Why The Lack Of Scarcity In Economics Is Getting More Important Now
from the thank-you-Mr.-Internet dept
One of the points that a few people have brought up in trying to dismiss this whole explanation is that what we're talking about is nothing new. Of course, that's exactly what we noted in that very first post (linked above). It's not new at all. It's not about a different kind of economics at all. It's simply about applying traditional economics into an area where it's not as easily (or intuitively) understood -- in part because traditionally economics has been taught as being about resource allocation in the presence of scarcity. Economics students aren't taught to look at situations where scarcity is absent, and there's an implicit assumption that economics breaks down in those cases or doesn't apply. However, all that really represents is confusion that results from a "zero" being thrown into the basic economics equations. Once you understand the zero, basic economics applies. So, no, we're not really talking about anything new -- but we are explaining why the economics that many think breaks down at a certain point, actually works fine.
But why is this conversation happening now? Why has it become a bigger issue recently? Some have argued against my posts on this topic by saying that the system and business models we've had in place have worked for the past 200 hundred years, so why tinker now? The reason we tinker now is because the market has changed (and continues to change), and it's removed the scarcity in places where it once existed -- and that's going to put tremendous pressure on existing companies. If they don't change, they'll be wiped out.
But, why has the market changed? That's easy: the rise of computers and the internet. The increasing digitization of so many parts of our lives (moving atoms to bits, in the words of Nicholas Negroponte) has wiped out scarcity in a number of markets -- and it's only just begun. Amazon used the web to wipe out scarcity on book store shelves. Netflix did the same for rental shelves. Those are the obvious examples that have direct comparisons, but there are many that are not direct, and even trickier for traditional industries to deal with. Napster and its followers showed how scarcity in music could be wiped away. YouTube has been doing the same thing for video content. TiVo, by introducing the world to easy time-shifting, has shown how scarcity in the TV schedule can be wiped away. There are thousands of other examples, and more and more are happening every day. It's the type of thing that will impact an awful lot of industries that don't see it coming -- which is why it's important to understand the economics of what happens when scarcity disappears and you're forced to shift your business model.