Sunday, April 17, 2011

Scarcity, Abundance, and the Knowledge Economy. Tightened Up.

Blogger A^3 spent a little time pondering my writings on Intellectual Property and the Knowledge Economy here. I thought I'd offer my response to his post here as well, as I thought it tightened up some of my earlier writings on the subject.

Also, it's a shame to waste that much decent writing in a comment response. Thanks again A^3. My response follows:

Thanks for speaking well of my blog posts. I'm very glad that more and more people are giving thought to these issues.

I think the key point when talking about that which can be meaningfully measured by economics, is that the Supply/Demand curve is based on *scarcity*, and in a world where *scarcity* is mostly artificially induced (via copyright and patent), the system is fighting a losing battle to cram 21st century ideas of production into 20th century framework of capitalism and property. The problem with the 21st century is dealing with *abundance* not *scarcity*, and traditional capitalism is a tool to allocate *scarce* resources in teh most efficient way. It says next to nothing about allocation of resources that are abundant.

In short, what happens to the Supply and Demand curve when Supply becomes infinite? It's not so much that economics falls down, as that it *divides by zero*, as it were.

For some goods, (notably, anything relying on materials in the real world) this will never happen (until we get the Star Trek replicators online, of course). However, we see what happens when the product is divorced from natural scarcity:

When music was distributed on vynyl records, there was next to no issue with copying or "piracy". When it moved to magneteic casette and CD, there started to be grumbling about "bootleggers" or "pirates", but the problem was still mostly well-contained because copies required a phsycial medium, and a decent investment of labor on the part of the copier to make the next copy. In short, marginal cast was still far from zero. Come to the early 21st cenntury, and the Internet changes everything: 1 copy could become thousands in the matter of a mouseclick: and recorded music was no longer scarce. It was abundant.

Thus my "bits vs. atoms" split helps me think about where traditional economics holds up, and where it doesn't in the coming decades.

When asking about "what we can reasonably say about the economy of two or three decades down the line" we should be asking ourselves if that which is "important to us" is still going to be *scarce*. If it is, then traditional economics will probably be quite unchanged, and still quite valuable when talking about them (atoms).

On the other hand, if our explosion of non-rival goods has rendered supply infinite for certain sectors of "production", we can reasonably expect the bottom to fall out of those sectors, at least economically.

Maybe these goods/sectors/services/endeavors get propped up by some other intrinsic motivation to create, or maybe they just go away in time. Perhaps the musician creates recorded music as a side-effect of getting paid to perform live, instead of the other way around. (For that matter, I know a lot of people who make music, and don't get paid for it today).

I agree that we don't fully understand what the next step in economics is over the next quarter-century, but I think we can safely assume that at least for some sectors of production, it's not just "opaque", as you say, but *wholly different* than what has come before. And I believe we can start identifying those sectors now, by identifying how reliant upon "Intellectual Property" and artifical scarcity they are.

Thank you again for given my writing such thoughtful consideration. Much like the examples above, I don't get paid for, so *my* intrinsic motivation for doing it is when I see others enjoying it.



  1. Essentially nothing happens to the supply and demand curve, it's just that the economy shifts from monetarism to a gift economy, or economy of attention. There will always be scarcity (most obviously scarcity of time) and I don't think that money is going away any time soon, but over the next few decades - assuming no major collapses, catastrophes or retrenchments befall humanity - monetarism is likely to become a less important factor in the economy.

    You can see an example of a post-scarcity economy in open source software. Atoms don't follow the same logic as bits, but downward mobility in automation will also mean that surplus value can be generated in a way which to some degree facilitates "wealth without money". This also has consequences for concentrations of political power, and power relationships in general, so I expect that advanced automation of a ubiquitous kind will be resisted by the status quo.

  2. On intrinsic motivation and how a better understanding of it will reshape our socioeconomics, see Dan Pink's talk at the RSA, here:
    "RSA Animate - Drive: The surprising truth about what motivates us"

    You are right on the divide-by-zero errors in mainstream economics. I talked about that in "Post-Scarcity Princeton".

    The way mainstream economists get around that is assuming infinite demand. Then they can divide infinite productivity by infinite demand to balance things out.

    The problem is, as you have pointed out in another entry, people are starting to use their leisure time cheaply through the internet to help others fill their leisure time. See also Malsow's Hierarchy of Needs on the move to self-actualization. And see also "Reduce, Reuse, Recycle" as an enviromental ethic. There is a law of diminishing returns, or even eventually negative returns, on more goods and services.

    And of course a concentration of wealth leads to monetary problems too with having consumer demand, and automation and energy replace a lot of human labor, reinforcing the concentration of wealth to owners of capital. But even if wealth was not being concentrated, demand would probably still not keep up with productivity improvements. See also a humorous short story called "The Midas Plague".

    Put that all together and you get the situation we are in. And it will only get worse until some form of radical change -- like a basic income, or a bigger transition to a gift economy, or better participatory government planning, and/or the wide spread of advanced 3D printing and household robots for subsistence production.