Scarcity Never Dies. It Climbs.

This article, originally published on the author's personal site, has been cross-posted here due to its relevance for individuals who work with words and the systems that make typing more efficient. The author, who has experience in computer systems, likens their career to an education in economics disguised as a technical profession.

Throughout their career, they have observed that every obstacle they faced was due to something being scarce – whether it was money, data, access, reputation, or something else. Whenever a barrier was overcome, the scarcity behind it did not disappear; instead, it shifted to another part of the system, causing the market to reorganize around the new valuable resource before most people even noticed the change.

The author, who is no longer breaking into systems, now builds them instead. They have been working on systems that make skilled labor more affordable in recent years, and they view this story as both a confession and a claim. They argue that technology does not destroy value; instead, it relocates scarcity, and value accumulates at the next binding constraint.

This insight has been rediscovered by economists and technologists multiple times over the past five decades, and the author emphasizes that it is a valuable concept that should be treated as a mechanism rather than a mood.

The author draws historical examples to illustrate this point, such as Napoleon III serving his most esteemed guests on aluminum while lesser guests ate from gold, as aluminum was the more expensive metal at the time. They also reference William Nordhaus' calculations showing the significant decrease in the cost of artificial light over the past two centuries, while the candle remained unchanged.

They explain that when a commodity survives despite being scarce, it is because its pricing power has diminished, and the rent has moved to a different location within the system.

To clarify the concept of value conservation, the author distinguishes it from the way energy is conserved. Value is not a conserved quantity, but rather a mechanism that can be observed, rather than a fixed law. They explain that value lives in differences, similar to how work in physics exists in gradients. When a technology industrializes one gradient, the economy seeks to minimize the remaining differences, moving immediately and without sentiment towards the steepest difference still present.

The article concludes by discussing the current state of abundance, which is not the death of value but rather a survey of where value was previously hidden. The author notes that the flood of technology has reached the execution phase, where competent work, working code, plausible analysis, and even basic image generation are now produced at the cost of electricity.

They argue that the panic and euphoria surrounding this change often overlook the fact that execution is merely the lowest rung of the ladder, and its cost now exposes the more significant factors at play. The two main types of scarcity in this new landscape are capability and exposure, which should not be confused with each other, as they do not exist on the same axis.

The author predicts that technology will continue to climb the capability axis faster than many people feel comfortable with, ultimately leading to the accumulation of value at the exposure axis.