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
    teece, 15 Nov 2006 @ 3:23pm

    Well, Sort of.

    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.

    When you say this, do you realize you are just playing a semantic game?

    Physics is not about rights. An atom bomb is just an application of physics; physics doesn't care if you drop atomic bombs on cities.

    Same thing, just as empty a statement.

    In the end, *everything* is a moral issue. Don't lose sight of that fact.

    I suspect I agree with your overall thrust here (I'm not a big fan of IP at all, DRM in particular), but it is nowhere near as simple as that statement makes it seem.

    You can't simply banish morality and be done with it. It is a fundamentally important decision: is this system moral? One hopes any economic systems are efficient, but they *also* must be moral. There are plenty of economic scenarios that are very immoral. Slavery, for instance, has made perfect economic sense at various times in human history. The simple study of the economies of slavery is not a moral issue, but the slavery itself most certainly is. It's pretty easy to show that a society can prosper economically and allow slavery. But that is in no way a refutation of the immorality of slavery.

    I think you are confusing those two ideas. If one feels there is a moral obligation to make money off of IP, you can't simply banish that belief with a hand-wave invocation to economics. So I think you pretty much have to stick with your point 1, and abandon point 2 altogether. WE decide what we think is right and wrong, NOT the theory of economics. Economics can only shed some light on the workability of our systems of right and wrong as they relate to economic issues.

    Such things as morals and beliefs and rights are NOT going to be anywhere near as neat as the messy soft science of economics. You are correct when you say that economics is not a moral issue, but it has no meaning at all in this context to make that statement.

    A study of the economic theory of something does not abdicate all considerations of morality. If someone thinks the economic system you argue for is immoral, you're going to have to engage that argument. I suspect I might agree your reasons on the lack of immorality here, but you need to be more careful with the reasoning.

    In any event, I am certain the economics of non-scarce items is not even slightly straightforward. Hell, we suck pretty bad at figuring out the economics of scarce items, without throwing a whole new genre into the mix.

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