ability to think out the consequences of our actions long-term and large-scale. The more we understand economies as whole systems on which we ourselves depend, the less we’re likely to act in ways that weaken them. Our enlightened awareness of how economies work and of our place in them shapes our interests.

Enlightened self-interest and selfishness aren’t, therefore, synonymous. As Smith understood them, they’re opposites. Enlightened self-interest builds economies. Selfishness destroys them, which is what Smith believed monopolistic merchants were doing to Britain. The Wealth of Nations documents many historical disasters which Smith traced to the avarice of powerful merchants. “Say yes to greed” wasn’t his choice.

Instead, he sought to enlighten self-interest out of its selfishness by exposing the dangers inherent in letting wants run loose. For economies to develop, he argued, individuals can’t prosper at the expense of systems, nor can systems thrive at the expense of individuals. Both do well, or both suffer.

Not that Adam Smith had all the solutions. But he put his finger on the problem: economic health can’t be separated from the aspirations of individuals, and these aspirations must go beyond selfish gain.

Greed in the Making
Why, then, do Smith’s interpreters so often turn him on his head, as if he were a champion for money-grubbing? Why do greed and selfishness command such a following in spite of all Smith’s warnings? Not because we’re necessarily that greedy, but because we believe—as Smith’s interpreters claim—that these responses reflect the realities of economic life. In the end, we think either that greed can’t be restrained, or that without it economies would fizzle. The root is philosophical: we take greed and selfishness to be what economies are all about.

In a recent interview, a member of an organized crime family rued the violent methods he claimed he had to use. However unfortunate it maybe, he said, extortion, bribery, and murder reflect economic reality. The price of not conforming to this reality is financial oblivion: a lifetime of drudgery and counting pennies.

His response isn’t as perverted as it sounds. Philosophically speaking, it simply pushes textbook notions of economies to their logical extremes. Not that economic textbooks endorse crime. But they depict economies as governed by scarcity. In the worlds that follow from this premise, unlimited desires compete for finite resources, gain to one person entails loss to another, and greater powers swallow lesser ones—all for the purpose of maximizing profits.

In other words, reducing economic reality to a herd of horses running after one bucket of oats narrows our economic options. Either we adopt desperate methods, as the mobster did, or we slip to the bottom of the economic ladder. Horse sense says that we either eat or starve. We either play Monopoly, or we’re out of the game.

The only thing that keeps this description of economies from collapsing into utter chaos are the institutions and mores of society. But mere conventions crumble under such fierce economic drives. When we’re pressed by circumstances or fear, the mobster’s methods seem worth a try. How else can we survive?

The question is, do economies work this way? Is the mobster’s or even the textbooks’ view the best characterization of economic reality?

II. Rethinking Economies: How do they really work?
To start with, economy refers to how we manage our household, which is also its original Greek meaning—“oiko-nomia”. Economies are our ways of handling the basic needs of human life: food, housing, clothing, transportation, education, cable TV, PCs, and VCRs.

Economies develop systems for meeting these needs. Each person contributes to the system, which then makes these contributions available to everyone else. The more efficient the system, the more time we have to develop other-than-economic talents.

As well managed systems, economies run smoothly. They become virtually invisible in supplying goods and services and then moving them to those who need them. When crises arise, economies handle them. More importantly, well managed economies prevent economic crises.

Economies become flawless servants to something greater, namely, us and our lives. We know we can depend on them to manage the household for us, so we can get on with our real life’s work, whether it happens to make money or not.

A sure sign of bad management is when we don’t have time to think of anything but household problems. Every relationship takes on an economic hue. Meeting basic demands becomes a life consuming activity, until we have no time or energy left for anything else.

Moreover, any disturbance can spell disaster. Losing a job or contracting an illness can wipe us out and put us on the streets. One or two major banks or corporations going bankrupt can trigger a collapse of the financial system. Third-world countries defaulting on loans can bring down the world economy.

But this isn’t invisible management; it’s front-and-center breakdown. When economies don’t help us and only burden us, their reason for existing disappears. Why have them? We’d be better off fending for ourselves.

Turning things around—mastering economies instead of letting them master us—means rethinking what economies are all about. It means evolving our philosophy of economies, which starts with reexamining our premises. What assumptions do we use to manage our households?

1. Which premise should we use: scarcity or creativity?
To manage things, we first take stock of what we have. Early 19th century economists, especially Thomas Malthus and David Ricardo, emphasized what we don’t have. Because the earth is limited, they insisted, its resources must also be limited. We humans, though, have unlimited desires, especially as we multiply our populations into the future. No matter how much we have, they claimed, we always want more. Our hunger won’t be filled. As a result, there’s never enough. Resources are always running out.

To Malthus and Ricardo, the “economic realities” of scarcity and overpopulation seemed so terrifying that wars, famines, and plagues began to sound like natural saviors, delivering the human race from its own shortsightedness. If these are saviors, though, there’s not much left to be saved from. One Malthusian economist can ruin your whole day.

The limits of our knowledge. The premise behind 19th century fears—persisting today—is that economies are closed systems, bound by fixed quantities of material goods. No matter how large economies become, they remain closed, thus limited. Their territory is fixed, which means there’s only a fixed quantity of resources available to us.

But that’s a strange premise. Economies involve not just resources but our management of them. Economist and sociologist Kenneth Boulding, for example, bases economies on “know-how”: knowing how to produce and exchange goods and services. On this premise, economies have to do less with procuring things and more with restructuring and combining them.

Assuming that scarcity of resources limits economies is like assuming that chemical elements limit chemistry, foods limit cooking, or notes limit music. The key lies not in what we have but in what we do with it.

Discoveries in chemistry, for instance, aren’t made by collecting the largest number of elements. The best meals aren’t those with the greatest quantities of food. Nor are the best symphonies those with the most notes. The value of each lies in their ingenious arrangement.

So, too, in economies: arrangement introduces order. Order multiplies the ways we use resources and so functions as an anti-scarcity factor. With order, we can do more with less—not by skimping but by being creative.

Without order, we don’t have access to resources at all. Oil was plentiful to the Comanches and Apaches, even a nuisance when it contaminated the water supply. But they didn’t use it. The ordered arrangement was lacking. As a result, neither the scarcity nor the abundance of oil was a factor in Indian economies.

Similarly, we’re surrounded by abundant energy sources: sun and wind, as well as the earth’s heat, motion, and magnetism. We could even be living on a huge geobattery. But all the energy sources imaginable aren’t of any use to us if we haven’t developed the know-how to tap them.

What we call scarcity, then, actually refers to our own limits—limits either of human knowledge or of its application. Scarcity isn’t an absolute fact, but a changing indicator of what we know and of what we’re doing with our knowledge. Of course natural resources are finite, but that’s not the issue. Economies thrive or fail on our responses to what we have—on how we manage resources.

If, for instance, two people are stranded in the wilderness, the one who knows how to forage will find food in abundance, while the other may starve. To the one who can manage what’s there, resources abound. To the one who lacks that knowledge, they’re scarce.

In the end, scarcity doesn’t describe reality but our perception of reality. If we accept closed-system premises, we regard scarcity as an iron law. But the so-called law describes us, not what’s out there. We create scarcity from the limits of our knowledge and the narrow uses of our creativity. No matter how much scarcity makes us feel trapped in limits, the walls binding us are our own.

Economies or a War?
Whether we reason from scarcity or anti-scarcity makes a huge difference. If scarcity governs economies, then we have to grab as much of the pie as possible or die off. By ignoring knowledge and creativity, the premise of scarcity reduces our role in economies to that of animals: can we gather enough nuts for the winter, or will the other squirrels take them all? Limited resources and unlimited desires meet as opposing forces in economies, making conflict inevitable. The war of each against all begins, giving power to those who grab the most.

But if economies challenge us to manage creatively what we have, then economies can develop away from scarcity. True, a struggle ensues, but not against others in a win/lose battle. The struggle is against ourselves—against the limits we impose on creativity by harboring too narrow a vision.

The Source of Prosperity.
If economies thrive on know-how, neither scarcity nor abundance determines economic health. Prosperity lies elsewhere. Writer-entrepreneur Paul Hawken illustrates this in his book, Growing A Business:

“The major problem affecting businesses,
large and small, is a lack of imagination, not capital.

A ready supply of too much money in startups tends to replace creativity. Companies with money buy solutions by buying consultants, lawyers, clever accountants, publicity agents, marketing studies, and on and on. Companies without money dream and… Small businesses, at least entrepreneurial ones, are formed in order to address problems that money alone cannot solve.”1

Scarcity of capital forces entrepreneurs to overcome obstacles in ways essential to success—through knowledge and creativity. By contrast, as business consultant Tom Peters observes, businesses flounder when they become “fat and flabby.”

The same logic applies to national economies. The more resources a nation has, the more it may drift into complacence. Abundant resources become cheap, leading to mismanagement and waste. No matter how badly the nation uses its resources, sheer abundance can bail it out. By contrast, countries without rich material resources are forced to survive by their wits. They have no choice but to be creative.

But even a richly endowed economy reaches its limits. The abundance dwindles. Sooner or later the nation has to develop real economic sinews: knowledge, imagination, flexibility, and ingenuity, as well as diligence, integrity, skill, and self-discipline. These qualities, not fixed amounts of things, build economic strength.

In short, the premise that scarcity rules economies is an emperor without clothes. It’s a myth. True, the perception of scarcity is useful for driving up prices, just as the perception of jackpots is useful for spreading lotto-fever. The fear of scarcity makes money for those who control the market when everyone else panics.

But economies don’t exist for the purpose of driving up prices or garnering profits. They exist to serve the needs of humanity. In this activity, scarcity, just like risk, poses economic challenges, but it says nothing about how economies meet those challenges. That’s for us to decide.

These two different starting-points reflect two different views of what we assume economies are all about.

1. Paul Hawken, Growing a Business (New York: Simon & Schuster, 1987), 33,35.

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