Anupam- The Dreamer

If you have read a little bit of economics, then you must have read about the forces of demand and supply operating in the market economy. This is an amazing concept which says that whenever there is dissonance or disequilibrium between the demand and supply, the market will shift in a direction so as to again create a new equilibrium between the demand and supply. At the same time, there are “extra market forces” which don’t want the equilibrium to be achieved, and instead want to exploit this vulnerable disequilibrium. Although this is primarily an economics concept, but it can be extrapolated to different dimensions in number of areas.

First, let’s explore economics dimension. Take for example, there is a supply shortage in the market regarding sugar/cooking oil/LPG/vegetables. But, the demand is more than the supply. The outcome is simple- the prices of the commodities will soar exorbitantly! In the black market, the price will rise even above the market price! What will the black marketers and hoarders do in this situation? They will try to hoard and sell these things in “black”, so as to make windfall gains. For example, when there is a cylinder crunch and the market price fixed by the government is Rs. 921. But, due to supply side constraints, the price in the black market rose above Rs. 2000. And people in desperate need have to pay even more than the market price, if they want that commodity! So, the extra market forces do profiteering with a premium charged above the market price.

What should be done to control this situation? First option is to increase the supply by measures like crackdown on hoarding agents, increase production of commodities domestically, or import more of such commodities. The second option is to reduce demand by adopting austerity measures, rationing distribution between all sections of society, adopting alternatives commodities which are available more easily etc.

But what happens in a situation where the demand continues to rise incessantly but the supply doesn’t increase proportionately to the demand? Then, this would lead to apocalyptical situation where the market forces will fail someday, and the “extra market forces” will reign supreme! Unfortunately, we are heading in the same situation in a number of areas, the escape from which will become unavoidable. I will prove how.

Take for example, food production and supply in the world. With rising population, living standards, focus on eating exotic foods all year round even in off-season, etc., we have a situation where the demand of food is ever increasing. But, there will be natural limits to supply set by the Mother Nature! We may try to technologically and artificially produce more by use of chemicals and fertilizers, cutting more forests and making them agricultural fields, etc etc, but these measures are not without their own share of negative consequences like food poisoning, soil degradation, greenhouse gas emissions. And for how long can they sustain? I am afraid that not even a few decades!

Another example, is rising demand for energy sources like oil, coal etc. But is their supply unlimited? Obviously not! But demand is increasing as if they are unlimited. There is constant supply pressure. Due to demand-supply gap, the price will continue to increase, till there comes a situation where they become unaffordable to the common masses.

The point is that the demand is like “greed” of human beings. And greed never ends. There can be a limit to our needs, but greed is incessant. Recently, there was a news item telling that people in Delhi NCR are not happy with even Rs. 50 lakh packages! Not because they don’t have things they need, but because they are comparing their lifestyles to the ultra-rich. And there is virtually no limit to the greed. You can be the richest person on the planet and still be unhappy. Because if happiness could come only from money, then king Midas with a golden touch would have been the happiest. But alas! He wasn’t.

And supply constraints are real! With a planet with limited resources at our disposal, the supply can never be unlimited. Some things are renewable and could be generated at a sustained pace over longer timespan, if used judiciously, but other things are not. And it does not matter whether we think about this or not, the supply will reduce and eventually stop one day for many things that we enjoy today. If there is a slight disruption in our lifestyle due to some war/civil war/tariff regulation etc., then we tend to go crazy. Imagine what will happen when there will be large scale disruption of supply someday.

If we don’t continually keep the equilibrium between demand and supply, then we are definitely heading for an apocalypse! The solution to this doesn’t lie in the economy, rather in the balance between our needs and greeds. We would not like ourselves to be counted as the “intelligent homo sapiens” who wrote their own obituary even before death! But, if we do, in retrospect, can we really call ourselves “intelligent”????

Today in World Environment Day! And I hope that we build some consciousness towards this aspect on this occasion. Sooner will be better 🙂