WHEN ZERO MEANS MORE THAN NOTHING

What's your image of heaven? For the sake of discussion, let's get beyond the question of whether heaven exists or not. My image of it is a place where you can have whatever you want, whenever you want it. I have that image because that's how heaven was initially described to me as a child. My image has become more complicated, but it's still a place of no scarcity. Of course, by the time some adult described this nirvana, I was already aware that the world around me was not like that. But the language I needed to explain the real world around me did not come to me until I took my first economics course. There, I was to get a more concrete understanding of what scarcity really meant. It means that whatever one wants – even those things that are emotional or spiritual – are limited. They are limited because we have just so many material resources, so much time, so much physical and emotional energy and no more. These are the things necessary to produce, get, and enjoy those things I want and they are scarce.

So what encourages those who produce what I want to do those things that result in my being able to acquire those things? Well, it turns out that those people have wants also and those wants exist in the same reality of scarcity with which I am confronted. To satisfy those desires, they take advantage of this general reality of scarcity and engage in activities that will result in meeting their individual wants by helping in meeting the needs and wants of others. They don't perform them for nothing. In exchange and under a system of competition, they take on certain costs to provide what goods and/or services will be used in exchange – usually for money, our medium of exchange – so they can have their desires satisfied. It is a way of handling scarcity and in a capitalist economy, this process counts on every one of us acting to advance our personal interests – seeking our own version of heaven as best we can.

The nature of these exchanges changes over time – we don't trade in beaver skins any more nor seek the products of the past such as buggies and whips. And the assumptions upon which the capitalist mode of production and exchange is based seem to be constantly challenged. All of these changes are mostly spurred by changes in technology. While this is not a new thing, up to now, capitalism has been nimble and has been able to accommodate and even take advantage of new technologies.

But let's take a closer look at the process. Producers of goods and/or services, as mentioned above, take on costs. One of the effects of technology is to lower those costs. In the main, that is a good thing to the producer. But costs don't just go lower. You have to initially purchase the use of new technology and this incurs an increase in marginal costs, the extra costs in changing your production process. If I produce a hundred “doo-hickies” for a thousand dollars and I want to produce two hundred units, the costs of producing the extra hundred units are my marginal costs. While the costs of any one doo-hicky might decrease with the new investment, my overall costs go up. According to economic theory, it is rational to continue this process of increase until my marginal costs equal my marginal revenues – which assumes I will sell all those extra doo-hickies I am producing. Actually, capitalism is good at lowering marginal costs – the reasons are beyond the purposes of this posting. But what happens if marginal costs fall so much lower that they approach or are equal to zero? “The inherent dynamism of competitive markets is bringing costs so far down that many goods and services are becoming nearly free, abundant, and no longer subject to market forces.”¹ Free stuff? Are we talking about the onslaught of heaven? Not so fast.

Capitalism is not going away. Scarcity will remain. But there are certain goods and services that are becoming so cheap to produce that the scarcity needed to sustain a market for those goods or services is in jeopardy. Like what, for example? Look at music. We used to buy albums and CDs and then came Napster. The resulting technologies that followed Napster's efforts to provide free music have led to very cheap music products; it's not as free as it used to be, but still … . Another example: I can have access to ten New York Times' articles a month at no charge. I just make a few clicks on this computer I'm using and I can read the lead article for tomorrow's edition of the Times and pay nothing. Similar developments are happening in the book publishing industry. How about people with 3-D printers, recycled plastic, and open-source software making their own products? Then there are education and free online course offerings. All of these developments are the results of new technologies. Of course, these are new developments and we don't know exactly how all of these changes will actually work, but the trend is clear, according to Jeremy Rifkin: we are on the verge of an era of zero marginal costs.

I have expended a lot of key strokes in this blog describing and explaining how we have adopted, as our primary mental construct, the natural rights view of politics. We have adopted this view because, more than for any other reason, it supports and promotes those ideas of social interaction most conducive to the capitalist mode of handling scarcity. Primary in that view is the reliance of the individual seeking his/her interests. But now we have a growing number of goods and services that might not be dependent on capitalist markets. It might not depend on each of us being limited to our own personal interests and being forced to engage in competitive relations – what happens then? Consider the case we are seeing today in many local markets with the growing use of shared access to goods – as opposed to ownership – as with automobiles: “Millions of people are using social media sites, redistribution networks, rentals and cooperatives to share not only cars but also homes, clothes, tools, toys and other items at low or near zero marginal cost.”² The most promising technology is the advent of the “Internet of Things.” This is a network that coordinates the information of billions of sensors distributed throughout our economy such as in residential and commercial buildings and houses, production facilities, service centers, and the like. By 2020, there will be 50 billion of these sensors. We will be able to connect to this network and detect, monitor, and expend resources at the most efficient rates imaginable. The efficiency we are now experiencing in information industries will be possible in all sorts of activities – reaching and accomplishing zero marginal costs.

This trend is dependent not on competition, but on cooperation and coordination. And to arrive at these zero marginal cost possibilities, we need to develop a common infrastructure “in fields that tend to be non-profit and strengthen social infrastructure – education, health care, aiding the poor, environmental restoration, child care and care for the elderly, the promotion of the arts and recreation.”³ And the non-profit segment of the economy is growing in real and relative terms. It grew 25% from 2001 to 2011 whereas profit-making enterprises grew one-half of one percent. Their revenues came from fees (50%), government support (36%), and private donations (14%). As they take over more producing roles, these numbers will change. As it is, they are not parasites on the “real,” profit seeking enterprises as is often charged. They are viable and they are growing in number. Whether the future holds the optimistic picture Rifkin presents, time will tell.

If it is as rosy as all that, will this affect our general views of how we should consider our social world? Can these developments shift our competitive orientation to one of more cooperation and collaboration? Will such change make it necessary to change how we view politics and governance? I believe that such a change is possible and one a federalist should anticipate as a welcome development – not one that will occur overnight, but one that will happen, hopefully, over the next few decades. If and when it does, do not be surprised if civics curricular expectations in our schools might change to accommodate a different economic reality. While it won't be heaven, the future need not hold such scarcity as we now confront.

1Rifkin, J. (2014). The rise of anti-capitalism. The New York Times, March 16, Sunday Review section, p. 4. The concept of zero-marginal costs reported in this posting along with the facts regarding zero marginal costs are derived from this article.

2Ibid.

3Ibid.