Economics Of Abundance Getting Some Well Deserved Attention

from the about-time dept

It's great to see Chris Anderson getting lots of attention for his recent talk on "the economics of abundance," because it's exactly the type of thing that a lot of people have been discussing for a while -- but still hasn't permeated the mainstream. In fact, it's quite similar to the talk I gave at the Cato Institute back in April in discussing why certain people seemed to have so much trouble grasping the economics of the digital age. Basically, it's the problem that occurs when people focus too hard on the idea that economics is the study of resource allocation in the presence of scarcity. That only makes sense when there's scarcity -- and in digital goods, scarcity doesn't exist.

Dave Hornik has a wonderful post about Anderson's talk while Ross Mayfield is also discussing how he's come to realize that the economics of scarcity doesn't apply digitally. Now, if we stuck with the focus on "scarcity," then I should be upset that these two are basically repeating the "idea" I discussed back in April. Those who keep harping on the importance of "property" and love to say that you can "steal" content might even say that this idea was "stolen." That, obviously, is ridiculous. These are basic ideas that we have all realized is fundamental and a truth of economics. And, it's hardly a new idea (which is why my one quibble with Anderson's own post is his decision to call the idea of the economics of abundance a "radical attack"). Mayfield talks about those who helped him realize it, from Jerry Michalski to Howard Rheingold. In the comments to that post, Julian Bond brings up the ideas of Buckminster Fuller and and Alan Cooper. In my case, the inspiration came from many different people, including the teachings of Alan McAdams (my old mentor and professor) and the writings of Brian Arthur (who focused on "increasing marginal returns" rather than diminishing ones) and even back to Thomas Jefferson, who famously said:
If nature has made any one thing less susceptible than all others of exclusive property, it is the action of the thinking power called an idea, which an individual may exclusively possess as long as he keeps it to himself; but the moment it is divulged, it forces itself into the possession of every one, and the receiver cannot dispossess himself of it. Its peculiar character, too, is that no one possesses the less, because every other possesses the whole of it. He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me.

That ideas should freely spread from one to another over the globe, for the moral and mutual instruction of man, and improvement of his condition, seems to have been peculiarly and benevolently designed by nature, when she made them, like fire, expansible over all space, without lessening their density in any point, and like the air in which we breathe, move, and have our physical being, incapable of confinement or exclusive appropriation. Inventions then cannot, in nature, be a subject of property.

So, no, it's not a new idea at all -- and yet, many people still don't seem to want to understand it. They don't believe that the free market can function with a lack of scarcity. It's understandable why that could make some uncomfortable -- but, it's a fundamental misunderstanding based on this desire to force scarcity where there is none, just so economics can continue to be the study of scarcity. It's this inability to get rid of that scarcity thinking that's holding back a number of developments these days, and the more people who realize this and the more people talking about this, the better. And it is fitting with the theory of abundance. The more abundant this discussion is, the more likely people will grasp it. And, it's especially exciting that someone like Chris Anderson is pitching it, because of his ability to take complex economic ideas and make them easy to understand, while getting people to listen. Hopefully, this is just the beginning of a widespread discussion about this topic.

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  1. icon
    Mike (profile), 26 Oct 2006 @ 4:12pm

    Re: Re: Re: Scarcity vs Abundance

    I must be brain-dead. I can't quite get your point...

    No, not your fault. I did a really bad job explaining... I may write up another, much more detailed post tomorrow trying to go through the basics.

    I'm not sure that I want to buy a million of something because there are an infinite amount, they're cheap and I happen to have the money.

    No, you don't buy a million of something.

    Conversely, I'm not sure that selling cheap is going to be rewarding enough. Perhaps, keeping the idea of "infinite supply" to myself would help my profits? That is if we are talking about something physical.

    It's not about selling cheap. It's about not selling that product at all. It's about recognizing that when the supply side is infinite, your price gets pushed to zero and therefore it doesn't make sense to sell it. Instead, you do just what the supply and demand curve tells you: you give it away for free.

    Now, obviously the first response is how does that help anyone? Lots of ways! First off, you need to recognize that if you don't, someone else will. That's why supply and demand work. As competition increases, you will eventually be forced to price at equilibrium. In other words, a competitor will price it at zero (i.e., give stuff away).

    So, what do you do? You stop looking at the thing that has infinite supply as a good to be sold, and start looking at it as a resource you can use to promote or sell something else (something else that isn't in infinite supply). You flip the equation. Instead of being forced to sell something cheap, you give away something to get people to buy something not so cheap.


    I understand your cost-reduction point, but I've missed how that helps so much. Reducing the cost of doing business is always good, but not at the expense of your profits. What am I not getting?


    As with my answer to Petrea above, as you recognize the lack of scarcity and embrace it, it opens up a ton of other possibilities for ways to make money. It's about creating entirely new markets where none existed before.

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