Jeremy Rifkin: 3D Printing may usher in an era of “free”, commons-oriented, material production

Summers and DeLong glimpsed that as marginal costs approach zero, “the competitive paradigm cannot be fully appropriate” for organising commercial life, but admitted “we do not yet know what the right replacement paradigm will be”. Now we know. A new economic paradigm – the collaborative commons – has leaped onto the world stage as a powerful challenger to the capitalist market.

The following entry is related to Jeremy Rifkin’s new book: * The Zero Marginal Cost Society: The Internet of Things, the Collaborative Commons, and the Eclipse of Capitalism. by Jeremy Rifkin. Palgrave Macmillan, 2014 Republished from Jeremy Rifkin‘s editorial in The Guardian: “Karl Marx spent a lifetime trying to uncover what he suspected were the deep contradictions that drove the capitalist system forward but that would one day lead to its demise. Although his search revealed a number of important ancillary contradictions, his focus on the relationship between the means of production, surplus value and alienated labour kept him from unmasking an even deeper paradox at the heart of the system. In a capitalist market, governed by the invisible hand of supply and demand, sellers are constantly searching for new technologies to increase productivity, allowing them to reduce the costs of producing their goods and services so they can sell them cheaper than their competitors, win over consumers and secure sufficient profit for their investors. Marx never asked what might happen if intense global competition some time in the future forced entrepreneurs to introduce ever more efficient technologies, accelerating productivity to the point where the marginal cost of production approached zero, making goods and services “priceless” and potentially free, putting an end to profit and rendering the market exchange economy obsolete. But that’s now beginning to happen. Over the past decade millions of consumers have become prosumers, producing and sharing music, videos, news, and knowledge at near-zero marginal cost and nearly for free, shrinking revenues in the music, newspaper and book-publishing industries. Some of the US’s leading economists are waking up to the paradox. Lawrence Summers, former US treasury secretary, and J Bradford DeLong, professor of economics at the University of California, Berkeley, addressed this in August 2001, in a speech delivered before the Federal Reserve Bank of Kansas City. Summers and DeLong focused their presentation on the new communication technologies that were already reducing the marginal (per-unit) cost of producing and sending information goods to near zero. They began by acknowledging that “the most basic condition for economic efficiency: [is] that price equal marginal cost”, and further conceded that “with information goods the social marginal cost of distribution is close to zero”. They then went to the crux of the problem. “If information goods are to be distributed at their marginal cost of production – zero – they cannot be created and produced by entrepreneurial firms that use revenues obtained from sales to consumers to cover their [fixed set-up] costs … [companies] must be able to anticipate selling their products at a profit to someone.” Summers and DeLong opposed government subsidies to cover up-front costs, arguing that they destroy the entrepreneurial spirit. Instead they supported short-term monopolies to ensure profits, declaring that this is “the reward needed to spur private enterprise to engage in such innovation”. They realised the trap this put them in, recognising that “natural monopoly does not meet the most basic condition for economic efficiency: that price equal marginal cost” but nonetheless concluded that in the new economic era, this might be the only practical way to proceed. The pair had come up against the catch-22 of capitalism that was already freeing a growing amount of economic activity from the market, and threw up their hands, favouring monopolies to artificially keep prices above marginal cost, thwarting the ultimate triumph of the invisible hand. This final victory, if allowed, would signal not only capitalism’s greatest accomplishment but also its death knell. While the notion of near-zero marginal cost raised a small flurry of attention 12 years ago, as its effects began to be felt in the music and entertainment industry and newspaper and publishing fields, the consensus was that it would likely be restricted to information goods, with limited effects on the rest of the economy. This is no longer the case. Now the zero-marginal cost revolution is beginning to affect other commercial sectors. The precipitating agent is an emerging general-purpose technology platform – the internet of things. The convergence of the communications internet with the fledgling renewable energy internet and automated logistics internet in a smart, inter-operable internet-of-things system is giving rise to a third industrial revolution. Siemens, IBM, Cisco and General Electric are among the firms erecting an internet-of-things infrastructure, connecting the world in a global neural network. There are now 11 billion sensors connecting devices to the internet of things. By 2030, 100 trillion sensors will be attached to natural resources, production lines, warehouses, transportation networks, the electricity grid and recycling flows, and be implanted in homes, offices, stores, and vehicles – continually sending big data to the communications, energy and logistics internets. Anyone will be able to access the internet of things and use big data and analytics to develop predictive algorithms that can speed efficiency, dramatically increase productivity and lower the marginal cost of producing and distributing physical things, including energy, products and services, to near zero, just as we now do with information goods. Summers and DeLong glimpsed that as marginal costs approach zero, “the competitive paradigm cannot be fully appropriate” for organising commercial life, but admitted “we do not yet know what the right replacement paradigm will be”. Now we know. A new economic paradigm – the collaborative commons – has leaped onto the world stage as a powerful challenger to the capitalist market. A growing legion of prosumers is producing and sharing information, not only knowledge, news and entertainment, but also renewable energy, 3D printed products and online college courses at near-zero marginal cost on the collaborative commons. They are even sharing cars, homes, clothes and tools, entirely bypassing the conventional capitalist market. An increasingly streamlined and savvy capitalist system will continue to operate at the edges of the new economy, finding sufficient vulnerabilities to exploit, primarily as an aggregator of network services and solutions, allowing it to flourish as a powerful niche player. But it will no longer reign. Hundreds of millions of people are already transferring bits and pieces of their lives from capitalist markets to the emerging global collaborative commons, operating on a ubiquitous internet-of-things platform. The great economic paradigm shift has begun.”

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