[p2p-research] big does not necessarily innovate: the current VC model is broken

[Kevin Carson]

On 11/6/09, Ryan Lanham <rlanham1963 at gmail.com> wrote:

> In fact, productivity is climbing extremely rapidly across the globe...as
> measured in GDP per work unit.  R&D capital really has had very little to do
> with it.  Most of the growth comes from IT, low labor cost units being
> rapidly trained (e.g. in China and India), economies of scale and improved
> systems.  Is it "innovation" if a guy in Africa gets a cash register in his
> store and a cell phone on which he can make supply orders?  It greatly
> enhances his productivity.  To me it is just applied capital...investment.

As I've argued before, there's a big difference between productivity
in the sense (on the one hand) of increased efficiency in extracting
greater amounts of utility from inputs like labor, and (on the other)
"growth."  The latter requires the ability to capitalize increased
efficiencies as a source of rents.  And absent the kinds of artificial
property rights that cause increased productivity to be capitalized by
rentiers rather than passed on to the consumer in terms of fewer work
hours per unit of consumption, the natural tendency of productivity
increases is to destroy exchange value and nominal GDP.

> Having an incrementally better cell phone isn't that great...it's just a
> cell phone.  The message of technology has been that marginal utility of
> invention is falling...rather fast.  That's the interesting crisis of
> economics now.  Intellectual property value is falling...Corry Doctorow and
> others have been discussing this for some time...as has Michel.

Yes, Doctorow has argued (as did Murray Bookchin 30 years ago) that a
huge part of technical innovation consists of what amounts to mashups
of off-the-shelf technology.

On the
> other hand, productivity is rapidly increasing because basic systems (e.g.
> cell phones in Africa) are applied at whole new scales.  It isn't
> "innovation" in the sense of a new idea, it is the simple application of
> capital.  Soon that will run its course as it has in the developed world.

And in any case, if such productivity means a reduction in material
inputs per unit of output, that should mean (ceteris paribus) a
reduction in nominal GDP and the opposite of economic "growth,"
because exchange-value (which results in the long run from the cost of
production) will implode.  The only way out of this is if the
increased productivity frees up demand for some other industry.  But
in general, I think the amount of new demand will always be less than
the freed up resources, because (as discussed in another thread)
demand is not infinitely elastic.


-- 
Kevin Carson
Center for a Stateless Society http://c4ss.org
Mutualist Blog:  Free Market Anti-Capitalism
http://mutualist.blogspot.com
Studies in Mutualist Political Economy
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Organization Theory:  A Libertarian Perspective
http://mutualist.blogspot.com/2005/12/studies-in-anarchist-theory-of.html