> That can't exactly be true, because scarcity is a physical limit.

Indeed, but - human productive capacity has become so vast, that the only way for there to be scarcity is for it to be artificially maintained.

> The natural human instincts are beyond terrible at allocating resources

Disagree, in the sense that a lot of what we consider "natural" is the result of social circumstances, emphasizing or encouraging the expression of some sentiments and tendencies over others. In other words, "natural" is usually rather artificial.