Scarcity and political complexity

So I’m watching the chute, and then the experimenters chuck down this pellet, which turns out to be some sort of libertarian riffing off my Neo-Edwardians post around the idea that perhaps the move away from a simple, Posh vs. Oiks politics is to do with the rise of post-scarcity, idea dear to the hearts of SF readers.

In the 20th century, politics & international relations were both focused around capital vs labour. Now, not so https://t.co/KBDJ2tYqf0

— Saku Panditharatne (@sknthla) January 21, 2017

Now I might get snarky and point out that I can see people sleeping in doorways in central London and it was -4 degrees C last night and where’s your post-scarcity now, eh, eh? (Insert the canonical Jabbing of the Virtual Finger.) But I think it’s worth examining this a bit. What would we mean by saying that some good or other is post-scarce? Well, I would start by saying that its marginal cost is zero, or for practical purposes, that its marginal cost of production (and therefore price, for the firm in perfect competition) has fallen below the overhead cost of charging for it.

Put like that, there’s more of it about than you might think.

The obvious example is information of one kind or another. It’s not just that Google has an advertising-funded business model – it’s also evident that the marginal cost of a search is extremely tiny, so much so that it’s probably indistinguishable from zero. The economics and politics of information goods are notoriously weird, which might both reassure us that we’re onto something and also suggest that perhaps this is just some boring Internet thing with no connection to the real world. You’d be wrong, though. It’s become, if not exactly routine, not unusual for the price of electricity to become negative in some markets where there is a lot of wind or solar power on the grid. And by “some markets” I mean Germany, half of the world’s manufacturing heartland. If you have to pay people to take it away, it ain’t scarce. A lot of industrial products are stupidly cheap at scale – the canonical example is micro-electronics. Even something as drastically physical as ocean freight is very, very cheap.

The example of electricity is an interesting one. The costs of production for these sources are basically made up of equipment, i.e. panels or turbines, interest on its capital cost and construction costs, and rent, because the sun is already post-scarce. As far as the equipment goes, it is getting remorselessly cheaper or in other words less scarce, like manufactured goods in general. Interest rates are of course nobbut bugger-all at the moment, and the construction cost is getting amortised over 25 years or more for wind machines. We can see from this that there are some specific sources of scarcity:

Enduring scarcity

First up, land, which they famously aren’t making any more. Those panels have to go on somebody’s property and that somebody can charge rent. Land as such is interesting not just because it’s permanently limited in supply, but because it’s radically heterogenous. You occasionally see economists saying things like “Houses are so much cheaper in the US’s open market cities! Silly people! All you need do is move to Bismarck, North Dakota and you’ll be rich!” Which is funny, because some of the same people will also tell you that cities are important because of agglomeration effects. Even if we could create land cheaply, we couldn’t make it all be in London. Landlords are still going to be with us. And to repeat the point about agglomeration, this isn’t just because some addresses are posher than others; people create cities because they are useful and enjoyable.

Economists have a nasty habit of rolling the whole planet up as undifferentiated “land”, so it’s worth noting separately that even if goods are extremely cheap, perhaps because we were using post-scarce solar energy to keep re-using the same elements, natural capital (e.g. the atmosphere) might still be scarce. This is hard to think about because the economy doesn’t do a good job of pricing it and it ends up as an externality, aka the Big Bin of Things Not To Think About. The obvious party to eventually stick a tag on this is the state.

Transitional scarcity

Even though a lot of industrial processes are hyper-deflationary, some of the technological pathways seem very resistant to commoditisation. Countries that can barely scrape into the middle-income category manufacture cars and even aircraft, but the number of firms worldwide that can make a jet engine is still probably smaller than the number that could make a nuclear bomb, and even more so if you restrict that to ones who should make them rather than risking the passengers’ lives unnecessarily. Think about that one for a moment; Frank Whittle’s first effort ran for the first time in 1937, so it’s stayed very high technology for a long time. Similarly, electronics is incredibly cheap and incredibly deflationary, but the suppliers of tooling like ASME are a very select bunch. Software is often free, and being digital information, its marginal cost is zero. But good software, free or not, is painfully rare.

A common feature of these cases is that they are often intensive in craft skills and hard-to-automate tacit knowledge, something which is also very common in the services economy. In many ways, this branch of scarcity is defined by the fact that it’s people. It might not stay that way, which is why I categorise this as transitional scarcity. But I also did that to remind us that a transitional phase can be very long, in fact, permanent for practical purposes. That brings us to:

Artificial scarcity

Because one man’s craft skill is another’s guild mystery! Google searches are abundant, but their private-use software very much isn’t. Unlike the tacit skills of their SREs, embodied in the people who possess them, this stuff could be leaked on pastebin or deliberately released into open source, so I classify its scarcity as artificial. Artifical scarcity is created either by a monopoly or else by an act of state. As it’s basically a social decision to have it, there is no reason to think it’s going anywhere. One of the absolute classic examples of this is copyright, but perhaps the more important one today is the associated right (called the database right in Europe) to collect, use, and claim property rights in data.

And, you know, I think I see it. If everything else is getting less scarce and you own land, you’re going to be very rich. If you’re a monopolist of technology or information that’s important to the nonscarce sector (or as I remember Mark Kleiman calling it, the communist sector) you’re going to be very rich and very keen on defending that monopoly. And if you are the technology, you ought to get paid for it. So what do we see? Skyrocketing land prices, extreme inequality between individuals, and huge profits at oligopolistic technology- and data-intensive firms, which match my three forms of enduring scarcity rather nicely. And political systems that were based on the assumption of fairly high scarcity, evenly distributed between sectors, aren’t functioning well. We also see deflation, which is what you’d expect if chunks of the world economy were approaching the zero lower bound on price. Hey! Zero lower bound, didn’t I hear that somewhere? Perhaps the secular stagnation concept is how capitalism ultimately defends scarcity and the benefits it brings to the rich. There’s a thought.

To wind up, eventually, in a substantially post-scarce future, what remains scarce is what society chooses to value. What that is, and how much it gets paid, is a political decision. ***prolonged, stormy applause as the giant gilt idol representing plutocracy is toppled***