How decreasing marginal cost of production undermines economics
In history, the marginal cost of production always decreased, but retained some value. This fact has encouraged people to invest in ideas that deliver lower marginal costs and allow larger profits than competitors using older technologies.
But we are already in the digital age of ideas, and rapidly entering the digital age of products.
It takes us time and effort to develop these things, but the marginal cost of production is essentially zero – for everything.
When marginal costs reach zero, we should in theory all be able to enjoy an abundance of everything that has been designed, but we don’t. We live in a system of market values that has evolved from a time when there were real marginal production costs, and our notions of profit and ultimately capital are based upon them.
We are now moving to a reality where marginal costs are approaching zero, and markets serve only to create scarcity, when we could all be enjoying abundance.
Time to move beyond market values.
The alternative is to value self awareness above all.
This would allow us to develop social systems that guaranteed that all individuals would have the basic means of survival and self actualisation. This would mean clean air, clean water, wholesome organic food, clothing, shelter, power, communications, transportation, sanitation, health services free for all.
It would mean real democracy, where local people took on responsibility for caring for the local environment.
All decisions would be taken in a context that valued individual life and liberty as the highest values, and would constrain people only if there was a very high probability of their actions causing real harm to others.
We would acknowledge the reality that we all depend on a healthy environment, and act responsibly toward it accordingly.
We would encourage the development of dangerous technologies in large orbiting space stations – like advanced biotechnology, and some forms of nanotechnology.
What I am saying is that markets and capitalism could arguably be said to have served us well in times of scarcity, as they are an effective means of allocating scarce resources; however, that is changing.
As we develop systems that have a marginal cost of production that is very close to zero, the only thing stopping universal abundance of those goods and services are the incentives of a market based system. That says nothing about greed. It makes no comment on inequality.
I don’t have any particular problem with inequality,
What I have a problem with is a lack of the necessities of life, when there is no technical reason for anyone to experience such a lack.
We used to need most people to be employed to produce the things we all needed. Now we don’t. We can design automated systems that can deliver most good and services, and all essential goods and services, in abundance, to everyone.
What stops us doing so is the incentives of the market place.
Hi Deep Thinker,
Some things are genuinely scarce today, but not many need to be.
We are not short of matter – we live on a big rock of it (called earth).
We are not short of energy – we have a big ball of hydrogen 93 million miles away that is converting some 600 million tons of hydrogen to helium every second, and giving us an energy flux of about 1kW/m2.
We are not short of creative people. Many people really like designing and making stuff (but cannot get paid work today).
You are right that currently most services require labour and are not automated. That does not mean that they could not be automated, it just means that no one has considered it worth doing.
When I was a kid we milked cows by hand in the paddock. Then we started using walk through milking sheds, then herringbone sheds, and now there are sheds without people, where the cows go to the machines when they want to be milked.
We now have self flying aeroplanes, and self driving cars.
Machines have beaten people at chess and jeopardy. Both of these are narrow field AI, and they were predicted impossible by the majority not that many years ago.
When Star Trek came out in the 60s, most people thought the communicators would never happen. Now I suspect most people reading this have smartphones that make the Star Trek communicators look like kinder-garden toys.
We could make machines to do all the repairs and maintenance of other machines (including others like themselves).
Why is healthy food too expensive for the majority?
I spend more on simple organic vegan food for myself than most people earn. We could easily put in place the systems to produce that food, but we don’t. Why? Simply monetary incentives. More profit to be made doing other things. So most people get highly processed addictive foods that are the major component causes of cancer, diabetes and obesity in our society.
A scientific look at incentives is interesting.
Dan Pink gave a great TED talk on the effect of incentives.
Incentives work well with mechanical tasks, but are counter productive with higher order creativity. People working creatively do so best simply because they love to do it. Put them under stress of a prize and they work more slowly and less creatively.
If we put in place the systems that guarantee all people the necessities of life, we will get a great deal of creativity.
I have been in the fortunate position of only “working” about 1 day a week for a decade or more, though I am very busy most waking hours with many voluntary activities in my community. I’m one of the lucky ones who worked hard and had some breaks go my way. I see plenty who worked harder and didn’t have the breaks, and are still living hand to mouth.
My son got his university degree, then spent two years looking for work. When he did eventually get a paid job, he beat over 200 other applicants for the position.
Its tough out there.
It doesn’t need to be tough out there.
It could be great fun out there.
We could have everyone living in safe warm houses, being well fed, with freedom to do whatever they responsibly choose; and we would see far greater creativity than we do from the existing system.
This system works for a very small minority of humanity.
We could easily create a system that works for every human being.
Its not that difficult- really.
It simply cannot be done inside a market paradigm, because there simply is no market value in that level of abundance of anything.
And I really do get how difficult it is to see that from within the paradigm of the market. It might open up for a second then slam shut again as the market based assumption set rejects the challenging ideas.
Our subconscious minds are amazingly complex things.
Hi Deep Thinker
What I am advocating is very definitely not the status quo.
What I am advocating is a public discussion about moving away from the incentives of the market.
I am also very definitely not advocating a centrally controlled socialism.
I am advocating open public investment in research and development.
I am advocating open access to information.
I am advocating major change to “business as usual”.
I am advocating valuing people over money.
I would have life and liberty as the highest values in society.
With environmental values deriving from them.
If the USA had put half the money into developing automated food production systems that it put in to bailing out a fundamentally corrupt finance sector, we would have everyone on the planet with access to abundant healthy food.
There is no way to characterise what I am talking about as status quo.
If you honestly think that, then you have not understood what I am saying!
Hi Deep Thinker
I acknowledge there is some truth in what you say. Things are trending in a general direction Marx predicted.
I live in New Zealand – so have good first hand knowledge of systems and situation here.
Over the last 9 years I have been involved in a local coastal management initiative here called Te Korowai o te tai o Marokura (www.teamkorowai.org.nz) which bought together the various sectors locally interested in the marine environment, Maori (you might call them first nation), conservation, tourism, recreational fisheries, commercial fisheries, education, science and the local regional and nation government agencies, to create a management plan for the coast. It took about 3 years of meetings to stop talking straight past each other, and start to understand what the others were saying. It took another couple of years to establish trust, and then about 4 years hard work to produce an agreed plan.
That last phase should probably have lasted another 2 to 3 years to be most effective, but government forced the process by refusing to further fund engagement with agencies.
Everyone acknowledged the market reality in which we live, and most of the decision making was done on a high set of values.
Another example comes from my personal life.
7 years ago I had a small melanoma on my temple which I took seriously and saw a GP within 3 days of finding it. The GP recommended me to a surgeon for urgent removal, but a mixup at the surgeon’s office had me wait over a month. In that time it grew from a tiny lump about 1/8 inch across to a 3/4 inch wide throbbing bleeding, ulcerated lesion. It was removed, and it was about a year later that I felt a small lump in my cheek. To cut a long story short, 4 and a half years ago after 3 sets of operations I was sent home “palliative care only”.
That was after having been told by the expert on melanoma that “there is nothing known to the medical science that can extend the probability of your survival. You may be dead in 6 weeks, have a 50% chance of living 5 months, and a 2% chance of living 2 years”. That rather got my attention, and I came home determined to put all of my training as a biochemist to good use.
I started searching on the internet for information.
Most of the information I wanted to check was behind pay per view firewalls. I estimated it would have cost me over a million dollars to get the information I wanted to check, and most of it would have been no use to me, but I wouldn’t know that until after checking. I didn’t have a million dollars, so that avenue was gone. (Keep in mind that most of that information was paid for by government grants, in public institutions.)
So that left me searching the information that was publicly available.
Well over 90% of that was either pure opinion without evidential basis, or was deliberate misinformation (usually for financial gain). Unlike most people, I am highly trained in distinguishing the difference.
That process was intensive. I can speed read, and it take intense concentration on my part. I was already in a highly emotionally charged state, and recovering from major surgery (a 6 hour operation removing most of the left side of my face and neck). I persisted.
It seems there is a great deal of evidence that vegan diet and high dose vitamin C can reverse most cancers in most people. And there is a great deal of misinformation from pharmaceutical companies and the American Medical Association on that subject.
I am alive (obviously) and have been tumour free for over 3 years.
The changes required were some of the hardest things I have ever done. All my favourite foods are off my diet. I went cold turkey off sugar, refined foods, meat, fish, coffee, alcohol.
Along this journey, I became acutely aware of amount of misery and destruction created in the pursuit of profit.
I have been a humanist and a sceptic for 50+ years.
I have been a businessman and a capitalist.
And I found it hard to accept just how destructive are the incentives to make money by any means.
It is clear to me that the vast bulk of human activity is directed to making money rather than toward human welfare.
If we did a lot less of most things, and a little more of some things, we would all be much better off.
I like understanding how things work.
I like designing system.
I refuse to do any more than I have, because of the social destruction it is causing.
We have lots more toys, but the levels of anxiety and hopelessness in society are going up.
So I am speaking out.
I am committed to classical liberal values – human life, individual liberty.
I acknowledge that we need to be conscious of the effects of our choices on the environment.
Liberty is not licence to follow every whim. It includes acknowledging our responsibilities for the reasonably foreseeable consequences of our actions on others and on the environment that supports us all.
I acknowledge that we all exist in societies.
We are fundamentally a species of highly cooperative ape.
I acknowledge the reality that it is possible to characterise all major advances in evolution as the emergence of new levels of cooperation with attendant stabilising strategies.
Evolution is not simply about competition, and competition is a major filter in many evolutionary environments.
What I see, is that market based values are very near the end of their social utility.
What I see is that we, as a species, need to be actively supporting the exploration of value sets that will replace market values. That is happening in a sense, and I see great utility in rapidly expanding that activity (ie – funding it in the current model).
Yes – its complex.
I agree it is happening.
It is also true that New Zealand is moving closer to the USA.
And if I want to visit friends in Seattle I will use a 747 rather than waiting for plate tectonics to deliver me.
It is happening, and if we choose to consciously promote the process, it could happen much faster – very much faster – within a decade.
For a host of reasons, that is now becoming an urgent priority.
Will respond to your other questions this evening (NZ time) – need to make use of the daylight I have to do some much need section maintenance (broke my collarbone 3 months ago falling off my mountain bike, so have thigh high grass over half an acre, and lots of gardens in need of TLC, etc…).
It started raining, and I slipped over on a steep slope, so I retreated indoors again. Grass is still tall but the irrigation systems are now working on all the gardens, though I still need to check the orchard systems (I have 4 separate systems, with about 200 nozzles and drippers).
Dogs are fed, washing done, dinner cooked and eaten.
1. About speed reading – Speed reading intrigues me and I have tried to do it at times but I found it very difficult. How long does it take to do effectively? What is the process?
I am not a great speed reader.
I can do it, and I get severe headaches if I do it too long.
There are several ways to speed read.
If you want to do it really fast, then you need to bypass the auditory system and establish direct links between the visual system and the meaning.
A girl that I flatted with at university had been taught to speed read in this fashion by her father who was a highschool teacher. She would read an average novel in about 20 minutes. In the three years we were at university together she read every book in the city’s public library and in the university’s library.
She had very good recall of the facts and the story lines.
She did not appear to have done any more correlation and abstraction than anyone with far less data.
The downside of that technique is that one misses all information related to homophones. Because the auditory system is completely bypassed, those associations simply don’t occur.
I didn’t find it a particularly satisfactory form of information acqusition and have not kept up the practice.
The other technique is to use the auditory system, but to do it on high speed.
This gives a significant increase, up to about 2000 words per minute, but far short of the 4,000 words per minute easily achievable on the visual only method.
I find it more satisfying, in that I get the auditory information encoded in homophones, which can be significant in some texts.
The down side is that I get headaches if I continue for more than about 20 minutes without a break. A five minute break seems to be sufficient to keep the headaches away.
Spent several hundred hours on each technique.
I usually just read at ordinary speed – about 400 words per minute, as it gives me plenty of time to contemplate the relationships between concepts as I read.
2. I would love to hear about your experiences about being told you have only 6 weeks to live. How that made you feel? What occupied your mind? What do you take away from it?
That was quite an experience.
It was a surreal feeling accepting that I could be dead in just a few weeks.
It is one thing to know it intellectually, and it is quite another to have it presented as something that is almost certain to happen.
I accepted it.
I found I wasn’t scared of dying, it was simply that it seemed such a waste, so it is something to be avoided if possible.
That became something of a foundational thought that allowed me to choose to do a lot of things that my emotional systems were telling me were very bad ideas (like giving up chocolate, and alcohol, and coffee, and salt, ….).
It gave me the incentive to spend about 15 hours a day scouring the internet for information. Most sites I could discount as unrelaiable in less than 20 seconds, and some few sites required hours of work to make useful assessments.
I didn’t keep an accurate track of numbers – I’m guessing about 2,000 sites a day rejected, and about 200 getting some examination, and about 20 getting 5 minutes, and about 2 per day getting a couple of hours.
I probably looked at some 40,000 sites over 3 weeks.
What occupied my mind was:
Is there any possibility of credible evidence here?
Is the risk low?
Is the cost low?
Does it correlate with anything else?
What I took out of that process is summarised on my blog site:
3. What are your takeaway lessons for generating effective collaboration among diverse groups?
It can be done.
It takes a lot of time.
It needs a good facilitator.
To date, our process has taken 9 years, with over 500 hours of minuted meetings, and at least as much time outside of meetings reading and preparing.
The focus needs to be on the long term, and the process needs to uncover shared values early.
Locals need to own the process, and not be controlled by central agencies, and they need support from those with the knowledge of science and sociology that might not exist locally.
It requires that all participants acknowledge their own needs, the needs of others, and the needs of the local and wider communities as wholes.
It requires a consensus approach. Everyone has to be able to live with all decisions. And people need to be willing to go back and revisit issues if new information or new perspectives become available.
The process needs to honour the experiences of all members of the community. One may not align with their interpretation and the reality of it being their interpretation needs to be acknowledged.