Implications of the Third Industrial Revolution | Hacker News Reader

Implications of the Third Industrial Revolution

theeuropean-magazine.com

75 pointsblue111 comments

For a more realistic view on this subject:

http://www.forbes.com/sites/timworstall/2014/03/16/12632/

Ad hoc I would say he is wrong, zero marginal costs are a problem for capitalism. Zero marginal costs imply no labor involved, no wages earned, no prices payed, no profits made. So how are you now going to acquire the capital for the initial investment?

I don't see how you get there from here. If a product requires fixed costs there will be prices paid and profit even if marginal costs are negligible. That's the software industry in a nutshell.

You are looking at it from the wrong side - selling software does not provide an income to anyone. Lets take the nuclear power plant example again. You have high initial costs F building it and then you are trying to produce x units of electricity without additional costs and sell them for a price per unit P. In this scenario you will provide incomes on the order of F to the people building the power plant but later you ask for x * P to pay for the produced electricity and x tends to infinity. So unless you just throw away your perfectly good nuclear power plant at some point or lower the price to zero, you will suck in money you will never hand out again.

The heart of the problem is that at zero marginal costs nobody has to work, nobody has an income, nobody can pay the price. And more realistically having very small but non-zero marginal costs does not really improve the situation either, because it will still only provide an income to very few workers compared to the large group of potential customers.

You still have to pay taxes, at least property and payroll taxes, and comply with laws; and the government can still print money, tax people and corporations, employ people, give/lend money to institutions at low rates, and pass laws and regulations/obligations which cost labor to fulfill. Likewise, people and organizations owe rents to each other, have covenants they need to fulfill. Your nuclear power plant will never be a money black hole in the way that you mean.

But then again the marginal costs are non-zero due to state intervention. But let me change the example, I can probably make a more convincing case with software.

You have developed the perfect office suite and it is used all over the place. No further development needed. You request a daily license fee of $1 per user. You have also bought and payed for a fully automatic solar powered license server on your private island processing credit card payments and handing out new license keys.

Now you have essentially enslaved the people - everyone has to directly or indirectly work a tiny bit harder, produce a tiny bit more goods and services, to pay your license fees and therefore finance your consumption. This is not a big deal if seven billion people have to finance only you, but it is obviously nothing that scales to an entire economy.

Even at $1 per day you will collect $140 million per month assuming 0.1 % of the population is using your office suite every working day. That is enough to also pay for your family and your friends, 14,000 friends at $10,000 per month. It still is a pretty tiny portion of the entire population but we are already in a region where only thousands of such businesses would have a significant impact.

Is the state going away sometime soon? Or it's going to stop intervening?

Good luck with your $1 a day, "enslave the people" software tax. World of Warcraft generates ballpark the numbers you are throwing out there, although they have some server costs and the game is getting a bit long in the tooth. If you want to keep your slaves you probably need programmers and designers continually improving the product, fixing bugs, maintaining compatibility with and fully utilizing OS and HW upgrades; otherwise, competition (both free and paid) will likely overtake you. If you are immune to competition, you could get hit with anti-trust action on three continents.

Your hypothetical 4.67M subscribers surely aren't going to pay $365 a year unless they have an expected payoff in excess of that. When you buy something, does it make it less valuable to you that there are no serfs working hard, endlessly and forever to make it? If that's the case the Beatle's catalog shouldn't still be a multi-billion property, since "the Band" isn't hitting the studio any time soon. Is software less valuable than music, videos, books or other forms of content?

Even if magically this never-updated software somehow keeps generating stable revenue forever without any ongoing costs (marketing? accounting? legal?), it still has a finite Net Present Value, with all its costs in the development phase. Are you suggesting there's a catastrophic limit on the allowed gain (NPV / total cost)? Why are investment bankers allowed unlimited upside on their investments without it posing an existential threat to the economy?

As soon as you earn your nut, that's it, you're done spending money and engaging in new economic activity? You won't invest, start new projects, buy stuff? Start a spaceship company or solve malaria, maybe run for office or fund election campaigns?

>You are looking at it from the wrong side - selling software does not provide an income to anyone.

Sure it does. It provides income to all the software company's shareholders, which they can then use to buy nuclear power.

The existence of zero marginal costs are not a problem for capitalism whatsoever. You're thinking in a very inflexible way. You're trying to take the model of economic activity today and map it with only a few adjustments onto some future world. But this is as foolish as trying to model the economy of 2015 from the example of the economies of 1950, 1850, or 1500.

I think the economics of air is an exemplary point here, worthy of delving deeper into. Throughout human history air has not been a subject of economic activity, precisely because it is free and abundant (and I'm setting aside the discussion of air pollution because it's a more complex subject and not strictly relevant). But despite the fact that air has always been a critical necessity for all human activity, the fact that it has not been the subject of economic activity has not been a hamper to other economic activity, in fact if anything it has been a boon. Internal combustion engines benefit greatly from the free availability of air, for example, to great financial and functional benefit to many.

But what happens in the context of, say, a commercially run colony on Mars? There air is very much not free and must be paid for in some way, either through fees, taxation, or metered use of some sort. But even then that wouldn't change the economic foundation of society in, say, rendering "capitalism" obsolete or not obsolete.

The point being, that what is and is not the subject of economic activity can change, and change drastically, between different contexts, but that doesn't require a grand revision of economic theory. In the future a lot of things that are currently very expensive may become extremely inexpensive or free. But this has happened repeatedly throughout history. What happens is that economic activity moves elsewhere. Today getting enough food to survive is very easy to do, even at a minimum wage. This is very unusual historically. And lots of other things were once tremendously expensive, such as: trans-continental travel, world-wide messaging, books, personal transportation, clothing, durable high quality silverware, and, of course, spices and "exotic" or "rare" fruits such as watermelons and pineapples. At one point pineapples were so exotic, expensive, and sought after that ship captains used to use pineapple motifs for decoration as a status/wealth indicator. Today, of course, you can go to any grocery store in any city in the US and buy one for a few dollars, or get canned pineapple for even cheaper. And so what? All that means is that people aren't working in order to buy pineapples, their working to buy other things.

The economy of 2050 is likely to be very different from today's, but it will still have a lot of familiar characteristics. People will still go to work, people will still exchange goods and services with one another. There will still be a huge amount of economic activity, though it's likely that many of the things we consider valuable today will be nearly valueless then and many things we are not even aware of today are considered valuable.

I think you are handwaving the issue away with »economic activity moves elsewhere«. Now that I have said this I have to handwave myself because I am not sure how to quantify this. I believe there is a much harder limit to the amount of things you can reasonably consume than to the things you can produce. 2500 calories and 3 liters water per day, one house, one car, one phone. On the other hand nothing really limits the amount of things you can produce if you are supported by enough machines.

The obvious consequence is that there is not enough work for everyone and therefore working for money and spending money for goods and services no longer works. And I am pretty sure we are already there in some sectors. We are already producing and throwing away hundreds of million of tons of food every year. We are already replacing mostly okay phones every year or two. Or look at these bullshit jobs, people generating reports all day long and handing them over to the other guy shredding reports all day long. What would the unemployment rate be if we removed all those inefficiencies and all the waste?

This article was a waste of time, it only tells us that the robots will take our jobs just like numerous times before. Technology have always changed the labour landscape and old professions vanish and new one show up.

Petition of the Candle Makers

Ironically, French economist Frederic Bastiat lampooned protectionism back in 1845 when he penned 'Petition of the Candle Makers', mocking the sun's "unfair trade advantage" over candle-makers.

We are suffering from the ruinous competition of a rival who apparently works under conditions so far superior to our own for the production of light that he is flooding the domestic market with it at an incredibly low price; for the moment he appears, our sales cease, all the consumers turn to him, and a branch of French industry whose ramifications are innumerable is all at once reduced to complete stagnation. This rival, which is none other than the sun, is waging war on us so mercilessly we suspect he is being stirred up against us by perfidious Albion (excellent diplomacy nowadays!), particularly because he has for that haughty island a respect that he does not show for us.”

http://globaleconomicanalysis.blogspot.no/2014/11/too-big-to...

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