The Physicist: I have heard they call your profession the dismal science. Is economics really a science?
The Economist: Yes, I think it is...like you, we start with empirical observations, and then use some of the same math that you use in physics.
The Physicist: As you know, in physics we keep looking for fundamental particles as building blocks. What are the fundamental building blocks in economics?
The Economist: I would say scarcity is the basic driving force in economics, and even though economics is only concerned with the effect of scarcity in human affairs, it appears that some of the same concepts can be applied to animals and plants.
The Physicist: Hmm...that's interesting, in the universe of physics there really is no scarcity...there just is...what is... For each interaction or change the total matter and energy is conserved, that is, we end up with the same amount of matter-energy we started with, so scarcity becomes a rather odd idea...
The Economist: Ha...it may be a rather odd idea in big picture physics, but if you go to the store and they are out of bread, then you can understand that scarcity is real...
The Physicist: I agree...I'm also annoyed when the store is out of bread, but the question is, if scarcity is a natural phenomenon, or a characteristic of human manipulation. To introduce an alternative concept, let's use the sun as an example. In the sun the driving force is a conversion process...in this case a conversion from hydrogen to helium. By studying this conversion process, physicists have been able to develop scenarios of steady state periods and end points in the life of the sun.
The Economist: I get a hint of where you are going...using conversion in lieu of scarcity as a driving force...I guess saying there is a scarcity of hydrogen in the sun would not mean much....but humans don't live on the sun.
The Physicist: You're right, but my question would be, are there cases where it make sense to use conversions and the related steady state periods and end points in analyzing economics systems, instead of scarcity and the related concepts of supply, demand, needs, wealth creation, etc? Returning to earth, let's take the case of the lion and the wildebeest. Scarcity appears to offer some answers, that is if wildebeest are scarce then lions will either find another food source or there will be less lions. On the other hand, we could say that nature allows for the conversion of some wildebeest into lions, and then develop information on relative steady state periods, and end points.
The Economist: Well, in this case it appears you can get some interesting answers using either scarcity or conversion, so what's the advantage of one over the other? By the way, don't environmentalists already use this type of analysis?
The Physicist: I would guess environmentalists do something like that. As to the advantage of one over the other...as I mentioned before, in the big picture view of the universe there is no scarcity...there just is...what is. Once we define and accept scarcity then the related characteristics of market systems follow. However, thinking in terms of conversions invites questions like, how much farm land should be converted to urban living space, rain forest to farm land, hydrocarbons to CO2, etc.
The Economist: I see your point...but once we have accepted scarcity as a basic driving force in economics, it is difficult to change. You're not going to get any stock broker to stop thinking in terms of supply and demand. In fact, their answer to how much wealth should be converted to their account, would be, "as much as possible," and a question to a commodity broker about the steady state conversion of corn to pork bellies would be met with a blank stare. However, thinking in terms of conversions may be useful for big picture analysis.
The Physicist: Also, I have heard economists talk about wealth creation and taxes. As mentioned above, you can stir the matter-energy pot, but cannot add or subtract from it, so wealth creation doesn't have much meaning. On the other hand, taxes raises an interesting point. Nature insists on a tax on every conversion no matter how large or small. We call this tax entropy. Matter-energy conservation prevents any tax from taking something out of the system, so the tax in nature is just to mess-up the system. In information systems, this tax often shows up as noise. In the sun, each conversion from hydrogen to helium is accompanied by a decrease in the order of the system...if the sun becomes very disordered, it will cease to give off light (among other things).