Masnick on Post-Scarcity Economics

by on January 19, 2007

I hope every TLF reader is also a Techdirt reader, but in case some of you missed it, I wanted to point out that Mike Masnick is doing a fantastic series on post-scarcity economics. Here’s a taste:

Throw an infinity into the supply of a good and the supply/demand curve is going to toss out a price of zero (sounds familiar, right?). Again, the first assumption is to assume the system is broken and to look for ways to artificially limit supply.

However, the mistake here is to look at the market in a manner that is way too simplified. Markets aren’t just dynamic things that constantly change, but they also impact other markets. Any good that is a component of another good may be a finished good for the seller, but for the buyer it’s a resource that has a cost. The more costly that resource is, the more expensive it is to make that other good. The impact flows throughout the economy. If the inputs get cheaper, that makes the finished goods cheaper, which open up more opportunities for greater economic development. That means that even if you have an infinite good in one market, not all the markets it touches on are also infinite. However, the infinite good suddenly becomes a really useful and cheap resource in all those other markets.

So the trick to embracing infinite goods isn’t in limiting the infinite nature of them, but in rethinking how you view them. Instead of looking at them as goods to sell, look at them as inputs into something else. In other words, rather than thinking of them as a product the market is pressuring you to price at $0, recognize they’re an infinite resource that is available for you to use freely in other products and markets. When looked at that way, the infinite nature of the goods is no longer a problem, but a tremendous resource to be exploited. It almost becomes difficult to believe that people would actively try to limit an infinitely exploitable resource, but they do so because they don’t understand infinity and don’t look at the good as a resource.

Of course, the concern is that information resources only become infinite after the first copy is produced, and that first copy might not be produced absent artificially constrained supply. But I expect Mike will argue that this condition occurs less often than the standard economic model suggests–that people can show surprising ingenuity in finding ways to profit from their intellectual creations even without the benefit of a legal monopoly.

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