Capitalism is making way for the age of free
theguardian.com
theguardian.com
Saying that the Internet of things will bring the marginal cost of energy prices to near zero because of big data seems like a stretch to me, as well as some amazing buzzword bingo.
It will accelerate our means to produce virtually anything locally, making the whole chain of production much less vulnerable to disaster. You could build vertical farms driven by technology (eliminating the need for pesticides, or huge land resources) and optimize food production. We'll be able to produce enough of what we need 10x over and with a small ecological foot print.
It's really interesting the things that become possible and economically viable once you have virtually unlimited energy. If there is one reason to keep living and be excited it is to see that day. It will be monumental. It will be bigger than the printing press or the electrical grid and maybe even the advent of the computer.
With unlimited, cheap energy, just imagine what we'll be able to do. Just imagine what the human race has been able to do in the 19th and 20th century with the advent of factories and machines. We built amazing tunnels, skyscrapers and road networks.
Imagine what we could in a different context, with different objectives. What if cleaning up the environment and creating beautiful buildings, parks and infrastructure again became the equivalent of what used to spur the economy on in the 19th and 20th century.
The cool thing is it could potentially happen in the next 30 years. There are so many different promising energy production technologies being worked on right now. It is only a matter of time.
Cheap(er) abundant(er) energy would be great but not transformative.
For example: Tired of landfills? Recycle everything! Tired of plowing your driveway, heat it! Tired of polluted air? Break water down into pure air for your house! etc
I think the trick here is a lot of energy is consumed by heavy industry. An single line in a plant can consume megawatts of power, and refining processes are flat out extravagant in consumption. If this energy was conserved or near free, we would see those savings passed onto lowered cost of goods or in process improvements/expansions. I think that's likely qualitatively different from just the Fed pumping cash into the system, and the impact would be impressive.
Recycling materials is also heavily constrained by energy costs. With so much energy available you can employ recycling techniques that are not viable right now and/or do it at a larger scale.
There are also huge reductions possible when you have abundant energy. Take out costs associated with driving your car, or the cost of cleaning up ongoing pollution, or the costs of extracting energy from scarce resources. Those could all be dramatically reduced once abundant energy becomes a reality.
It will be impactful for people who are not rich (99% of the planet), not having to pay huge chunks of income for energy. After rent costs, the biggest part of my living costs come from energy production (elec, gas, water etc).
Abundant energy also makes a more distributed form of general production more viable. The more communities become self reliant, the less vulnerable the world becomes to localized disasters (political and environmental) and the stronger our ability to help out communities that are suffering. All the costs we are making (money & environmental) for the purpose of transporting goods and resources around the world can be scaled back.
Think about this for a minute, if you have access to cheap abundant energy, you have some source of water and the technology to filter it than you have all the basic necessities to supply basic survival needs to a community. That is huge.
The processes you describe may be energy intensive, but the systems which surround said processes - and the design required to deploy them - are intensive in man hours. Labor is of course a far larger portion of GDP, and lowering the cost of labor would of course have a far more dramatic impact on our lives than would lowering the cost of energy. Prof Hanson has written on this subject if you care to read a more comprehensive academic take on it.
In summation, much of the focus people place upon lowering the cost of energy is misplaced and quite silly when one stops to think about it in an unbiased manner.
I think this tech will be revolutionary, don't get me wrong, but I don't think everything is going to be free nor do I think capitalism is going anywhere fast (at least, not on account of 3d printers!)
No, these things aren't produced for "free". They're replicated for "free". Huge difference.
The first cancer vaccine will "cost" trillions of spent research dollars. The second one? Probably a few cents, if that.
Let's not, especially on this site, forget about how important investors are.
Yeah there are costs involved in setting it all up, but with robotics it comes down to material access to build with. The nice thing about robotics is you can put them into inhospitable areas for about, well forever.
I fully expect there will be a generation not too far off whose primary source of work is creating things just because and not for whom. Oh sure there will be people who do and do for others, but it won't be a real requirement. Just like a small number of people get the real work done in most work environments so will society migrate too.
1/N > 0 for N = (1,∞)
There is a very significant difference between a cost of distribution close to zero vs actually zero. So long as revenue costs are above zero, entrepreneurial firms can find a way to profit enough for food, clothing, and shelter.
There is a basic cost to survival (food/clothing/shelter/healthcare is not, and never will be, free), requiring everyone contribute something which another will consider valuable enough to exchange their work for. Confiscation of "excess" fails as it disincentives increased productivity. So long as people have a motive to either elicit value from their environment, or persuade others to trade that value in a mutually beneficial manner, capitalism will ensure enough productivity to provide for all ... and as marginal costs decrease towards (but not reach!) zero, incentive is there to accelerate productivity to match.
As an example, consider some top-selling video game on the iOS app store. The $100/year fee for the development licence isn't nothing, but compared to the cost of the staff and their equipment, it really might as well be. And yet it's perfectly possible for these things to make money, and in the cases they don't, the zero marginal cost thing has absolutely nothing to do with it. In fact the zero marginal cost is a major draw, for exactly the reasons I give in my first paragraph.
This seems like some an obvious rebuttal that I can only imagine I've missed something...
(Another article from this chap reached the front page a couple of weeks ago - see https://news.ycombinator.com/item?id=7406894 - basically the same thing.)
Incidentally, diminoten points out that replication is free, rather than production. The industries undergoing the cost squeeze which the article specifically mentions (knowledge, news and entertainment) are in the replication business. Therefore, leveraging marginal costs is literally their business model. But I expect the cost of creation will remain more or less constant. In other businesses like manufacturing, this is equivalent to economies of scale, except manufacturing produces the first copy and replicates subsequent copies. So while music corporations might eventually go totally bankrupt, musicians will continue producing music while uploading for free, and I expect manufacturing will continue manufacturing widgets (even if it comes down to a monopoly).
I'm not sure what you mean. Are you referring to a specific technology (like Soylent) or just automating the process of growing, harvesting, and distributing food?
To those ends, the logistics of food production are massively intensive and account for most of the food waste worldwide, so shrinking the logistics chain alone would significantly reduce costs and improve quality. I am thinking in this regard about the containerized growing systems that are starting to enter the market.
1. Politics that prevent innovation, i.e. regulation.
2. Disruptive innovations, i.e. innovations that trade quality for cost have negative view by consumers relative to other industries.
Change those ,and tomorrow we can have a serious reduction in costs, and within a decade or two a huge amount of cost reducing innovation.
BTW 1 and 2 can be partially solved by targeting poor countries with disruptive innovations , letting them improve and prove their quality there, and then transfer them to the 1st world.
And when you think about it, it's rather strange that we are still working the same amount of hours as they did in the early 20th century - given the amount technological progress since.
You would have to bend the rules a bit to get that 600-800 euro's but you could also earn it by working 10-20 hours every week.
Contrast this with Keynesian/demand side economics that countries like Germany and Finland have adopted, where one of the top priorities is per-capita income. In Germany, 50% of a company’s board must be made up of labor, and during downturns the government pays people to go on furloughs while they are still employed (to maintain demand by propping up buying power) . And in Finland, they redistribute the North Sea oil money back into the economy (I realize this is not sustainable, I’m just saying that it’s arguably better than what the US does). Education, maternity leave, healthcare, pretty much everything that contributes to a higher quality of life is given priority over profit. They’ve been at it so long that their customer base is huge and companies are able to invest in long term planning and research. Jobs are plentiful, one can’t hardly even get fired, and the middle class is huge.
Regardless of political ideology, if we look out 10, 20, 30 years, it’s pretty obvious that natural resources are going to go into the toilet and more and more work is going to be done by machines. Communism was able to absorb that by forcing everyone to work unproductive jobs. Socialism seems to be able to absorb it to some degree by focussing on people first. But capitalism.. I don’t know. It’s the economic form of darwinism. If it’s going to survive into the future then I think it’s going to evolve into something unrecognizable. To me it looks like there are two extremes: a Star Trek economy with guaranteed basic incomes or a new gilded age where perhaps 1000 people own all of the wealth on the planet and people’s labor/personal profit is on an ever declining trajectory.
These seem to be contradictory. If natural resources are going to go into the toilet, wouldn't intensive labor be more necessary? What are you using to power and build the machines?
But you bring up a good point, about how if natural resources are in decline, we may be headed back to an agrarian society (which incidentally is not productive enough to feed more than about 1 or 2 billion people, so most of the world would starve). To me, a future in which people are still engaged in manual labor is one where technology has stopped improving or even failed.
For example, I’m shocked that people still pick crops by hand. Some of that is propped up by immigration laws and being able to pay farm workers below minimum wage. Otherwise someone surely would have automated it by now. But then, I could say the same thing about almost any manual labor (somewhere along the line, the dignity of manual labor and the compensation we pay for it diverged, so almost all of it pays less now than we think it does, and is declining).
Finland doesn't border the North Sea, nor does it produce a drop of oil from anywhere else. I'm not quite sure which country you were thinking of there -- Norway quite explicitly doesn't pump the oil money into the local economy but runs a giant fund that invests the proceeds elsewhere, to be used once the oil runs out.
It's also completely absurd to claim that Germany and Finland are somehow optimizing for per-capita income (wtf?), or that profit is the last priority, or that jobs are plentiful, or that one can't even get fired, etc. You appear to have built up some idealized version of Europe that has little to do with reality.
But Germany does have the policy I mentioned, that inject money directly into employees' pockets during downturns rather than firing them, it's called Kurzarbeit:
http://www.aei.org/article/economics/fiscal-policy/us-should...
What Rifkin isn't really analyzing is the role of free. Why do people provide free goods and services? It's usually for the same reason grocery stores and heroine dealers do: to let you test the merchandise, so they can make money if you want more. "Free" is simply a way to lower the friction points for consumers, and draw public attention.
Uh, Marx did ask that question. It's called the tendency of the rate of profit to fall.
The problem with increased productivity and lower marginal costs is that labor, too, becomes less and less valuable. Supply of labor goes up; demand of labor goes down. People are more easily exploited.
This is an age of improvements in computing/communications. That is eventually going to help other areas but for now people seem to be determined to stop that from happening...
Yes, sending an email can be free.
But the infrastructure for the Internet? The article really ignored how many tax payer dollars went into different public institutions to make the Internet a reality, e.g. Big Government and universities.
Which is why their analysis focuses on the marginal cost, which is the cost of producing the next unit (or sending the next piece of information electronically). Even if you amortize infrastructure costs over each piece of information sent, the costs are on their way to near-zero.
Now suppose an analogous situation occurs with food, energy etc. Does this mean we will eventually end up eating pizza every day?
"A new economic paradigm – the collaborative commons – has leaped onto the world stage as a powerful challenger to the capitalist market."
Whereas capitalism as a philosophy is about individual rights and private property, this "new collaborative economy" stinks of failed historical experiments.
Huh? I would think that economic efficiency is when something that is hugely desired gets delivered, meaning that price would be way higher than marginal cost.
And in virtual reality ,marginal cost does go to zero.