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 @ 4:28pm

    RE: Jaime's Well, Sort of Response

    No, I don't really think I missed the point, Jaimie.

    It is a simple fact that people today commonly violate software and music copyright, much of which now is (ridiculously) a criminal act.

    Economics has nothing to say about the morality of IP laws. But if one *does* think that IP laws are moral, and that to violate them is immoral, then it is *very* important to address that.

    It may be a horribly inefficient system, but if the laws are not changed, the content producers do not have to change their business model. It's a perfectly valid business model, and they have every right to lobby the government to enforce existing laws. And with those laws in place, they can continue on as they are (it's a very unstable system, to be sure, and one major content producor could disrupt the equilibrium, but seeing as how the media conglomerats operate as a cartel anyway, I don't think that is a concern.

    This is not an issue of the Miller refusing to believe that mills are no longer necessary. The artificial, imposed-by-man nature of IP law changes the nature of the game fundamentally. Not only are there issues like a lack of real scarcity, there is also the issue of the very product itself being plastic and defined by law only.

    I see this all the time: the idea that economics can somehow tell us the right thing to do. It can't. So when someone starts talking about things that are moral, you can't just hand wave the concern away.

    (Yes, you can say "I'm only addressing economic issues" but you're not going to convince anyone that way).

    Mike is simply trying to state facts about what the shift from physical media to digital media means to the economics of the market.

    No, that's not what he said, actually. I think he might have *meant* to say something like that, but he didn't. He said:

    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.

    That's very much an overstatement, and bad rhetoric. (Like I said, I suspect I [more or less] agree with where he's going). I suspect that Mike thinks the economic argument he is going to make will dispel the moral problems, but he needs to be much more clear about that.

    Because you can never take the morality out of the question unless your only concern is an academic study of economics.

    I see this a lot in armchair economics folks, that have an Econ 101 understanding of things (not saying that's Mike). A lot of Americans really believe that modern economics says communism is wrong and capitalism is right. That's complete nonsense. Modern economics says one is more efficient than the other, which is a whole 'nother animal.

    Mike is treading too close to that kind of thinking for my tastes.

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