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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    Mike (profile), 15 Nov 2006 @ 6:55pm


    Continually: "the old way (pretending the content is scarce) won't be viable any more"

    Ah, that's different. I'm talking about the old *business model*. That's different than the new business model. But the economics remain the same.

    There is no old way and new way, there is the same way there has always been; people creating, and other people copying those creations illegally, and getting sued for it.

    The thing is, not once in this debate (or anywhere on this site) have I EVER defended the practice of taking or downloading unauthorized content. I agree that it's illegal and I do not support it. The entire point is that the companies and individuals producing the content should learn to embrace new business models so that it wouldn't even be an issue any more.

    It's an important distinction. This debate is not about downloading music. It's entirely from the company side and what they should do.

    Where is that, because I see one example, Italy, and it appears to be a pretty poor one. And, I might add, you pretty much got your clock cleaned in the debate there.

    How did I get my "clock cleaned"? I'm curious, because the evidence still stands. Italy had a thriving pharma industry even with no patents. Do you dispute that?

    The only point that people disagreed with was that them putting patents in place later hurt the pharma industry. The pharma industry did, in fact, do poorly after patents were put in place, but it may or may not have had anything to do with the patents. Either way, however, it disproves your claim that there can be no pharma industry without patents. So, I don't see how I had my "clock cleaned" when the facts still support my position and disprove yours.

    As for other examples, we've highlighted the case of Switzerland and Denmark in the past, both of whom did away with their patent systems for a period of time and discovered it helped their economies grow. There are also other cases in Europe where pharma patents were forbidden and the industries still did well.

    Um, huh? You haven't even come close to "proving" it. You don't even have a workable theory for exactly how many industries would avoid destruction in the IP-less world you envision.

    Well, I have actually written about it here a bunch of times, given out plenty of examples of models where it worked, but as I said in this post, future posts in this series will continue to lay it out. If you look back at the comments on the last post, you'll see I hint at it a great deal as well.

    However, I do take exception to your claim about "how industries would avoid destruction." That completely misses the point. The destruction they face is in NOT DOING ANYTHING. That's the point I'm making. The market gets ripped out from under their feet if they don't change. That's the destruction they're facing.

    You keep saying supply is infinite. Maybe it is infinite once for a single item, but let's see how infinite supply is when no-one is creating any new items anymore because there is no money in it.

    Again, please read what I've written carefully again. I've made it clear that there are many, many business models that can make plenty of money, even if it's not about selling the content directly. I will explain them more in future posts, but to claim I've never discussed them here is flat out false.

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