Evonomics – Markets – again removed.

Why the Economics Of “Me” Can’t Replace the Economics Of “We”

Beyond the market vs. state duality

I agree with aspects of what you say, and not others.

You stated “The economic problem is not markets per se.” which is both true and false, depending on context.

As Hayek and others clearly established, markets are very powerful tools in dealing with scarce resources. The signals available from profit and price (in free markets), can provide a degree of coordination of specialist knowledge that is logically impossible to achieve via any sort of central control. That much is clear, and obvious, and not in any sort of dispute. (And it is now possible to use non-market technologies and near instantaneous communication through distributed networks to achieve the same outcome.)

And as many others have noted, even Adam Smith was clearly aware of the limitations of markets alone, their tendency to monopolies, and the need to balance those tendencies to achieve any sort of justice.
Thorstein Veblen clearly defined many limitations of the logic of markets over a hundred years ago, and as we all do, he built on the work of many of those who came before him.

I am very much in the classical liberal camp, alongside Hayek on many issues.
I see and understand the power of distributed cognition, distributed signalling, and distributed freedom of action and choice. Those things are fundamental, and my confidence in them comes from 50 years of studying evolutionary processes (from the biochemical through to logical and mathematical and strategic levels), and 40 years involvement in business and politics and computer systems design and development.

What very few people seem to comprehend at present is what is clear to me as the central problem of markets, the fact that the value measure they deliver is based in scarcity. The more of something there is, the less it is worth, the less of it there is, the more it is worth.
In the case of things that are naturally scarce, and compete for human labour in development, that is a perfectly sensible system.
The critical issue of our age is automation.
The doubling time on our computational ability is under a year.
Economists are used to thinking in terms of growth around 2% per year, not 120% per year (and growing).

Oxygen in the air is arguably the single most important thing to any human being, yet it has no market value.
Why is that important?
Because it is an example of a limiting case.
In logic, in mathematical induction, limiting cases are important.
It clearly demonstrates that there is not, nor can there be, any market value in delivering universal abundance.
Why is that an issue?
It is an issue because every human being needs to have enough air, water, food, housing, education, sanitation, healthcare, transport and communication to do whatever it is they responsibly choose to do. And that simple list (the base of Abraham Maslow’s pyramid of human needs) needs to be universally abundant if we are any of us, ever, to have a reasonable chance of living a very long time.
None of those things are things which go to infinite demand. They are all quite finite quantities, quite easily deliverable. The demand curves have the form they do, and it doesn’t take very much matter or energy to meet them, universally.
Delivering universal abundance of those things is not a technically difficult issue.
It is, however, an impossible thing for markets.
The reason it is impossible, is because universal abundance has zero market value – as we have already established in the case of air.

So it is clear, in logic, and in practice, that market equilibrium, and human needs, are two very different things.

In the past, when production of most things required human labour, it made sense to ignore this problem, because it wasn’t a practical one at the time. Marx saw it, and wrote about it, but few people picked up on it (their focus was on other aspects).

What we have today, is exponential expansion of our ability to automate any process of production and delivery of goods and services.
Left to its own tendencies, that will drive market values to zero.

Having seen that, and in an attempt to counter it, corporate strategic interests have formulated a counter strategy and are creating barriers to abundance, artificial scarcity – we call them “intellectual property laws”. That is, in logic, all that they are.

In today’s digital world, the cost of copying anything is pennies per gigabyte.
It takes years to read a gigabyte of text.

When I was diagnosed terminal cancer a few years ago, and I wanted access to all research papers, I found that the abstracts did not give me enough information to eliminate papers from my search in about 95% of cases. So on the best prices I could get on subscription databases, it was going to cost me hundreds of dollars to get find each useful paper. I couldn’t afford that (not with tens of thousands of papers invovled). I managed to find enough information to find a cure, but did so in spite of the market system, not because of it.
The market system of IP laws was clearly, in that case, a barrier to knowledge transfer, not an enabler. {If anyone is interested, what I found effectively boils down to, the rate limiting step in immune system function is in most people availability of vitamin C. When fighting disease, most people can make effective use of quantities up to about 100g per day (and in rare cases up to double that). Many cancer cells have a high preference for sugar, so eliminating added sugar from diet buys time. The immune system is involved in removing protein fragments resulting from partial digestion from the bloodstream, so eating proteins as different as possible from our own (plant based rather than animal based foods) increases the probability of the immune system retaining the ability to detect and remove cancer. In the event – going vegan, eliminating added sugar and alcohol, worked for me. I take 2 x 9g doses of vitamin C every day, and have been 5 years clear of tumours since sticking rigidly to that regime.}

Back to markets, and the systemic incentive structures present.

Markets are complex systems, and have evolved very complex functions, and they have some quite simple strategies at their core.

Markets can be very useful tools where things are genuinely scarce, but fail when full automation becomes available.

Human beings need universal abundance of some sets of goods and services.
Markets will never universally satisfy those needs.
We can as a society choose to put sufficient resources in to fully automating the production and distribution of those goods and services. I go further and make the assertion that we have both a moral responsibility, and a personal self interest (in terms of our personal long term security) in doing so.
It will never make sense, in terms of measures of monetary value, to do so.

It is time that all people became clear that market measures of value (money) and human values, are not the same thing, and never can be.

Human beings will always value some things (like air, and natural beauty) that are universally abundant, and therefore have no market value. And actually – there is potentially, an infinite set of such things.

One thing about people is, that the more secure they are, the less energy and material goods they really need. Universal abundance, and universal security, makes good ecological sense, it reduces our total demands on the environment.
Universal delivery of automated tools to act as the two servants needed by all people to allow prosperity for all, is actually a near term realistic deliverable. And making it so will require thinking outside the “box” of market values.

About Ted Howard NZ

Seems like I might be a cancer survivor. Thinking about the systemic incentives within the world we find ourselves in, and how we might adjust them to provide an environment that supports everyone (no exceptions) - see www.tedhowardnz.com/money
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