Economics and Resources and Scarcity

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I just got done reading a bad science fiction novel. Part of the reason it was bad was because the author did not understand economics, being so eager to mock capitalism that he got caught up in things that capitalism is not, so let's back up a moment here and look at.

Resources are things we want or need in order to go about our lives. Most are wants; a few are actual needs. We need food and water. Most folks would also agree that shelter and clothing are needs. You don't need filet mignon and Perrier with a twist of lemon, but you do need enough calories to keep you going and enough water to replace what you lose. We also need air to breathe, a temperature at which life can be sustained, etcetera. If we're on Earth, those may be obtained simply by being here where they are freely available, but if we leave Earth, we have to figure out a way to get those resources. Imagine what the space missions of the United States and the Soviet Union would have been like if we hadn't realized humans needed air until those men were out of the atmosphere for the first time.

Some folks persist in believing that eventually the coming singularity will mean that resources will be so plentiful that machines will magically provide them for everyone. This belief is nonsense on stilts. Even if the machines provide them without further input from humans, someone's going to have to maintain the machines. Someone's going to have to find or recycle the raw materials. Someone is going to have to monitor the output so that it's wholesome and not poisonous. This stuff isn't going to do itself. Even - especially even - if the machines themselves become sentient. If they ever do, they're going to have needs and wants of their own - not to mention that the ethical and economic issue of slavery then becomes an automatic concern.

(FYI: No slave society in history has ever competed successfully with a free society. It won't happen with sentient machines, either)

David Friedman - an economist worth paying attention to, if not as high profile as his father - in his classic essay "Love is Not Enough" lays it out with brutal simplicity:

Under any institutions, there are essentially only three ways that I can get another person to help me achieve my ends: love, trade, and force. By love I mean making my end your end. Those who love me wish me to get what I want (except for those who think I am very stupid about what is good for me). So they voluntarily, 'unselfishly', help me. Love is too narrow a word. You might also share my end not because it is my end but because in a particular respect we perceive the good in the same way. You might volunteer to work on my political campaign, not because you love me, but because you think that it would be good if I were elected. Of course, we might share the common ends for entirely different reasons. I might think I was just what the country needed, and you, that I was just what the country deserved.

The second method of cooperation is trade. I agree to help you achieve your end if you help me achieve mine.

The third method is force. You do what I want or I shoot you.

So unless you're going to produce your own food, your own clothing, your own shelter, and everything else you need (and that begs the question of where you're getting the tools - there is no single person alive capable of making a tool as simple as a pencil all by themselves), you have to figure out one of these three methods to get others to help you.

Mr. Friedman in his essay makes clear that even in the most rapacious society ever, Love does fulfill a surprising number of needs. I'm pretty certain the vast majority of those reading this volunteer time, money, or both to charity on a regular basis. Some people volunteer ungodly amounts of both, either in absolute or relative terms, and my hat would be off to them, if I had a hat.

But love has its limits, limits of proximity, limits of number, limits of exhaustion, limits of willingness. And those are where we get into the other two ways of getting someone to help with what you want: trade and force.

Force has been common throughout history, and I'm not pleased it does not seem to be going away. When you try to replace trade with love beyond its limits, what you have is force. People aren't doing it because they want to. They're doing it because they're being forced to. At some level, in some wise, there is a gun to the back of their head. As much as those controlling the levers of force try to pretend otherwise, it's a real gun, and it will be used if those it's pointed at don't fulfill the basic commands of those in charge of the levers of force.

Capitalism, for those unclear on the concept, isn't rich old white men in a boardroom debating the fate of the economic world. That's force in action - government - whether those in the meeting are rich old white men or young women of color there because they won a poularity contest, or anything else. The people in such meetings are holding such debates because they have the means to force compliance with their decrees.

Capitalism is people looking for you to choose to make a willing trade. They do not have the means to force you. If they're not providing a good or a service you want at a price you're willing to pay, they can't force you to make their trade. And every time I write something like this essay, I get loads of idiots asking about government monopolies like utility companies, which use government force to preclude anyone from being legally able to offer a better deal. Once again, we have force rearing its ugly head, and when force is involved, it's not capitalism.

Capitalism is people willing to do what you want from them in exchange for what you're willing to offer. You can't force them, they can't force you. Both of you must be made better off by the exchange in your own opinion, or one of you isn't going to agree to it.

Just because resources get cheaper doesn't mean they're going to be free. The law of supply and demand takes no vacations - even from the land of Totalitaria, where everyone has a gun to the back of their heads. Even in the most optimistic future, all the crap you want isn't going to be free, and if someone is forced to provide it to you as if it were, they are your slave. Even the basics you need are going to have some cost. You can negotiate trades via intermediary markers (money) in exchange for something you're providing, but the resources you want or need are not going to be free. Money isn't evil, it's simply a marker we use because the person who needs the services of an air traffic controller at the moment might not be the people with the house that controller wanted to live in, the food she wanted to eat, or the car she wanted to drive. Without money, you'd have to have a good or service valued at the point of sale by everyone you wanted to trade with.

Capitalism is decentralized. There is nobody making all the planning decisions for everyone else. It's a network of people who supply something they make or do in exchange for something they need or want - and the intermediary of money means that the exchange doesn't have to wait until the air traffic controller can find someone who needs her services and can supply food to be able to buy the food she needs to eat today. Whomever offers the food she wants for the lowest price (including the price of finding it and the price of fetching it) will likely be her choice. If someone else offers her a better deal, she's free to take it - and everyone with food is free to offer whatever deal they think she might take. Or she's free to decide she'd rather snack on the last saltines in her cupboard and save her money. Capitalism works because people want you to take their deal, so they figure out a way to get you to think their deal is the best one available - and the classic example of that is offering something that is in fact a better deal. This is why the standard of living improves best and fastest. Lots of people are eager to teach about the Gilded Age of Robber Barons here in the United States. What very few people teach about it is during that period, the standard of living of the common person (not the rich robber baron!) improved more and faster than any other time and place on Earth.

There are always going to be things in demand that are scarce - where the available supply does not extend to providing everyone with the amount of them they would like to consume in an idea world. As our capabilities expand, things might get cheaper, but new goods and services come along all the time, and there are the old classics of room (land or space), location, and timeliness. There's only so much linear space for beachfront property. There are only so many pieces of property next door to Disneyland. The hotel can only put one party up in the Presidential Suite on New Year's Eve. To determine who the lucky recipient is, the holders of those rights are going to want to find out who is willing and able to pay the most in terms of things those holders want. In the general case, it's not going to be because they love the recipients. It's more commonly settled by force - none of the top totalitarians has difficulty getting the vacation spot or anything else they want, however deprived it leaves the proles - but it's most commonly and best settled by trade, and trade means the people most willing and able to pay in terms of resources that the sellers want. This is not going to change for humans. Even the vast majority of hive insects do the absolute minimum they can get away with.

When you're talking about replacing capitalism, you're talking about restricting the number of choices someone has to find a better bargain - or none at all. You're usually talking about guns to the back of someone's head - that's the default solution in history, and the default assumption I'm going to have while reading your story, and I can count on the thumbs of one hand with digits to spare the number of believable exceptions I've seen in literature or anywhere else. Whether you realize it or not, you're talking about a restricted and declining standard of living, not a rich and plentiful one with increasing wealth - at least not for the masses. In the last forty years, the real cost of college in the United States has increased 297 percent - it's essentially four times as expensive in terms of how long the mean person has to work to pay for it. Why? Because it's subsidized by government and protected from competition by government and it's a gateway through which you must pass to be considered by many employers - even if the job requires no skills taught in college. By comparison, the real cost of a Happy Meal at McDonalds has fallen forty percent in the same time frame. Nobody's protecting McDonalds. Nobody is subsidizing McDonalds. Nobody is saying you have to go to McDonalds to get or keep your job, your home, or your spouse. They have to convince you their deal is the one you want. Otherwise, they end up with unsold Happy Meals that they spent resources to acquire and more resources to prepare. And everyone else wanting to sell you food is on the same treadmill - they have to convince you their deal is the one you want, and when somebody figures out a way to offer a better deal and still come out better in their own opinion, they are going to be rewarded by the market. That's capitalism - where everyone is incentivized to make the best and most efficient use of resources, because that's how they offer their customers a better deal, which gets people to want to take their deal, because they end up better off when people take their deal.

So writers, when you want to write about a place where everyone is better off and resources are plentiful and the standard of living is high and increasing, do you think you want to write about a place where everyone is competing to figure out the best deal to offer all their potential customers, all of whom have a plentiful number of alternative choices, or a place where everyone has a gun to the back of their head, however well hidden, and just does the minimum not to get shot?

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This page contains a single entry by Dan Melson published on September 3, 2019 9:02 AM.

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