[p2p-research] Artificial Scarcity Is Subject To Massive Deflation | Techdirt

[Paul D. Fernhout]

Another aspect of this is that if demand was possibly infinite eventually 
(as people thought up things they wanted over time), but if real demand 
still grew more slowly than increases in productivity, demand would be 
effectively limited at any point in time to less that what could be 
produced, and that gap might increase over time if demand and productivity 
followed slightly different exponential curves.

For example, if everyone wanted an infinite number of shoes, but they only 
bought one a day or so, and then sometimes two, and sometimes four, and 
exponential productivity of shoe manufacturing was rising even faster, so 
that more and more shoes could be produced in a day than were consumed, even 
if theoretically the demand for shoes was infinite, practically it might be 
lagging behind production. But as this example shows, anyone acquiring 
millions of shoes would probably either be mentally ill or running a museum. 
:-) Realistically, long before then, someone might invent a type of footwear 
based on nanotech that could shapeshift as desired (sneaker, high heel, 
boot, slipper) -- another example of how a sudden design breakthrough 
effectively increases productivity enormously by removing the need for that 
much production.

Still, I feel demand is also practically limited for the reasons Roberto 
outlines in his excellent entry (and his article that may well have gotten 
me thinking in those directions myself). Healthy people just don't need that 
much stuff to be happy.

Granted, they may eventually need a certain level of infrastructure (space 
habitats etc. that may be huge by today's standards. :-) But by that time, 
talking about the basics of three meals a day, a laptop, and nice shoes are 
just insignificant compared to the mass of a constructed habitat. So, 
effectively, rationing personal items like those would seem ludicrous -- 
like worrying a lot about the ongoing expense of compressed air for the 
tires when you bought a car. Compared to all the other concerns, the cost of 
air for the tires is very small. Likewise, in the future, I'd expect the 
cost of food, shoes, laptops, and so on to be so small as to not be worth 
bothering to account for most of the time.

And, once people think a resource is abundant, they tend to shop hoarding 
it. Why hoard material goods when you can have them printed out when you 
want? Then we return to the ways of the hunter/gatherers, where almost 
everything they used (stone knives, baskets) was relatively easy to make, so 
they were not that upset if they were lost or broken or given away. How many 
people today are upset if a computer printout gets dirty or lost (as far as 
the physical cost to replace)? But centuries ago, a lost scroll would have 
been a big problem, when scrolls and books were so expensive. But now, with 
so much cheap information on the internet, hoarding it in a large collection 
of books is less appealing.

--Paul Fernhout
http://www.pdfernhout.net/

Michel Bauwens wrote:
> Hi Ryan,
> 
> this relates a critique against infinite elasticity  of demand with the
> potential of creating post-scarcity relative abundance
> 
> from
> 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.”*
> 
> 
> On Fri, Nov 6, 2009 at 2:31 AM, Ryan Lanham <rlanham1963 at gmail.com> wrote:
> 
>>
>>  On Thu, Nov 5, 2009 at 1:59 PM, Kevin Carson <
>> free.market.anticapitalist at gmail.com> wrote:
>>
>>> As people
>>> are able to meet present needs outside the cash nexus, with less
>>> labor, they won't discover enough new needs to keep working the same
>>> number of hours to buy additional kinds of stuff; they'll just work
>>> less.
>>>
>>> I still tend to think there is infinite elasticity of demand for high end
>> services--restaurant food for instance--but I even begin to see how that
>> could wane.  But the point is clearly taken on stuff.  There is a clear
>> moral shift on climate change that is also impacting this discussion.  It is
>> no longer fashionable to be a conspicuous consumer.
>>
>> The way I thought this would work has been tied to technology
>> acceleration.  I've always wondered...what happens when you build the best
>> possible diesel locomotive and then start finding ways to make it cheaper
>> and cheaper.  In a sense, the IP can go on for a while, but the relative
>> value of the IP is the question.  The marginal value (utility) of IP is
>> clearly falling as technology accelerates.
>>
>> It is difficult to build a better X now, and the rent value of an X (say an
>> email system) will fall over time as technology improves in related
>> domains.  It begins to become an interesting question to ask what if all
>> corporate information services came from Google?  Would that be a license
>> for corruption or the advent of the free economy?  Leading pundits are
>> saying both things.
>>
>> Personally I cannot reconcile the IP world's obvious changes with changes
>> to the service world.  I suppose robotics makes that leap.  What is the
>> value of a French restaurant if my robot cooks a perfect French meal on
>> demand--after going shopping for the necessary ingredients at the optimal
>> prices?
>>
>> As a recent strong skeptic, I am prepared to say something is definitely
>> afoot and that it is accelerating.  I didn't see the beginnings of it as
>> many here did, but I am clearly impressed that the outlines of the thing
>> people here have been calling "post-scarcity" is starting to take real
>> shape.  For the first time in some years, a logical economic progression
>> toward something is beginning to emerge in my own mind...the last time this
>> happened was about 1984 when the first Macintoshes fell into my hands and I
>> realized computing was going to become ubiquitous and commonplace.  Now with
>> that obviously in hand some 25 years later, I can now see a path to widely
>> deployed post-scarcity 25 years from now.  I share strongly the balance
>> concern that Reasons cited about value decay of productivity versus market
>> force needs.  It could still end very badly.  Maybe today I am less
>> pessimistic though.