Production, the process of working to produce more valuable and useful goods and services than what is naturally available, is fundamental to economics. In fact, economics has historically viewed that there are really only two types of human activity: consumption and production. Further, mainstream economics (and by implication, the ideologies and policies of economic systems) has been based on two other assumptions about the relationship between people, resources/goods, and these two activities of consumption and production. The 21st century might challenge these assumptions and might disrupt our economic systems. These two assumptions are:
- Production is only done in order to have more goods to consume. At first, this seems obvious. We work and produce so that we can have more and better goods to consume. In a complex market economy, this means that individuals go out into the labor market, get jobs, and go to work in order to get paid. They then take the pay check to go buy the goods/services they want or need and then do what they really want: consume. Virtually all economic models, theories, and therefore systems, are based upon this assumption. It certainly has a lot of truth to it. But is it strictly true? Do people, or would they if given a chance, engage in production simply because they enjoy producing? Historically this has been a moot question since only the tiniest percent of society could possibly survive without working for pay. But incomes and general production technology have risen to an unprecedented level today. People have alternatives. In other words, what if people prefer producing to simply consuming more stuff, even if they can’t sell their output?
Let’s a take a simple example: the phenomenon of YouTube. It takes time to create a video, particularly a well-edited or planned video. It’s work. It’s production. Yet millions of people apparently are choosing to spend their time producing videos and making them available for free. The same is true of blogging. Hundreds of thousands of people blog regularly. They receive no pay and it is a lot of work. It is a labor of love. Yet mainstream economics has little room in theory for the products of a labor of love. The assumptions behind mainstream economics and the assumptions that underpin our economic systems say this shouldn’t happen. The historical thinking is that these people should choose not to produce videos since they won’t be paid and should therefore prefer to spend their time watching (consuming) somebody else’s videos. - Resources and Goods are Scarceand therefore there must be Prices. Indeed, the first thing Principles of Economics students are taught is that resources are limited, desires and needs infinite, and therefore we have scarcity. The economic system is about dealing with scarcity. (you remember this from Unit 1 and 2, I hope). But the truth is that while many things, and historically most things, are scarce, not everything is scarce or limited. True, physical items and resources are scarce. When the discipline of economics was first being written, physical things were what mattered: food, shelter, transportation, etc. But what of the other things, the things that because they are not physical, they are not necessarily scarce or limited? What about things like knowledge? Or love? Or friendship or camaraderie? These are goods, they just aren’t traditional economic tangible goods. They aren’t easily bought or sold and property rights are not easily established for them. (although there’s no shortage of marketers that try to tell us that their product, when purchased, will bring us love!). When knowledge is reproduced, it adds to the supply.Let’s consider the case of digital information. In the physical world, the traditional assumptions of economics and property hold true. A particular copy of a book or a music CD is either owned by me or owned by you. If I give or sell you my copy, you now have it and I no longer possess it. But knowledge and digital information is different. The traditional assumptions of scarcity and property don’t necessarily hold. If I have a digital book or digital music (such as an MP3 file), I can give or sell it to you without using any additional physical resources and without denying it to myself.
The issue or challenge I’m posing here is the question of what are the implications for our economic systems if the traditional scarcity assumptions are no longer valid. After all, researchers have shown that the world actually now produces enough food to feed everybody on the planet (although it’s unclear if this is sustainable the way we currently do it). The problem of famine and starvation is largely one of distribution and income, not fundamental shortage of food across the planet
Video to Watch
TED Talk: Yochai Benkler on the new open-source economic (18 minutes)
Yochai Benkler explains how collaborative projects like Wikipedia and Linux represent the next stage of human organization.
On the New Open Source Economics (alternate link if embedded video doesn’t display above)
What happens or what does it mean if large numbers of people spontaneously produce things, valuable things, without demanding to be compensated for them?
What are the implications for an economic system and society when the highest priorities are obtaining more knowledge, love, and friendship?
What if, through technology, we come close to solving the problem of scarcity of food and shelter?