The economics of abundance

by Henry on September 4, 2003

It may sound to the uninitiated as though science fiction conferences are bad places to go for insights into economics, but the uninitiated would be wrong. One of the more interesting sf phenomena of the last fifteen years or so has been the creation of a more economically literate science fiction, which gets away from the libertarian ‘competent man’ certitudes of much of the early writing in the genre. It seems to me that the Brits have pioneered this – Iain Banks, Charlie Stross, Ken MacLeod, China Mieville, Justina Robson, Paul McAuley come to mind – but notable Americans too (Steven Brust, Cory Doctorow and Neal Stephenson) have been guilty of economically sophisticated literature on occasion.

This came home to me at Torcon, where a well-attended and intelligent panel discussed the economics of abundance – if future scientific progress allows us to produce material goods effectively for free (as some sf writers postulate), then what happens to society? Iain Banks’ ‘Culture’ series is perhaps the best known sf take on this question; Banks sneakily describes a Communist utopia in terms which might well mislead the uninitiated into thinking that he’s a gung-ho libertarian. And Banks got frequent and deserved namechecks at the panel. Charlie Stross gave the standard take that economics is the science of choice under scarcity, and then launched into a discussion of what economics might have to say under conditions where scarcity didn’t apply (answer: not much). The panel, after some meanderings, more or less agreed that material abundance would lead people to displace their energies to achieving social status through positional goods and the like.

Which got me thinking about the difficulties of applying economic analysis to these phenomena – while economic reasoning can lead to some interesting insights about people’s struggle for social status, it also has some very clear limitations. Certainly, Gary Becker’s ‘strong’ programme of applying marginal analysis to social phenomena across the board hasn’t had enormous success. Even if people behave in a self-interested fashion in their efforts to grab status, this self-interested behavior doesn’t lend itself well to standard economic analysis. Why?

Both the late Mancur Olson and the still-very-extant Doug North 1 have remarkably similar takes on this. Social goods and political goods are difficult to analyse using economic tools, because they’re not easily measurable. As Olson points out, political and social goods tend to be indivisible. That is, it’s hard to divide them up into discrete amounts without changing the quality of the good in question. As Olson says, friendship (as against acquaintanceship) and marriage (as against prostitution) involve a certain amount of indivisibility – beneath a certain level of provision, the good becomes qualitatively different. This means both that it’s difficult to impossible to translate these goods into money, and that it’s bloody difficult to measure them. As North argues, this has rather fundamental implications for neoclassical economic theory, which tends to assume that it’s possible in principle to measure what it is that actors are exchanging. To put it bluntly, neo-classical theory can’t tell us much about choice under these circumstances.

What does this tell us about situations where material (measurable) goods are abundant? I reckon that two implications follow. First: as the Torcon panelists argued, human beings are dissatisfied sorts by nature – if they’re getting enough in the way of material wants, they’ll find other unrequited (social) needs to squabble about, so that they can vie for position. Economists and sociologists like Thorstein Veblen and Fred Hirsch would likely agree with this assessment. Second, the economists of the future aren’t going to have much that’s useful to say about choice under these conditions, unless they radically change their assumptions and tools. Someday far hence, the dismal science may be a thing of the past.

1 Olson, Mancur. 1990. Toward a Unified View of Economics and the Other Social Sciences. In Perspectives on Positive Political Economy, edited by James E. Alt, and Kenneth A. Shepsle. Cambridge: Cambridge University Press. North, Douglass C. 1993. What Do We Mean by Rationality? Public Choice 77: 159-62.

{ 24 comments }

1

Megan 09.04.03 at 2:22 am

So, do you think that the economists of the future will be similar to the sociologists of today?

2

Omri 09.04.03 at 2:38 am

So, how long before scifi authors pick up the torch on a new economics of scarcity? (*cough*energyshortage*cough*)

3

Barry 09.04.03 at 2:51 am

The way I see it, there are two factors going on – the first is one of scarcity (‘Mooooooommmmmmmm, why can’t I have a X! All of the other kids have an X!’). The second factor is that of abundance (X changes from a wooden doll to a sub-orbital aircar).

So (in this view), people will still feel scarcity, but in a sea of abundance, from our viewpoint.

4

Bill Riley 09.04.03 at 3:12 am

Hmmm, I thought science fiction was dominated by Ayn Rand groupies. And Heinlein fans. Future societies are ruled by an elite in SF, no? (Just kidding, I don’t read SF.)

5

Henry 09.04.03 at 3:27 am

Nope – there’s a rich vein of leftie sf out there, as well as some good stuff by the libertarians (early Heinlein can be a lot of fun; Neal Stephenson’s Snow Crash is one of the smartest books I know). If you want to read a couple of the lefties, I recommend the following.

Frederick Pohl and Cyril M. Kornbluth, _The Space Merchants_. Clever, funny, and talks about environmentalism as a political movement a decade before _Silent Spring_. Check out Pohl’s short stories “The Tunnel under the World,” and “The Wizard of Pung’s Corner” as well – the Enemy is Advertising.

Steven Brust and Emma Bull, _Freedom and Necessity_. Not so much a historical romance as a historical-materialist romance. Wonderful revisionist take on the epistolary novel, with all the tropes of a nineteenth century adventure story like _Kidnapped_, but reversed (the Chartists are the heroes rather than the feudalists; Engels is an important minor character).

China Mieville, _Perdido Street Station_. Marxist steampunk – a grotesque early industrialist/robber baron capitalist political setting, fun characters, a ‘science’ based on dialectics, and boundless, glorious sociological invention.

6

Michael C 09.04.03 at 4:01 am

Echoing Barry, can’t we learn something just from the 20th First World boom — that when prosperity arrive, people will define their “needs” or “interests” up so that (absolute) abundance gives way, at least in people’s minds, to (relative) scarcity? An example from my own teaching: I often teach world hunger as an issue in applied ethics courses, where Peter Singer’s work is obviously important. Singer thinks we should meet all human needs before indulging in any luxuries. But what counts as a need as opposed to a want or a luxury? E.g., is a college education a “need” in the U.S. but a “luxury” in Laos? My students usually feel that way. To me, that shows (a) a serious inability to think coherently about the concept of a need, and (b) people will respond to abundance by identifying new needs, wants, etc. Few of my students are grateful to live in a period of historically unprecedented luxury.

7

Carlos 09.04.03 at 5:34 am

Hm. I think you’re underestimating some SF writers’ will to believe in some imminent fundamental change in material existence, and overestimating their knowledge of economics.

But I wasn’t at the panel.

As for social and political goods, well, people will put a price on the strangest things. I had a friend auction off a new swear word on eBay. I wonder how much it would get in the secondary market.

The upshot of a post-scarcity world might mean that social and political goods become (more) commodified, and the institutions change to fit. Somehow I don’t think a more mercenary world is what Charlie has in mind.

8

Doug 09.04.03 at 8:05 am

In some areas – think music and software – digitalization has already brought an economy of abundance, and contemporary economics seems to be having a hard time coming to grips with it. Does economic theory cope well with the social dynamics of Linux? What about serial dominance in software? Sure, it says that people will prefer free music to expensive music, but does it give any additional insight into whether there will still be stars and hits in the world of the celestial jukebox?

The SF folks may not be that far ahead of the curve. Or their main contribution may be thinking about what happens when the abundance that’s already hear – in goods with a high nonmaterial content – arrives for material goods as well.

9

Walt Pohl 09.04.03 at 9:27 am

Curiously, I was just reading Perdido Street Station, and I almost stopped reading it because the economics in it was so dumb. Fortunately I stuck it out until page 200 or so, when the plot finally shows up.

10

Nabakov 09.04.03 at 9:29 am

Bruce Sterling’s novels’ ‘Schismatrix’, ‘Islands In The Net’ and his Mechanist/Shaper short stories, all published in the early eighties, placed economic and political issues arising from new technologies squarely at the centre of their narratives.

11

John James 09.04.03 at 10:46 am

A negative take on what happens in an economy of abundance is E.M. Forster’s ‘The Machine Stops’ – where a machine provides for all material needs and earthlings have moved underground. Basic message: this is a life in which human potential cannot be realised.

Anyway, I question whether absolute abundance, in every sense, is a theoretical possibility. I agree that it is possible to imagine that all our material and bodily needs will some day be met. However, can the same be said of informational/cultural/spiritual (whatever you call them) ‘needs’. If we assume that human imagination knows no limits and that there are an infinite possible ‘information/knowledge’ outputs, Say’s law would suggest that we can go on producing and consuming information/knowledge for all eternity. I accept that the magic of non-rivalry implies that consumption of these outputs will be on a non-market basis (i.e. for free). Nevertheless, the organisation of production may still require some assistance from economists.

12

Natalie Solent 09.04.03 at 10:59 am

Someone once said that there will always be one limited resource – attention. You don’t have time to do everything or even think about everything.

Even now, some economic decisions revolve about competition for time.

The only SF way round that would be artificially enhanced brains, so that we could process information much faster. But I suspect that a story about creatures so far from our present state would be very hard to write.

BTW, as a libertarian I don’t see why I should ‘not like’ the idea of abundance. It sounds great to me. The underlying point of libertarianism is – surprise! – liberty, not the transient details of this millenium’s economy.

13

ajay 09.04.03 at 2:43 pm

Hmm. Wrote a piece on this once: there are some goods that even in a Banks/Stephenson utopia will be scarce. Even if the Source will build you essentially any material object you want, you will still need power – electricity or whatever – to run all your new material goods. Which will need to be generated somehow from some scarce resource (sunlight/geothermal/uranium/deuterium).
Also living space: a Source can’t build unlimited numbers of Park Lane apartments, for obvious reasons; nor can it magically expand the number of Mount Everests, so the Nepalese government will still be able to charge $60 000 to climb it. Also rare elements (although extraction from seawater through nanotech may make these easier). Creativity has also been mentioned, but what about all the other “human services”? Doctors, actors, servants, managers, lawyers… most of these can’t be replaced without significant changes in society and/or AI advances, and some not even then. Governments. Politicians. Policemen. University (as someone mentions).
So even in a post-scarcity society, we will still be having arguments about zoning laws, universal healthcare provision, frivolous lawsuits, tax cuts and the growth of the state.
[Banks and other real post-scarcity utopians get round this by introducing a) lots of strong AI and b) anarchy.]

14

Rich Puchalsky 09.04.03 at 5:16 pm

Funny — there was a discussion (well, more like a monologue) on the Usenet group alt.books.iain-banks just a little while ago, under the thread called “Social limits to growth”, in which people tried to work out whether there were ways of getting around even limits on positional goods.

I suggested that if you had intelligent machines that a) didn’t require much attention themselves and b) could pay attention to millions of people at once in a way that felt similar to human attention, that even some positional goods could become plentiful and post-economic.

Banks avoids the issue of positional goods by having intelligent machines called Minds do all the leadership jobs, and by assuming that the Minds themselves don’t have all the problems that humans do with competition for and use of power.

15

WIll Wilkinson 09.04.03 at 6:24 pm

It’s really pretty absurd to suggest we can ever get over scarcity. Many goods are goods because they are essentially scarce. Take the property of BEING THE MOST POPULAR ROCKSTAR or HAVING THE BIGGEST APARTMENT OVERLOOKING CENTRAL PARK. These are highly desirable properties, but cannot be multiply instantiated. Economists can very well discuss competition over the scarcity of this sort of thing. As Natalie points out attention is scarce, which is what entertainment providers compete over. It will not become significantly less scarce. Also, time is scarce. How to budget time, and how to understand the costs of foregone alternatives, is perhaps the most fundamental economic issue. Even immortality does not solve this problem. How does the ability to create whole spaceships out of ambient matter affect this AT ALL?

16

Simon Jester 09.04.03 at 6:28 pm

I think just about all British science fiction has a leftish bias; the closest thing to a piece of right-wing SF produced by a British author (that I can think of) is the last chapter of Bob Shaw’s “The Peace Machine”. And only the last chapter.

17

Chirag Kasbekar 09.04.03 at 7:58 pm

Henry,

I’m not the most avid sf reader in the world — far from it — even though I’ve sort of inherited a small library of sf books from my father. But I like the genre for the potential it offers social science.

In any case, I don’t know if you’ve come across Robin Hanson’s “The Economics of Science Fiction” page. So here it is:

http://hanson.gmu.edu/econofsf.html

18

Cory Doctorow 09.05.03 at 1:57 pm

Hey, Henry! I’m a Canadian!

19

ajay 09.05.03 at 2:52 pm

Rich:

Of course, in the recent Culture novels he is starting to deal with the issues raised: in “Look to Windward” an enormous one-off concert is described as “worth inventing money for” in the sense that tickets are valued and scarce; but of course, there are very few things that ticket holders will accept in exchange…romantic favours being about the only one.
And in “Excession” we start to see that the Minds are not exactly free from the lust for power that afflicts humans.
I love the argument against time travel, based on the existence of interest rates (see Hanson’s page). Can anyone remind me who came up with the economic rationale for FTL travel (basically people deposit money in long-term high-interest accounts and then take a relativistic holiday)? Despite its sound, it wasn’t Douglas Adams…

20

Jonathan Wilde 09.06.03 at 10:27 pm

Can you go into more detail about what makes these works more economically ‘literate’ and ‘sophisticated’?

21

Ray 09.07.03 at 12:06 am

Gotta put in a plug for Delany’s “Trouble on Triton”, which posited a satellite economy based on 1960s ideals of abundance, set a deliberately engineered third-world Earth against it, and centered an unhappy libertarian protagonist in it.

22

Michael Sinclair 09.08.03 at 1:19 am

Your original report brought to mind a novel from the early seventies which it has taken me until today to dig up: John Brunner, “Total Eclipse” (Doubleday, NY, 1974). It was an archaelogical puzzle; why had this race which had a super abundance of material goods so quickly become extinct? Economic competition was for genetic breeding rights; with success came hereditary concentration of wealth, and by the time they realized it, it was too late, the society was genetically bankrupt. At the time I remember thinking it simply an analogue of money. Another curious example might be the punishments meted out in the movie “Zardoz”: where people lived forever, offenders were “aged” a number of years according to the crime. Perhaps in such a society competition could be for years.

23

Maureen 09.08.03 at 8:36 pm

Rich–Regarding the “machine-generated attention that so effectively mirrors human attention that it can’t be differentiated”, I don’t think most people will go for that–in a philosophy class I took last year we discussed going into a virtual reality where everyone loved you and your knowledge of the unreality of the situation was erased. If given a choice, most of us would reject this virtual reality in favor of the real world; we wanted our human contact to be real and we wanted to truly matter to other (philosophical) actors. If a machine is programmed to pay attention to you, the attention is meaningless because the machine has none of what we call free will (whatever that is) and thus cannot be spoken of as a philosophical actor. (Perhaps this is why demagogue dictators crave more and more public support–as they sap the free will of individuals, they subconciously realize that they’re decreasing the value of the attention/adoration they receive.) On a more materialistic basis, people still buy real, natural diamonds even though few can tell them apart from cubic zirconia and they’re physically identical to synthetic diamonds. We–or at least American society–place a specific worth to authenticity.

24

Matt 09.11.03 at 12:45 am

Couple of points:

1)I suspect Iain Banks did not have libertarian ideas in mind for the Culture, he would tend towards anarchist ideas, he is very much on the left. The Culture seems like an “anarchist/libertarian” set up but I think in fact that its a benign dictatorship. The Minds/ships do the heavy lifting – formulating long term policies, thinking about stuff, generally organising while humans are just along for the ride, they dont have a scarcity problem, life is just one long holiday.

2)Downloadable MP3s are available for free/very low cost yet if one checks ebay one will find thousands of 2nd hand CDs for sale and people are willing to pay good money for them. They still have a regard for the artifact itself, not just the tracks on the CD.

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