economic scarcity
In the face of economic scarcity, there have been widespread concerns about whether the poor and the rich make different financial decisions. Indeed, there are no enough resources to satisfy the needs of everyone, thus the way individuals make decisions matters a lot in their economic statuses. This nexus has led to the emergence of the concept of opportunity cost, which implies how people make strategic decisions when faced with economic scarcity (Plantinga, Krijnen, Zeelenberg, & Breugelmans, 2018). Therefore, this idea is a direct implication of shortage. People have to make different alternatives when deciding how to invest their finances. While economic scarcity is a primary concern for all people, poverty is not caused by failure to be keen on opportunity cost; instead, by the negative implications of the capitalistic system.
It is highly recognized among economic practitioners that the poor are most likely to suffer from opportunity cost neglect. However, a cording to Plantinga et al. (2018), people are more prone to ignoring implicit alternatives when the decisions involve low-cost items, and the decision-makers have significant slack in their budgets. In effect, individuals are more likely to ignore opportunity costs when the impact of the trade-offs that have to be made are not limited. By this purview, people tend to weigh opportunity cost more often in their decisions when trade-offs are significant (Plantinga et al., 2018). In the words of Frederick et al. (2009, p. 559), “very poor individuals or those on fixed incomes may be keenly aware of opportunity costs in many decisions because their binding budget constraints may frequently necessitate a careful comparison of mutually exclusive options.” This observation, therefore, implies the poor are equally sensitive to opportunity cost like their rich counterparts but are limited in their choices.
The main problem of poverty is not scarcity but the disproportionate impact of capitalism. While this concept is attributed to the great milestones it has made in wealth-generation over several decades, it also contributes to income inequality among individuals and states. This impact has been worsened through the neoliberal process of globalization, which has mainly resulted in the entrenchment of the two different capitalistic classes, the upper and the lower classes, in the international sphere (Panayotakis, 2011). As each group seeks to respond to the realities of economic scarcity, the bourgeoisie tends to use its economic power to exploit the underprivileged. More than ever before, the wealth-owning individuals operate at a global level, in which they exploit the poor to advance their agendas (Panayotakis, 2011). This observation implies the uneven economic impact of the capitalistic system has made poor people susceptible to abuse from the rich. In other words, this form of the financial system has facilitated the worsening of the existing economic scarcity by widening the gap between the haves and the have nots, thus highlighting the importance of economic democracy.
Overall, while the poor have instincts towards opportunity cost, their options are limited because of their economic disadvantage. Though there is a misconception that the underprivileged individuals are suffering economically because of making bad alternative choices, the negative implication of the capitalistic financial system is largely to blame. Even in their impoverished situations, the poor are sensitive to the idea of opportunity cost. By advancing inequalities between people, capitalism has allowed the rich to exploit the poor for personal gains.