Scarcity in the theories of value

The chapter focuses on the notion of scarcity as the principle regulating the relative price of commodities. As is well known, scarcity represents the basis of the neoclassical theory of value, having replaced the principle, proper to Classical political economy, that relative prices are determined by difficulty of production. The principle of scarcity is however much older and can be found both in some of Ricardo’s contemporaries and in earlier authors. The debates between Ricardo and his opponents throw some light on the subsequent birth and early evolution of neoclassical theories, and on the way they rescue the old scarcity principle – although in a much more complex theoretical structure as compared to that of its early proponents. The aim of the chapter is especially analytical rather than historical. It tries to address the basic characteristics of the modern theories of scarcity and the main challenges they face as regards the potential non-existence of economically meaningful equilibrium solutions. To this end, attention will be focused on the Walras-Cassel system of general equilibrium, in which the principle of scarcity is applied in its purest form, and on the discussions that took place in the 1930s around the existence of economically meaningful solutions to that system.