Thursday, December 8, 2011

Artificial Scarcity

As I said before, economics is the science of managing scarcity.

In an agricultural or industrial economy, this makes perfect sense.  There is only so much food, or physical goods to go around.  Some will have, and some will have not.

But the industrial economy has been slowly giving way to an "information economy" - where the people most in demand produce ideas (be it stories, movies, insightful commentary, whatever).

Information is not a physical good (although it requires physical goods to store and manipulate).  It can be transferred quickly and easily, and every transfer is an opportunity for copying (distribution is nearly free, and scales well over huge numbers of people).

At the same time, the industrial side of things have become immensely cheap and efficient.  China produces all the computers we can possibly need, each more powerful than a room size super computer from the 80's.

How do we handle this?

From very early on, the answer was "artificial scarcity" (it's in the Constitution!).  This is usually in the form of "patents", and "copyright".  A patent grants a monopoly to the inventor of a design for some time.  Copyright grants a monopoly to the author of a creative work.

It's unclear how well this ever worked (it has always sort of muddled along).  But in the age of the Internet, it is clearly failing badly.

Charles Stross eloquently identifies how the cure has been worse than the disease.
"As ebook sales mushroom, the Big Six's insistence on DRM has proven to be a hideous mistake. Rather than reducing piracy[*], it has locked customers in Amazon's walled garden, which in turn increases Amazon's leverage over publishers."
 Charlie is noting the problem in the publishing industry, but we see similar things in music (ruled by iTunes).  Movies suffer similarly, although no one agent has managed to corner the market (there have been huge upheavals - witnessed by the rapid move of new releases from theaters to DVD (to forestall piracy)).

The obvious solution is to not charge for distribution.  Money would need to be gathered beforehand (like the patronage system).  Obviously, a lot of kinks need to be worked out of the system, but it doesn't seem anyone is thinking this way...
(for example, why do we even need money)

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