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
    wire cramped, 15 Nov 2006 @ 2:15pm

    ZERO sum game

    I agree its a difficult issue but I have been in the PC computer industry since its birth(ish) and I knew from the onset that with the *copy* command a few electrons later and wham brand spanking new copy for me!

    The issue never send before is a product that can be replicated with the click rather then setting up an entire production or whatever. In this we see not a lessening of the worth of that product but an override on its ability to be obtained without effort(which means money).

    Now I love me some artists and I dont want them to do this for free as I think that will kill the music world. I want a way for them to be paid for their efforts but I dont want to pay an unfair price for it either. As an aside i think the distribution companies need to die then the artisit sees a ton more profit even at the $0.30/mp3 from certain sites.

    We need to fix this industry as well as others like email. Their are ways to legally get music and prove you own it and it will take buy in from everyone including consumers. It will take some sort of digital check in method that everyone is going to hate like when you play it it verifies your ownership and before you can copy it verifies the device is yours too or you pay to copy to unknown device.

    Now remember anything, including my stupid suggestion, will always get a bad backlash but I wager that the backlash comes from everyone who is trading it illegally not legally. Those who are on the up and up would not mind a verification process if it were made simple and anonymous for them. This is already true for anyone who has a subscription to cable DVR or sattelite etc as the card in the machine identifies the owner and makes them pay for the content (pay per view) on some monthly billing after the fact. It does not stop them from copying it to others but that part could be added to all devices.

    ALL or any suggestion can be defeated by criminals but 'tis the way of the world so we try to stay a step ahead. We copied the game DOOM to almost every computer in the world and likely not many people ever bought it but this company is going strong today!

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