Bitcoin is obviously scarce. And it seems to be becoming scarcer over time.
But, perhaps due to the current bull run, doubts about both of these propositions are seemingly on the rise among bitcoin skeptics. Criticisms come in a few different flavors. The main one that I have seen argues that bitcoin cannot be scarce because it is highly divisible. Recently, that particular line of reasoning was subject to some particularly colorful discussions on Twitter.
In this article, I want to clarify bitcoin’s scarcity. Let’s start with what the concept of scarcity actually means.
What Is Scarcity?
Scarcity is a core concept within economics. This is attested to by the concept’s frequent appearance in characterizations of the discipline.
Thomas Sowell, for instance, characterizes economics as “the study of the allocation of scarce resources with alternative uses” in his book “Basic Economics.”
Somewhat more elaborately, in the book “Economics,” Paul Samuelson characterizes the discipline as “Economics is the study of how people and society end up choosing, with or without the use of money, to employ scarce productive resources that could have alternative uses, to produce various commodities and distribute them for consumption, now or in the future, among various persons and groups in society. It analyzes the costs and benefits of improving patterns of resource allocation.”
Both Sowell’s and Sameulson’s characterizations borrow from the famous characterization of the discipline made by Lionel Robbins in his “An Essay on the Nature and Significance of Economic Science” in the early twentieth century: “The science which studies human behavior as a relationship between ends and scarce means which have alternative uses.”
The concept of scarcity in all of these characterizations of the economics discipline can be roughly summarized in the following way:
Humans have a variety of wants,…