The assumption of abundance vs. the assumption of scarcity

I think that one of the most important misunderstandings about economic and political matters is not understanding the economic assumptions of abundance vs. scarcity. As an economics major in undergraduate school, one of the first things I learned was that most people go through life with one of two assumptions about economics, an assumption of scarcity or an assumption of abundance.

If you assume abundance, you assume that things like economic resources, wealth and opportunities are abundant and plentiful and are regularly created, or you can assume that resources and opportunities are scarce, limited and difficult to create.

If you believe that resources and opportunities are scarce or limited and you care about people, you may be led to want to see that resources and opportunities are shared equally with all people. This assumption leads people to favor strong governments, socialism over capitalism and to buy into concepts like “equity,” which comes out of Critical Race Theory.

When people with that assumption see that the United States with 4% of the world’s population has 25% of the world’s wealth, they think that the United States must have done something wrong or unfair to get to that point. That causes them to want to criticize the U.S.

If you believe that economic resources, wealth and opportunity are abundant, almost unlimited and are regularly created, with the right attitude, and you care about people, you will favor individual freedoms, capitalism over socialism and the concept of equality of opportunity rather than the concept of equity in outcomes which can only be achieved when some powerful force controls all of the outcomes.

One way to test assumptions is to look at how things turn out in real life.

At an international level, the answer seems really clear. Let’s think back to the end of World War II. The United States was clearly the dominant military power in the world. We could have done what many secular conquerors did in the past. That is, run around the world grabbing wealth from countries that we had defeated in war or that were not as strong as we were. That would certainly have gotten us some wealth.

But we think this was because we had a Christian worldview (called to love our neighbors, even our enemies among other things) and an assumption of abundance; we did something that had never been done by a conqueror before. We went to our conquered enemies, who were certainly weaker than we were, and instead of taking their wealth, we offered to help them build free societies of their own. Not only did we not take their resources away, we actually invested part of our resources (capital) into their countries. If we saw the world as a pie of limited resources, or if the assumption of scarcity was true, that was a really stupid move.

Well, how did that turn out? We know how it turned out. The United States became massively wealthy over the next 50 years, and so did our former enemies. The total resources in the world got a lot bigger at the end of the 50 years than they were when we started. Resources, wealth and opportunities were abundant, not scarce.

And because of our assumption of abundance, we have helped to raise the standard of living for billions of people around the world.

The other winner in World War II was Russia. They acted like other conquerors and oppressed hundreds of millions of people, then imploded, because they operated with bad assumptions about economic reality.

Unfortunately, for scarcity believers who lean toward socialism and equity, they often turn to government to fix their lives. They spend time watching what others are doing and often want someone, like the government, to help them make sure that other people don’t get too much, which might end up limiting their own opportunity to acquire wealth.

Meanwhile Christian and abundance believers turn to God for discernment and guidance to help them identify the unique gifts and talents God has given to them and are off to try to achieve their full potential.

It is extremely incapacitating to base your life on a false economic assumption.