<p>Yes there are theories like that. For example, even in standard textbook monopoly model a monopolist would purposefully limit the quantity on the market to maximize profit. A classic historical example is DeBeers diamond monopoly, which before invention on artificial diamonds held monopoly on most diamond mines (see Mankiw Principles of Microeconomics for more detail). Such behavior is not consequence of private ownership per se but rather of market power on the side of the seller.</p>
<p>There is also whole literature on timing of sale, or on auctions of unique items like trading cards where you might see this behavior. Obviously, this is too broad of a subject for SE format, some literature you might want to look at would be <a href="https://scholar.google.com/scholar?hl=en&amp;as_sdt=0%2C5&amp;q=dynamic%20industrial%20organization&amp;btnG=&amp;oq=dynamic%20in" rel="nofollow noreferrer">dynamic industrial organization</a>, or even industrial organization in general or literature on strategic timing of the sale or <a href="https://scholar.google.com/scholar?hl=en&amp;as_sdt=0%2C5&amp;q=auction%20theory&amp;btnG=" rel="nofollow noreferrer">auction theory</a> or <a href="https://scholar.google.com/scholar?hl=en&amp;as_sdt=0%2C5&amp;q=rent%20seeking&amp;btnG=" rel="nofollow noreferrer">rent seeking behavior</a>.</p>
<p>However, many examples you use are invalid examples of this. There are also further inaccuracies in your question. For example;</p>
<ol>
<li><p>This is not artificial scarcity as understood in economics, the goods would already be scarce even if quantity is not artificially limited. Scarcity exists because of the gap between limited resources and virtually unlimited wants. Unless the demand of all individuals can be met at <em>zero</em> price (e.g. air) we can't talk about scarcity not being present.</p>
</li>
<li>
<blockquote>
<p>or how grocery stores and restaurants throw out tons of food at the end of the night, rather than publicly giving it away freely;</p>
</blockquote>
<p>This is not example of this phenomenon. Firms rather throw out food then donate it because they would have to pay taxes on that donated food, if they throw it out its write-off so that is not example of phenomenon you describe. Furthermore, donating would create additional expenses for them as they would have to manage the logistics of the donations. In addition, there are also information problems since many business are worried about being liable in case of lets say food poisoning even though reportedly such lawsuit are not common (see <a href="https://imperfect-foods.medium.com/why-are-businesses-afraid-to-donate-food-15174fb38165" rel="nofollow noreferrer">here</a> and also other reasons in <a href="https://www.nrdc.org/sites/default/files/wasted-food-IP.pdf" rel="nofollow noreferrer">Gunders 2012</a> or <a href="https://www.sciencedirect.com/science/article/pii/S2211335522000444" rel="nofollow noreferrer">Hudak et al 2022</a>). US states and countries that have policies that encourage these actually have firms donating some food instead throwing it out. So this is completely unrelated issue.</p>
</li>
<li>
<blockquote>
<p>I am kind of thinking about how when people do not use money at all - a genuinely non-capitalist society in the sense that there is no capital</p>
</blockquote>
<p>Money <span class="math-container">$\neq$</span> capital. When economists, even heterodox and not generally accepted economists such as Marx, write about capital, they do not generally mean money. Capital is things like houses, factories, tools, computers etc (see Blanchard et al Macroeconomics). People colloquially use the term capital for money because money can be easily converted into lets say factories and other capital, but this is not the way how the term is used in sciences at least not in economics. Getting rid of capital would thus not solve this problem at all. In addition, capitalist society is not defined as a society that uses money, feudal or even socialist countries frequently used money. Capitalism actually does not have proper definition in economics since capitalism was originally a pejorative, it was meant as an critical term/insult because early Marxist economists believed free market/enterprise benefited the capitalist class (again not money holders but lets say factory holders/business owners) and all insults are vague (e.g. define 'stupid'). However, a <a href="https://www.merriam-webster.com/dictionary/capitalism#:%7E:text=%CB%88kap%2Dt%C9%99%2D,competition%20in%20a%20free%20market" rel="nofollow noreferrer">dictionary</a> defines capitalism as a system that  based predominantly on  private ownership of capital goods/property, free trade and free markets, none of which requires money per se to exist.</p>
</li>
<li><p>This phenomenon of artificially limiting quantity has nothing to do with use of money. In a monopoly model with barter the same phenomenon occurs. So getting rid of the money would in no way made difference. Firms with market power such as DeBeers diamond monopoly would still artificially limit quantity produce. Literally, the same model mentioned in first paragraph can be easily redo without any money involved, just having people trading things for other things. In addition, even if getting rid of a money would solve this problem, which it doesn't, barter is so inefficient that it would likely make everyone much worse of then tolerating some firms limiting their production.</p>
<p>The phenomenon you describe is a result of market power (see the above cited textbooks). Hence, if you would like to eliminate such phenomenon you need some solution that erodes market power (e.g. increases competition, increases elasticity of demand etc).</p>
</li>
</ol>

CC BY-SA 4.0
2023-02-24T12:12:37.797Z
2023-02-24T12:26:01.617Z
2023-02-24T12:26:01.617Z
1muflon1
<p>I have been thinking about how hotels and hostels have available rooms / beds, but they don’t give them away for free or a heavily discounted price; or how grocery stores and restaurants throw out tons of food at the end of the night, rather than publicly giving it away freely; and other similar examples.</p>
<p>In general, while there may be numerous different reasons, I am thinking about how very often the amount one pays for something is not at all correlated to some estimate of how much effort it took to make. There are numerous things where the only reason people can demand money in order to access them is because they have control over it. In other words, they are able to give you the ultimatum of paying them or you not getting what you want; so often you end up paying.</p>
<p>I’m sure there are other reasons for this, of course. If people knew the surplus is given away free at the end, they would wait until then, and buy less in the beginning. If a hotel let anyone stay in the empty rooms for free, it might stain the fancy aura of the luxury locale. The cost of an object may be deferred, either in the past or future - maybe one neglects to acknowledge background preparation and investment that made something possible in the first place, so it’s not the case that someone is truly making passive income with zero effort or labor or time investment; and a hotel room has to be cleaned, so it might cost the hotel to let people stay there.</p>
<p>That all makes perfect sense, but I am still really interested in a more broad, general view of just how common it appears to be in the modern world that there is actually a noteworthy surplus of many things - food, space, places to sleep, probably technology and retail goods, possibly some types of medicine, and especially information and information services, and so on - but the exact opposite is the observed result, in that due to the widespread, general need / tendency for economic actors to withhold, a kind of “forcing move” where they know they can make you pay for something they already have right now, ready to be dispensed, so they do so because they want the money - we see a world of “artificial scarcity”, of myriad things that are actually already there, but you’re just not <em>allowed</em> to have them.</p>
<p>I guess I’m wondering what economists have thought about this. I’m sure it reflects something about poverty, or capitalism, where there appears to be a pretty (IMO) regrettable state in the modern world where companies are often apparently incentivized to throw things away and stop people from going through the garbage, literally or metaphorically, than giving away perfectly usable things to people who either want or maybe need them.</p>
<p>I don’t know if there’s a neat angle by which to frame this but you could think of it as the “withholding effect” or the “toll man effect” - maybe a person stopping people and making them pay a toll is a very good general example of this. It encapsulates the simple idea that one of the most fundamental ways to make money is by <em>having</em> something people want; as opposed to <em>doing</em> something they want.</p>
<p>While not wanting to advocate somehow forcing this not to happen, I am more interested if there are alternative theories which try to maybe resolve some of the downsides of this phenomena - unnecessary poverty and a high degree of waste - in a natural way. Like, instead of (I think) a Marxist idea that private property should be made illegal, or something, I was thinking more about anarchism or libertarianism or a moneyless society where the toll-man effect doesn’t happen because there isn’t any reason for everybody to constantly be forcibly withholding everything from each other - it seems like our system pushes everyone to do the same, because everyone else is; you have to be competitive, and also drive a profit, if you want access to those other goods and services you don’t have.</p>
<p>I am kind of thinking about how when people do not use money at all - a genuinely non-capitalist society in the sense that there is no capital - I think there is a chance this effect is drastically reduced; because I think it flattens the value of things relative to one another. It is possible that the perfusion of capitalism in our modern lives has even a profound effect on how we think socially and psychologically, and interact with each other. For example, a piece of chewing gum might be worth about 10 cents, a bottle of fine wine $100. But if you erase those price tags, depending on the situation, you might see those objects - their use value - totally differently. Without quantified worth, there could be a situation where two people might consider it a satisfying trade, given whatever each one happened to want in that moment (arguably - even if one disagrees with this, I think one could create a similar example to make the point).</p>
<p>I guess I am wondering what interesting things people have analyzed about what I am calling “artificial scarcity”, why it seems to be so common, and varying perspectives on what an actually good way to reduce it could be, because in a world of artificial scarcity combined with huge amounts of waste, it seems like so much of what we call “work” is not actually necessary; a waste of time that is not creating real value for the economy, but is a sort of arbitrary, accidental scenario where people are forced into the yoke of the modern economy, whatever jobs it has to offer, just because they need money to be able to survive in a world where otherwise everything will be withheld.</p>
<p>Thank you.</p>

CC BY-SA 4.0
2023-02-24T12:11:29.260Z
These are pretty widely discussed topics, e.g.; see monopoly, rent-seeking, etc.
Giskard
<theory><inequality><marxism><artificial-scarcity>
Is there a theory in economics about how companies have to withhold surplus goods or services for strategic reasons, creating artificial scarcity?
Julius Hamilton
# Is there a theory in economics about how companies have to withhold surplus goods or services for strategic reasons, creating artificial scarcity?

(Asked by: username_0 on 2023-02-23)

I have been thinking about how hotels and hostels have available rooms / beds, but they don’t give them away for free or a heavily discounted price; or how grocery stores and restaurants throw out tons of food at the end of the night, rather than publicly giving it away freely; and other similar examples.

In general, while there may be numerous different reasons, I am thinking about how very often the amount one pays for something is not at all correlated to some estimate of how much effort it took to make. There are numerous things where the only reason people can demand money in order to access them is because they have control over it. In other words, they are able to give you the ultimatum of paying them or you not getting what you want; so often you end up paying.

I’m sure there are other reasons for this, of course. If people knew the surplus is given away free at the end, they would wait until then, and buy less in the beginning. If a hotel let anyone stay in the empty rooms for free, it might stain the fancy aura of the luxury locale. The cost of an object may be deferred, either in the past or future - maybe one neglects to acknowledge background preparation and investment that made something possible in the first place, so it’s not the case that someone is truly making passive income with zero effort or labor or time investment; and a hotel room has to be cleaned, so it might cost the hotel to let people stay there.

That all makes perfect sense, but I am still really interested in a more broad, general view of just how common it appears to be in the modern world that there is actually a noteworthy surplus of many things - food, space, places to sleep, probably technology and retail goods, possibly some types of medicine, and especially information and information services, and so on - but the exact opposite is the observed result, in that due to the widespread, general need / tendency for economic actors to withhold, a kind of “forcing move” where they know they can make you pay for something they already have right now, ready to be dispensed, so they do so because they want the money - we see a world of “artificial scarcity”, of myriad things that are actually already there, but you’re just not *allowed* to have them.

I guess I’m wondering what economists have thought about this. I’m sure it reflects something about poverty, or capitalism, where there appears to be a pretty (IMO) regrettable state in the modern world where companies are often apparently incentivized to throw things away and stop people from going through the garbage, literally or metaphorically, than giving away perfectly usable things to people who either want or maybe need them.

I don’t know if there’s a neat angle by which to frame this but you could think of it as the “withholding effect” or the “toll man effect” - maybe a person stopping people and making them pay a toll is a very good general example of this. It encapsulates the simple idea that one of the most fundamental ways to make money is by *having* something people want; as opposed to *doing* something they want.

While not wanting to advocate somehow forcing this not to happen, I am more interested if there are alternative theories which try to maybe resolve some of the downsides of this phenomena - unnecessary poverty and a high degree of waste - in a natural way. Like, instead of (I think) a Marxist idea that private property should be made illegal, or something, I was thinking more about anarchism or libertarianism or a moneyless society where the toll-man effect doesn’t happen because there isn’t any reason for everybody to constantly be forcibly withholding everything from each other - it seems like our system pushes everyone to do the same, because everyone else is; you have to be competitive, and also drive a profit, if you want access to those other goods and services you don’t have.

I am kind of thinking about how when people do not use money at all - a genuinely non-capitalist society in the sense that there is no capital - I think there is a chance this effect is drastically reduced; because I think it flattens the value of things relative to one another. It is possible that the perfusion of capitalism in our modern lives has even a profound effect on how we think socially and psychologically, and interact with each other. For example, a piece of chewing gum might be worth about 10 cents, a bottle of fine wine $100. But if you erase those price tags, depending on the situation, you might see those objects - their use value - totally differently. Without quantified worth, there could be a situation where two people might consider it a satisfying trade, given whatever each one happened to want in that moment (arguably - even if one disagrees with this, I think one could create a similar example to make the point).

I guess I am wondering what interesting things people have analyzed about what I am calling “artificial scarcity”, why it seems to be so common, and varying perspectives on what an actually good way to reduce it could be, because in a world of artificial scarcity combined with huge amounts of waste, it seems like so much of what we call “work” is not actually necessary; a waste of time that is not creating real value for the economy, but is a sort of arbitrary, accidental scenario where people are forced into the yoke of the modern economy, whatever jobs it has to offer, just because they need money to be able to survive in a world where otherwise everything will be withheld.

Thank you.

**Tags:** theory, inequality, marxism, artificial-scarcity

> **Comments:**
> **username_1**: These are pretty widely discussed topics, e.g.; see monopoly, rent-seeking, etc.  

---

## 1 answers

### Answer by username_2 on 2023-02-24. Score: 1

Yes there are theories like that. For example, even in standard textbook monopoly model a monopolist would purposefully limit the quantity on the market to maximize profit. A classic historical example is DeBeers diamond monopoly, which before invention on artificial diamonds held monopoly on most diamond mines (see Mankiw Principles of Microeconomics for more detail). Such behavior is not consequence of private ownership per se but rather of market power on the side of the seller.

There is also whole literature on timing of sale, or on auctions of unique items like trading cards where you might see this behavior. Obviously, this is too broad of a subject for SE format, some literature you might want to look at would be [dynamic industrial organization](https://scholar.google.com/scholar?hl=en&as_sdt=0%2C5&q=dynamic%20industrial%20organization&btnG=&oq=dynamic%20in), or even industrial organization in general or literature on strategic timing of the sale or [auction theory](https://scholar.google.com/scholar?hl=en&as_sdt=0%2C5&q=auction%20theory&btnG=) or [rent seeking behavior](https://scholar.google.com/scholar?hl=en&as_sdt=0%2C5&q=rent%20seeking&btnG=).

However, many examples you use are invalid examples of this. There are also further inaccuracies in your question. For example;

1. This is not artificial scarcity as understood in economics, the goods would already be scarce even if quantity is not artificially limited. Scarcity exists because of the gap between limited resources and virtually unlimited wants. Unless the demand of all individuals can be met at *zero* price (e.g. air) we can't talk about scarcity not being present.
2. > or how grocery stores and restaurants throw out tons of food at the end of the night, rather than publicly giving it away freely;

   This is not example of this phenomenon. Firms rather throw out food then donate it because they would have to pay taxes on that donated food, if they throw it out its write-off so that is not example of phenomenon you describe. Furthermore, donating would create additional expenses for them as they would have to manage the logistics of the donations. In addition, there are also information problems since many business are worried about being liable in case of lets say food poisoning even though reportedly such lawsuit are not common (see [here](https://imperfect-foods.medium.com/why-are-businesses-afraid-to-donate-food-15174fb38165) and also other reasons in [Gunders 2012](https://www.nrdc.org/sites/default/files/wasted-food-IP.pdf) or [Hudak et al 2022](https://www.sciencedirect.com/science/article/pii/S2211335522000444)). US states and countries that have policies that encourage these actually have firms donating some food instead throwing it out. So this is completely unrelated issue.
3. > I am kind of thinking about how when people do not use money at all - a genuinely non-capitalist society in the sense that there is no capital

   Money $\neq$ capital. When economists, even heterodox and not generally accepted economists such as Marx, write about capital, they do not generally mean money. Capital is things like houses, factories, tools, computers etc (see Blanchard et al Macroeconomics). People colloquially use the term capital for money because money can be easily converted into lets say factories and other capital, but this is not the way how the term is used in sciences at least not in economics. Getting rid of capital would thus not solve this problem at all. In addition, capitalist society is not defined as a society that uses money, feudal or even socialist countries frequently used money. Capitalism actually does not have proper definition in economics since capitalism was originally a pejorative, it was meant as an critical term/insult because early Marxist economists believed free market/enterprise benefited the capitalist class (again not money holders but lets say factory holders/business owners) and all insults are vague (e.g. define 'stupid'). However, a [dictionary](https://www.merriam-webster.com/dictionary/capitalism#:%7E:text=%CB%88kap%2Dt%C9%99%2D,competition%20in%20a%20free%20market) defines capitalism as a system that based predominantly on private ownership of capital goods/property, free trade and free markets, none of which requires money per se to exist.
4. This phenomenon of artificially limiting quantity has nothing to do with use of money. In a monopoly model with barter the same phenomenon occurs. So getting rid of the money would in no way made difference. Firms with market power such as DeBeers diamond monopoly would still artificially limit quantity produce. Literally, the same model mentioned in first paragraph can be easily redo without any money involved, just having people trading things for other things. In addition, even if getting rid of a money would solve this problem, which it doesn't, barter is so inefficient that it would likely make everyone much worse of then tolerating some firms limiting their production.

   The phenomenon you describe is a result of market power (see the above cited textbooks). Hence, if you would like to eliminate such phenomenon you need some solution that erodes market power (e.g. increases competition, increases elasticity of demand etc).


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