[p2p-research] Fwd: More on the Supply and Demand Curve

[Michel Bauwens]

Dear Paul,

thanks for this great and insightful contribution, which I have slated for
the 6th.

As you know, I have no design skills <g>, so I'm repeating your appeal for
an illustration on this list. Can you describe very clearly what you need.

If you need more time, the item can be post-dated.

Even more general appeal: I'll be travelling from 4 to 9 july, so really
need extra material for our blog, thanks for considering extra contributions
during that week!

Here a contribution on the same topic of limiting demand, by Roberto
Verzola, our in-house abundance expert:

http://blog.p2pfoundation.net/roberto-verzola-finite-demand-makes-relative-abundance-possible/2009/01/31

Roberto Verzola: Finite demand makes relative abundance
possible<http://blog.p2pfoundation.net/roberto-verzola-finite-demand-makes-relative-abundance-possible/2009/01/31>
[image: photo of Michel Bauwens]Michel Bauwens
31st January 2009

 A very *important contribution to abundance
theory<http://p2pfoundation.net/Abundance_vs._Scarcity>
* by Roberto Verzola<http://rverzola.wordpress.com/2009/01/21/finite-demand-makes-relative-abundance-possible/>
:

*“It is almost by definition that economists predominantly focus on
scarcity, when they define economics as the study of “the most efficient
ways to allocate scarce resources to meet infinite human wants”. If, indeed,
people had infinite wants, then not even all the resources of this finite
world will be enough for a single person.*

*But I contend that consumer demand is not infinite. There exist physical,
physiological, psychological and cultural limits - both actual and potential
- to consumption which can keep individual as well as collective needs and
wants within finite bounds.*

*If demand is finite, then satisfying this demand becomes a real
possibility, and relative abundance is within reach.*

*The following three concepts will help show that demand can remain within
finite bounds:*

*Satiation. Economists define satiation as the consumption level which the
consumer most prefers. *

*The closer he is to this level, writes economist Hal Varian, “the better
off he is in terms of his own preferences”.This satiation level is also
called bliss point. Beyond it, the consumer becomes indifferent towards
getting more of the same good or may even prefer to have less of the good.
While many economists still cling to the hedonist principle that “more is
always preferred to less,” some acknowledge, at least in theory, that a
satiation level exists for some, if not most, goods. Varian, in particular,
says that most goods have a satiation point and that “you can have too much
of nearly anything,” which contradicts the “infinite wants” assertion in
most definitions of economics.*

*Saturation. While satiation may apply more to the psychological attitude of
a consumer not wanting more, saturation is more about the physiological or
physical incapacity of a person to consume more. *

*Beyond the saturation point, one’s body will either become incapable or
involuntarily reject additional servings of food and drinks. One can only
wear so many clothes, or shoes. One can listen to only so many CDs or watch
only so many videos. There are only twenty-four hours a day after all.*

*To reach the brain, a sense stimulus takes around 10-20 milliseconds. To
respond in a conscious way, neuro-scientists have found out, the brain takes
longer - around 500 milliseconds (half a second).2 This suggests that our
brain can only enjoy at most two distinct events every second or about
170,000 every twenty-four hours. For a world with some six billion people,
that adds up to maximum of one quad (i.e., quadrillion) consumption events
per day. That is a huge number, it is true, but finite nevertheless. Most of
us will probably be too saturated long before that point.*

*However, the concept of saturation as distinct from satiation is missing in
consumer theory and most economists still cling to the “infinite wants”
idea.*

*Satisficing. Even before we reach our satiation or saturation levels, we
may already reach our “satisficed” level, in which the quantity we have of a
particular good or bundle of goods already suffices to satisfy, and beyond
which we would only weakly prefer more.*

*The idea that consumers satisfice rather than optimize when fitting their
wants to their budget was first raised by psychologist Herbert Simon, who
subsequently won the Economics Nobel Prize in 1978.*

*Any of these “sat” concepts - certainly all of them, together - are
sufficient to argue that individual and likewise aggregate demand have
finite bounds.*

*This justifies the following assertion: some consumers have a satisficing
level for some goods. We will leave to future research the debate whether
the weak assertion of “some consumers” and “some goods” can, in some
contexts or periods, be changed to a stronger assertion of “some consumers
for all goods”, “all consumers for some goods”, or even “all consumers for
all goods”.*

*The above assertion leads directly to a formal definition of abundance: when
a person can afford enough quantity of a good to reach his/her satisficed
level, then the person enjoys a state of abundance for that good. *

*The concept is not new. Gandhi must have been referring to abundance when
he said, “the Earth has enough for everyone’s need”. This definition also
allows a good’s state of abundance with respect to one person to be
quantified. For instance, if a person’s satisficing level is five pairs of
shoes, but s/he can only afford two pairs, then s/he enjoys a state of
abundance of 40% (two out of five) with respect to shoes. This makes it
simple to relate abundance to its inverse, scarcity: the person needs three
pairs more to reach the five-pair satisficed level. Thus s/he faces a
scarcity level of 60%.*

*Economics usually assumes that business firms maximize their profits by
producing until their marginal cost (the cost of the next additional unit)
equals their marginal revenue (unit price of the good). If, in addition to
this behavioral assumption, we also assume diminishing returns or decreasing
returns to scale, this will eventually result in increasing marginal costs.
Thus business firms will, in theory, reach their satiation level when they
reach their maximum profits.*

*This also means, however, that profitable firms employing technologies with
constant or increasing returns to scale will face constant or decreasing
marginal costs. They will therefore have no profit maximum and likewise no
satiation level. These firms will conform to the theoretical hedonist image
for whom “more is always preferred to less”, and whose desire to purchase is
limited only by their budget and nothing more. They will also try to keep
increasing their scale of operations, as they go after higher and higher
profits - making them an engine of globalization. Here is a possible answer,
by the way, to what some economists consider a mystery, that “neoclassical
theory has no full explanation of why firms grow at all, nor why it is that
the typical pattern of the growth rates of firms seems to lead inexorably
towards persistently increasing aggregate business concentration.”*

6 notes and references available
here<http://rverzola.wordpress.com/2009/01/21/finite-demand-makes-relative-abundance-possible/>
.


On Wed, Jul 1, 2009 at 7:53 PM, Paul D. Fernhout <
pdfernhout at kurtz-fernhout.com> wrote:

> Michel Bauwens cites Andy Robinson as saying:
>
>> I think on close examination the capitalist/libertarian types don't
>>> actually expect capitalism to realise "abundance" as such, since they
>>> assume
>>> insatiability of desires and constant emergence of new marginal utilities
>>> generating preferences, which ensure that scarcity is part of the "human
>>> condition".
>>>
>>
> I posted the below to the Open Manufacturing list, but I am forwarding it
> to the P2P research list with some prefacing notes because I feel this
> analysis gets at the core of the difference in sentiment from classical
> capitalism and peer production (as well as issues related to a gift economy
> and a basic income). Essentially, I am trying to show that a specific key
> assumption of macroeconomics (infinite demand for consumer goods and
> services) is flawed, and to consider the consequences of assuming limited
> demand.
>
> Classical macroeconomics assumes demand for consumer goods and services is
> unlimited (infinite), and so it makes sense to automate the production of
> these goods in centralized factories to the point where they are produced as
> cheaply as possible (or to redesign them to that end), even if the
> consequence is unemployment from automation and centralization and redesign,
> since (the theory goes) the unemployed will be able get jobs in other
> centralized factories producing other consumer goods and services to meet
> the assumed never ending infinite demand for more stuff and services.
> Essentially, infinite demand means infinite jobs. Also, based on the
> thinking that flows from this assumption, there is no need for a basic
> income, because there will always be good jobs producing goods and services,
> even if there may be some temporary discomfort while the unemployed search
> or new jobs in new industries making new goods and services (thus, maybe a
> little need for temporary unemployment insurance). The Supply and Demand
> Curve, at the core of such classical economic thinking, reflects this
> assumption of infinite demand by the asymptotic tail going to the left
> approaching but never touching the X-axis. The theory goes that each
> commodity is like this, and when you add up all these microeconomic curves
> for an infinite demand by people for each product if it was only cheap
> enough, you get a macroeconomic curve for our society that is the same shape
> reflecting an infinite demand for all products. It is easy to see limited
> demand for any specific good on a microeconomic level (my free iPhone
> example below, showing eventual market saturation), but the macroeconomic
> implications are easily handwaved away for any specific produce, even as the
> big curve depends on adding up the little curves -- essentially, there is
> some slight of hand here by mainstream economists, where the sum of
> macroeconomic demand is somehow greater than the microeconomic parts. :-)
>
> However, if you instead assume limited demand (or, at least, demand growing
> more slowly than productivity, which has essentially the same effects) for
> all products added over all of an emotionally healthy society, where that
> tail of the curve on the Supply and Demand graph touches the X-axis at some
> point of material saturation (or service saturation) the macroeconomic
> implications are very different from classical economics. If that was true,
> that the curve touches the X-axis, then there would *not* be an infinite
> demand for goods and services, and so there would not be an infinite number
> of jobs as productivity increases so less people can produce more goods. So,
> rising productivity (given a stable population) would mean rising
> unemployment, either directly by layoffs or indirectly by "jobless
> recoveries" as we have already experienced in the USA. There would be no
> classical way for these unemployed people to get jobs, because there would
> be no demand for more goods and services beyond what were already being
> produced by other people augmented by machinery. And, with exponentially
> increasing technological capacity, including the development of ever more
> human-like robots, this jobs situation will only get worse from here on, as
> Marshall Brain talks about in "Robotic Nation" and "Manna".
>
> There are at least four possible interpretations of the implications of
> limited demand (beyond mass unemployment). These interpretations, or paths
> of future development for our global society, are not necessarily mutually
> exclusive, although our society may tend more towards one depending on
> social movements.
>
> A first interpretation is that there should then be a basic income, so
> everyone can have access to this productivity of goods and services by the
> few with jobs in a society. This is point made in the Triple Revolution
> memorandum in 1964, as well as Marshall Brain's Manna. For decades, there
> have been social movements towards this end; related laws were passed by the
> US House of Representatives (but no the Senate) during the Nixon
> administration, and there are several other historic and ongoing examples of
> this (like Canada, the Netherlands, Brazil, Namibia, and South Africa).
>
> A second interpretation is that, at some point, the few can produce so much
> for the many, that it is easy to find a few who will produce just because
> they enjoy producing or do it because they want the results themselves, and
> thus we can have a gift economy. Debian GNU/Linux is a good example here,
> with a few hundred core maintainers providing free software used by a few
> hundred million people every day (including through Google searches). This
> is an example of a million-fold increase in value, with a few people mainly
> producing software for themselves but making possible a vast digital
> abundance of free and open source software and content due to extremely
> cheap (essentially free) duplication costs. We are just starting to see the
> beginnings of that in the physical world too, like with RepRap, CupCake CNC,
> Fab at Home, and other 3D printers under free licenses. This is a digital
> side of peer production.
>
> The third intepretation is that at some point of productivity (probably
> already reached with CNC machines, 3D printers, agricultural crop diversity,
> permaculture, and the internet), it makes more sense to focus on the
> enjoyability of the work as play (Bob Black's point in "The Abolition of
> Work") as well as to emphasize the social nature of the work, even if
> productivity is not maximized (thus, leading to a reorganization of social
> relationships towards some joyful goal). E.F. Schumacher talks about this in
> "Buddhist Economics".  An example is various sorts of physical peer
> production done for a medium of exchange or barter, so, a local bicycle
> repair shop participating in a local currency system is an example of that,
> as would be all the other local community businesses also participating in
> this local economy. This physical side of peer production has different
> rules than the digital side because of high duplication and materials costs,
> but the digital and physical versions might converge as 3D printing and
> other types of digital fabrication spread, and as cradle-to-cradle design
> makes local recycling and resource extraction and more feasible in an
> environmentally responsible way.
>
> The fourth interpretation is pathological IMHO. There are several related
> aspects to it, which essentially define our dominant culture today both in
> the USA and many other places. It is the thinking that demand needs to be
> stimulated by ever more advertising to get people to buy goods and services
> they don't really need and which don't really make them more happy. It is
> the thinking that production needs to be sabotaged by destroying equipment
> (by intelligence operatives or even unions) or that peer production needs to
> be slowed by suppressing ideologies of sharing and abundance (like shutting
> down the old Napster). It is the ideology of making production harder by
> extending copyrights and expanding patents in scope. It is the thinking
> behind creating day prisons to keep young people from producing things as
> well as dumbing them down to the point where they can only be mindless
> consumers, compliant but unproductive and uncreative workers, and where they
> will be obedient soldiers destroying abundance of lives and infrastructure
> when ordered. It is the thinking that creates a university PhD system
> putting out "Disciplined Minds" who can't examine these questions for
> ideological reasons or because they have not been assigned to do that. It is
> also to plan for the excess goods to be removed through war preparation
> (stockpiling arms) and eventually war making (using arms to destroy
> abundance). In this fourth state of mind, a global nuclear war to wipe the
> Earth clean of messy abundance would be a very good thing, because the
> capitalism could start over again with scarcity, thus preserving the
> ideological underpinnings of our capitalist (and imperialist) society by
> avoiding the part of the Supply and Demand curve that is drawn in error.
> (James P. Hogan's novel "Voyage From Yesteryear" has a character think that
> for a moment.)
>
> So, abundance threatens this fourth world view, but it is this fourth world
> view that is dominant in many parts of our society, and may well have been
> time and time again in the past (see Daniel Quinn's writings). And, the
> irony is, the people who most support this world view to date have had the
> most access to post-scarcity technologies to spread, enforce, and realize
> this world view -- so they wield post-scarcity technologies like biotech,
> nuclear tech, computers, robots, nanotech, bureaucracy, the internet, the
> printing press, and many other things to suppress a post-scarcity society,
> by using post-scarcity technology to create and maintain artificial
> scarcities. The use of guns, germs, an steel to destroy most of the
> abundance based societies of the Americas in the second half of the second
> millennium (1500 to 2000) were an example of this. Einstein saw part of the
> problem when he said: "The release of atom power has changed everything
> except our way of thinking...the solution to this problem lies in the heart
> of mankind. If only I had known, I should have become a watchmaker." But he
> missed that even mainstream watchmaking fits into this problem, both in how
> it is done in centralized factories now and in the nature of portable
> timepieces in relation to social control (see Philip Zimbardo's recent work
> on "The Time Paradox"). :-( But, Einstein got the big picture part about the
> change of heart right. :-)
>
> So, "limited demand" is the theoretical underpinnings of what makes each of
> these first three possibilities a path that *should* to be pursued as
> mainstream economics generates "divide by zero" errors from limited demand;
> otherwise, some people will be tempted to continue along the fourth path
> that results from scarcity fears from trying to make a system work that is
> built around a flawed assumption, which probably leads eventually to
> somewhere most of us don't want to go (global war to destroy abundance, to
> make the facts fit the theory).
>
> Still, as I said at the start, all four paths are not necessarily mutually
> exclusive, and our society is currently pursuing all four of them at once in
> different ways. What we can at best hope to do is shift the emphasis away
> from the fourth path (post-scarcity technology used to create artificial
> scarcity) and towards the first three (a basic income, a gift economy,
> and/or peer production -- all using post-scarcity technology to create
> abundance).
>
> (Michel, you can feel free to use any of this in the p2p blog if you think
> it of value. An artist putting two curves side by side, classical asymptotic
> and abundance one with a curve going from Y Axis to X axis and touching
> each, would add a lot to this presentation. :-)]
>
> --Paul Fernhout
> http://www.pdfernhout.net/
>
> Forwarded note below:
> "More on the Supply and Demand Curve"
> http://groups.google.com/group/openmanufacturing/msg/b69f072328468352
>
> -------- Original Message --------
> Subject: [Open Manufacturing] More on the Supply and Demand Curve
> Date: Tue, 30 Jun 2009 19:07:47 -0400
> From: Paul D. Fernhout <pdfernhout at kurtz-fernhout.com>
> Reply-To: openmanufacturing at googlegroups.com
> To: openmanufacturing at googlegroups.com
>
>
> Some more commends on the curve pictured here:
>   http://en.wikipedia.org/wiki/Supply_and_demand
>
> I had previously written:
> """
> By the way, on limited demand, the classical theoretical Demand Curve here
> should touch the X axis to the right side rather than parallel it, because
> psychologically healthy humans have a limited demand for material things
> (even if that demand may be higher than what we have now globally):
>    http://en.wikipedia.org/wiki/Demand_curve
> That curve touching the X axis (meaning a fixed maximum quantity and a zero
> price for additional units) would produce the divide by zero error in
> macroeconomics. :-)
> Which spreads, since as the article says: "The demand curve for all
> consumers together follows from the demand curve of every individual
> consumer: the individual demands at each price are added together."
> Which leads to widespread joblessness in the face of better technology,
> because there is no longer a way to create new jobs making things, whether
> goods or services.
> That is the "smoking gun" of the failure of classical economics an the
> beginnings of a new theory of abundance. :-)
> A basic income is one way to address this.
> """
>
> I've been thinking more about this and some other things occur to me.
>
> ==== The Y Axis
>
> The Supply and Demand graph should touch the Y Axis as well. That would be
> a
> point where no one will purchase a product because it is too expensive or
> no
> one has that much money who might otherwise want it.
>
> That has a few implications too. That spot on the Y axis is where the human
> races starves to death in a mechanized system (food is too expensive for
> anyone left out of the system, even though machines could produce it
> easily). That is the point of unrealized dreams -- stuff people might want
> (like self-replicating space habitats) but which the people who want it
> don't have enough money to pay for it. There might be some other
> implications as well.
>
> ==== Houses of Buffet and Gates
>
> As an example of limited demand, we can look at the houses of two of the
> richest people in the world, Warren Buffet and Bill Gates.
>
> First, Warren Buffet's house:
>   http://en.wikipedia.org/wiki/Warren_Buffett
> "In 1957, Buffett had three partnerships operating the entire year. He
> purchased a five-bedroom stucco house in Omaha, where he still lives, for
> $31,500."
>
> Now, that's probably a nice house, and well maintained, but it is not a
> sprawling castle. is net worth of US$37 billion. He could afford a
> sprawling
> castle, but he chooses not to. He has limited his demand.
>
> According to that page, Warren Buffet pays himself a salary of US$100,000.
> That is another way he is limiting his demand.
>
> Now, Bill Gates is more extreme, but not that much more in some ways. From:
>   http://en.wikipedia.org/wiki/Bill_Gates
> "The Gateses' home is an earth-sheltered house in the side of a hill
> overlooking Lake Washington in Medina, Washington. According to King County
> public records, as of 2006 the total assessed value of the property (land
> and house) is $125 million, and the annual property tax is $991,000. His
> 66,000 sq. ft. estate has a 60-foot swimming pool with an underwater music
> system, as well as a 2500 sq. ft. gym and a 1000 sq. ft. dining room."
>
> The average home size for new construction in the USA is about 2300 square
> feet.
>   "Behind the Ever-Expanding American Dream House"
>   http://www.npr.org/templates/story/story.php?storyId=5525283
>
> So, Bill Gate's home is about thirty times the average new US home size.
> But
> what does this prove? Bill Gate's net worth (after donations) is currently
> about US$40 billion. But, from:
>
> http://www.bargaineering.com/articles/average-net-worth-of-an-american-family.html
> "Across all groups, the 2007 median net worth was $120,300 and the mean was
> $556,300 (guys like Bill Gates and Warren Buffett really mess things up)."
>
> So, even working from the average (which includes home equity), we can see
> that Bill Gates has a net worth 80,000 times the average. But, his home is
> only thirty times the average in size. So, even in this case, Bill Gates is
> showing incredible restraint, as well as a recognition of the law of
> diminishing returns -- a much bigger home is not likely to make him much
> happier.
>
> And, Bill Gates' job as CEO of a big company may require him to entertain,
> so there are aspects of that house that are no doubt more like a hotel or
> conference center or technology demonstrator than a home. That is not a
> common need of most people to that degree.
>
> So, between two of the richest guys in the world, we can see limited demand
> in action. Sure, these guys may own other stuff (I don't know) like planes
> or yachts or other homes, they might buy stuff for their kids, but I doubt
> they buy for personal use anywhere near 100,000 times what the average
> person in the USA consumes.
>
> They do own companies, but essentially they chose to use that ownership
> more
> for social control than for providing themselves with lots of stuff, given
> how much stuff they could have if they sold their holdings. Essentially,
> these two guys are living proof of limited demand for consumer goods in the
> face of abundance (at least, for the moderately psychological healthy,
> although even there, these two guys may not be the best examples, given
> they
> are otherwise financially obese likely for some dysfunctional psychological
> reason).
>
> ==== Free iPhones
>
> Here is another way to look at this. Imagine the open manufacturing mailing
> list pooled its money and decided to give free iPhones to whoever wanted
> them in the world, :-) what would be the demand? We could hire someone like
> Nobel Prize winner in Economics Paul Krugman to do the math. :-)  Brilliant
> guy that he is, he might suggest there would be three sets of demands for
> such a good: primary, secondary, and tertiary (I'm making these terms up,
> pretending to be him. :-).
>
> Primary is the intended use, so as a personal communicator, there is not
> that much more demand for iPhones in the globe than the human population,
> or
> about seven billion people. Sure, some people would want spares, one for
> home and office and car, and so on, but the demand there is limited by the
> population times some small multiplier, so maybe a few tens of billions of
> them. At $200 a piece in quantity, that's about US$6 trillion dollars or so
> for 30 billion iPhones at about for or five per person. I'm sure we could
> swing that if we tried on the OM list (like if open manufacturing got a few
> of those banking bailouts from the USA. :-)
>
> Secondary demand would be clever repositioning related to its unique
> attributes. So, people might want free iPhones to build supercomputers, or
> to build display walls, or to build into toys, or to take them apart to get
> the electronic parts to use for other things, or people might want the
> batteries to build into electric cars. So, the entire electronic industry
> might reorganize itself around free iPhones. Everyone wants some
> electronics, plus infrastructure needs some, so, let's say there might be a
> demand for 1000 iPhones per person globally for parts, or about seven
> trillion iPhones, or about $1400 trillion dollars worth of iPhones. We'd
> have to call in some derivatives to swing that much cash, but maybe we
> could? :-) Obviously, this is a dumb way to organize an electronic
> industry,
> but that might be what happens if iPhones were the *only* free product in
> the world.
>
> Then there is tertiary demand, where the product is just used for its value
> as mass. So, we might use iPhones instead of gravel in concrete (assuming
> they were as good), or we might build houses out of iPhones, or we might
> burn iPhones to produce power. Clearly, there might be a demand for
> quadrillions of iPhones for this sort of use. So, maybe a million trillion
> dollars worth of iPhones? That is probably well within our abilities on the
> open manufacturing list, although it would take changes to banking computer
> balances to magic up the money, the kind of thing the Federal reserve does
> legally, and which it would have to do in extreme; naturally I'm not
> advocating anyone do that illegal thing themselves, this is just a thought
> experiment -- I'm sure magicking a million trillion US dollars would get
> noticed, at the very least, whoever did it. :-) You can't even slip by a
> measly fourteen trillion dollars these days:
> "Miami man charged with trying to con federal government out of $14
> trillion"
>
> http://www.sun-sentinel.com/news/local/breakingnews/sfl-14-trillion-man-bn061509,0,3658684.story
>
> Maybe soon those numbers will seem small though:
>   http://en.wikipedia.org/wiki/Hyperinflation#Examples_of_hyperinflation
> "Germany went through its worst inflation in 1923. In 1922, the highest
> denomination was 50,000 Mark. By 1923, the highest denomination was
> 100,000,000,000,000 Mark. In December 1923 the exchange rate was
> 4,200,000,000,000 Marks to 1 US dollar. In 1923, the rate of inflation hit
> 3.25 × 106 percent per month (prices double every two days). Beginning on
> November 20, 1923, 1,000,000,000,000 old Marks were exchanged for 1
> Rentenmark so that 4.2 Rentenmarks were worth 1 US dollar, exactly the same
> rate the Mark had in 1914."
>
> But here is the key point -- even in the worst tertiary case in our
> hypothetical open manufacturing project to give out free iPhones to anyone
> for any reason, demand would end. We'd all build Bill Gates' size homes out
> of iPhones, or Warren Buffet smaller houses out of iPhones -- and then we'd
> stop. We'd crush iPhones to repair the roads connecting our houses, and
> then, roads built or repaired, we'd stop. Granted, if we burned iPhones to
> get power, maybe that would continue at some level, but it would not be an
> infinite level, it would be some fixed annual level related to seven
> billion
> people living in Bill Gates' size homes. It would be *limited* demand, even
> if it was *large* demand.
>
> And, once all that pent up demand for free iPhones was met, what would be
> the value of the next iPhone out of an open manufacturing 3D printer?
> *Zero*. The next iPhone would be worthless because people would not want
> it,
> just like when people in the wild have so many blueberry bushed blooming
> all
> at once they can't pick and eat all the berries. The extra stuff falls to
> the ground and rots, as would any extra iPhones at that point, even if our
> economy was built around them. More iPhones would be about as valuable as
> more seawater at the seashore.
>
> So, that Supply and Demand curve is wrong. At some point, the value of more
> products is zero in an economy of mentally healthy somewhat rational
> economic actors -- even in absurd situations like grinding up free iPhones
> to pave roads.
>
> ==== Time cost of handling "free" goods
>
> Here is another way to look at that issue of limited demand. Every consumer
> product has a handling cost in terms of free time that could otherwise be
> spent with friends and family and nature and other activities. Every iPhone
> we buy requires opening the box, reading the manual, charging it, finding a
> place to put it, worrying about it getting damaged, cleaning it, and
> eventually disposing of it somehow. Everything we own, also owns us. Now,
> that cost is not very noticeable when you pay a lot for a product. When you
> pay US$6000 for a computer, an hour to unpack it, or a corner of your desk
> to place it on, or a final trip to the recycling center to get rid of it,
> all those activities don't seem like much of a cost. But, when a computer
> only costs $100, then you start thinking, how much is my time worth to me?
> And it gets to the point that even if the computer was free, and as good as
> the one you paid $6000 for many years ago, it just isn't worth your time to
> get it, even if a store is giving you one for free. I pass up "free"
> computers all the time at the local recycling center.
>
> This is similar in some ways that the cost of operating system software at
> $200 is nothing for a $6000 computer, but it is a ridiculously high cost to
> add to $100 of computer hardware. At some point, the non-monetary costs
> related to our time and environment (including pollution, but also just
> space used) become the obvious dominant costs for handling "free" goods.
> The
> true cost of anything is never the price tag, but the price tag plus our
> time (as well as hidden costs related to the life cycle like disposal). So,
> given every free good still costs us in time, even in a world of StarTrek
> matter replicators, we would become choosy about what free goods we want.
>
> The same is true on the internet -- there are billions of free web pages
> and
> emails like this one out there, and yet each one takes time to read, so we
> become choosy how much we let into our lives.
>
> So, even in a world of an enormous amount of free web pages and other free
> goods and free services, demand for them is limited by the human capacity
> to
> consume them. Demand is even limited by the human capacity to even *waste*
> them, like in the example above using iPhones for things like road
> construction materials.
>
> === Implications
>
> Anyway, I hope I have made the case that demand is limited. It's true,
> people will invent new products, but it is also true that the best things
> in
> life are already cheap or free, and more products distract from enjoying
> those (not to mention that new products almost always replace old ones --
> the truly new product category is very rare).
>
> And if demand is limited, then if we can produce more and more products
> with
> less and less people using automation and better design and better
> processes, the number of people who need to work in a conventional economy
> is limited and falling. (There can always be an enormous need for
> human-to-human interaction, but most of that has always been outside the
> conventional economy, and rationing human-to-human contact has never been
> the main point of mainstream economics, and even it it became so, we would
> then see human-like robots providing those services to most people.)
>
> Thus, as technology improves, there will be less jobs making goods and
> providing services. Thus, we will see the world of Marshall Brain's
> Terrafoam (from "Manna") unless we transform our economy.
>
> Mainstream economics denies this; again from 1964:
>
> http://www.educationanddemocracy.org/FSCfiles/C_CC2a_TripleRevolution.htm
> "As machines take over production from men, they absorb an increasing
> proportion of resources while the men who are displaced become dependent on
> minimal and unrelated government measures—unemployment insurance, social
> security, welfare payments. These measures are less and less able to
> disguise a historic paradox: That a substantial proportion of the
> population
> is subsisting on minimal incomes, often below the poverty line, at a time
> when sufficient productive potential is available to supply the needs of
> everyone in the U.S. The existence of this paradox is denied or ignored by
> conventional economic analysis."
>
> So, this note is to show exactly where, at its most basic, mainstream
> economics goes wrong in the first day of classes, or on the first page of
> every textbook. And by basic formal logic, once you've made a serious bad
> assumption, everything else that rests on it is suspect.
>
> Or, as is said here:
>   "Confessions of a Recovering Economist*"
>   http://www.paecon.net/PAEReview/issue21/Stanford21.htm
> "A recovering economist can confess - even in public - that they might have
> something to learn from other disciplines. Turn to your friends, those who
> haven't been hypnotized by supply and demand graphs, for help in
> understanding the world and how it works."
>
> Still, the Roman Catholic church burned people at the stake for not
> believing in the church's dogma, and functioning in a Roman Catholic
> country
> would be hard if you did not talk the talk (whatever you believed in
> private). (That was true for other religions, too, of course, Catholics
> have
> no monopoly on intolerance.) So, the fact that mainstream economic ideology
> is based on half-truths like the classical Supply and Demand Curve does not
> mean that the religion of economics has any less hold on our lives and our
> behaviors. If everyone believes in the Supply and Demand curve, and acts
> like it was true, and fights or disgraces or makes jobless anyone who says
> it is not true, then, for all intensive purposes, that curve of scarcity is
> "true" (or, true enough). Mainstream economic ideology thus creates the
> scarcities it bemoans, through artificial means, by using the post-scarcity
> informational technologies of printing, bureaucracy, lecturing, schooling,
> mass-media, electronic Kanban-like fiat-dollar tokens, charitable and
> government dollars subsidizing economics professorships, and so on, to
> reinforce the ideology of scarcity and competition. The religion of
> economics gets us to virtually hang up a portrait of the Supply and Demand
> curve in all our sacred institutions like Congress or Universities or the
> White House, as a continual reminder of that ideology. But, as I have
> shown,
> ultimately that curve is a half-truth built on flawed assumptions about
> human nature and technology.
>
> The Protestant Reformation took centuries:
>   http://en.wikipedia.org/wiki/Protestant_Reformation
> and it is questionable if it really made things any better, :-) so who
> knows
> where we will end up from here or how long exactly it will take? Still, I
> feel within twenty years or so, with 3D printing, we will see a huge mind
> shift on this topic. But it may be hard in the interim.
>
> By the way, Catholics on abundance since the 1950s:
>   http://www.michaeljournal.org/
> "Welcome to the new on-line version of the “Michael” Journal, which exists
> since 1953 in its printed version, to promote Catholic principles and the
> Social Credit monetary reform, conceived by the Scottish engineer Clifford
> Hugh Douglas. You will find in the following links a mine of information on
> all that is related to this journal: ..."
>
> And also from there:
>   http://www.michaeljournal.org/obama.htm
> "Barack Obama is a man of consummate skill and incisive intelligence. (His
> name "Barack," in Arabic and Swahili, means "blessed.") He can become a
> great President, or he can become a toady for the corporate powers that
> have
> brought both parties to their knees. Will Obama be the servant of Wall
> Street or Main Street, the servant of the bankers or of ordinary people?
> Obama has much to offer. But he needs prayer... for when one considers who
> advises and surrounds him, it would take a real miracle for him to buck the
> system and stand for the ordinary people. ... We know who are the greedy
> and
> irresponsible people: the international bankers. The dogma that states that
> only the debt-money borrowed at interest from private bankers is good, and
> not the money issued interest-free by society, is a worn out dogma that
> should no longer be in use. The production capacity of the nation has not
> diminished, it is only the artificial money system that is defective and
> needs to be corrected. Our nation will be really rich if every citizen can
> benefit from the fruits of progress and natural resources, through a
> dividend (since we are all shareholders in the resources and inventions of
> our nation)."
>
> (Personally I feel it unfair to blame the "bankers" -- that is like blaming
> the Cardinals and the Pope for the Inquisition. It was a whole big social
> network and ideology thing full of complex feed-back loops, same as our
> belief in the mainstream Supply and Demand curve.)
>
> We can all grow and change in different ways, like Catholics going back to
> deeper roots of abundance, and maybe someday economists and the rest of us
> too. :-)
>
> --Paul Fernhout
> http://www.pdfernhout.net/
>
>
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>



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