The Economics Of Abundance Is Not A Moral Issue

from the continuing-the-series dept

As regular readers know, I've been working on a series of posts discussing the concept of economics when there's a lack of scarcity. My last post on the importance of understanding "zero" in economics (and the fact that many of the problems people have in grasping the subject being due to a misunderstanding of zero) kicked off a really interesting discussion, that has me diverging from my planned third post in the series. Instead, I'd like to focus on one of the key objections people keep coming up with: the idea that this whole concept of the economics of abundance makes no sense because it means the creators of content make no money and they have a right to make money for their creative output.

It makes for a compelling emotional argument, but it is wrong on two major points. First, is the idea that it means creators of content can't make any money. In fact, nothing can be further from the truth. What this series is leading up to is an explanation of how the opportunity for making money is even larger when you understand the economics, and don't rely on directly selling the non-scarce good. However, for now we'll leave that aside and focus on the second point: that there's a right to make money. That's completely false. Economics is not a moral issue. It doesn't care about anyone's "right" to make money from their creative output... and neither should you. The idea that anyone automatically has a right to make money from their creative output is wrong. Everyone has the right to try to make money out of their creative output, but if the market isn't there, then there's no money to be made.

For example, I could draw a picture on a scrap of paper and try to sell it as fine art -- but no one would buy it, because my artistic drawing ability is pretty weak. That is, the market would properly value my drawing at something close to zero because there would be no demand for it. It has nothing to do with my right to make money. Similarly, in a situation where there's a lack of scarcity, the market would properly value something at close to (or equal to) zero because there's infinite supply. It has nothing to do with the moral issue of the creators right to profit from the creative output, and everything to do with the market at hand.

Perhaps part of where this gets confusing is that we have the current situation to fall back on: where content creators have had a good run selling their content. People have trouble then understanding why we would suggest that they should learn how to take the same content they've been selling for money and give it away free. The issue here is that the comparison is wrong. It's not about a choice between being able to sell the content for money or giving it away for free, but a recognition of where the market is going. Historically, the content has been made scarce by connecting it to a specific media (music on CDs, video on tape/DVD, etc.). What the internet is doing is breaking down the barrier of that scarcity, and that's changing the market, pushing out the supply to infinite levels and putting clear pricing pressure on the content. People used to make a living selling buggy whips too, but the market changed, and they couldn't any more.

In other words, it's wrong to look at this as a "choice" between the old way and the new way, but to look at the market trends and recognize that the old way (pretending the content is scarce) won't be viable any more -- and when that happens, those who try to sell their abundant good based on scarcity will find that there is no market and no matter what "right" they have to try to make money, the market won't care. Once you realize that, you can make the argument that content creators should wait until that market shift is complete to make the change, but as we go forward, I'll hopefully make a convincing argument that it actually makes much more sense (and much more money) to begin shifting now, before being forced to shift. But, for that, we'll have to wait a little longer...

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  1. identicon
    C-Delerious, 15 Nov 2006 @ 3:07pm

    Pricing was the problem

    Record companies are/were in the business of selling entertainment, not media. They call[ed] it 'product'. That they controlled secondary uses of the entertainment by the high cost of devices to reproduce the media (not the content) was convenient and that is the convenience they'd like to legislate back into existence (cost passed on to taxpayers via FBI salaries).
    Thus the pay-per-play technologies they love and the market hates.
    The Big Problem to me is not that the cost of reproducing the media is near zero now, but the ubiquity of "music" - you can't go into a store or many other public places without pervasive background music; as a nation we've lost comfort with silence. People prefer even radio commercials to quiet - quiet makes many nervous. With music everywhere, it's hard to think of it having any intrinsic value (oversimplified but the point is there). So who can blame a music publisher for trying to collect cash for an instance of enjoying the music, rather than a piece of plastic that enables that experience?
    We the market are accustomed to paying once for the privilege of enjoying some music whenever we want - that's the deal we've had ever since Edison. The music marketers are trying to change that deal but we are mostly not buying, instead clinging to the original model which has served us well. Why else would we pay $18 for a lump of plastic that cost less than a dollar to make?
    Well now we don't necessarily have to. It's the pricing that's wrong, not the distribution technology. I can make a pretty good copy, packaging and all, of a DVD, but unless I pay myself nothing it's worth more to me to buy it than to copy it, because most DVDs are priced reasonably. CD's have always been priced too high. Now a whole generation has come along with no interest in CDs. Can't think of a way to put that genie back in a bottle.

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