Classical capitalism, peer production, and the consequences of limited demand

What we can at best hope to do is shift the emphasis away from the fourth path (post-scarcity technology used to create artificial scarcity) and towards the first three (a basic income, a gift economy, and/or peer production — all using post-scarcity technology to create abundance).

A meditation by Paul Fernhout, who distinguishes four reactions to increased abundance, one of them being renewed demands to artificially impose scarcities so that market mechanisms can continue to operate even when they are not needed.

See also for background, an earlier article by Roberto Verzola: Finite demand makes relative abundance possible.

Paul Fernhout:

Classical macroeconomics assumes demand for consumer goods and services is unlimited (infinite), and so it makes sense to automate the production of these goods in centralized factories to the point where they are produced as cheaply as possible (or to redesign them to that end), even if the consequence is unemployment from automation and centralization and redesign, since (the theory goes) the unemployed will be able get jobs in other centralized factories producing other consumer goods and services to meet the assumed never ending infinite demand for more stuff and services. Essentially, infinite demand means infinite jobs.

Also, based on the thinking that flows from this assumption, there is no need for a basic income, because there will always be good jobs producing goods and services, even if there may be some temporary discomfort while the unemployed search or new jobs in new industries making new goods and services (thus, maybe a little need for temporary unemployment insurance). The Supply and Demand Curve, at the core of such classical economic thinking, reflects this assumption of infinite demand by the asymptotic tail going to the left approaching but never touching the X-axis. The theory goes that each commodity is like this, and when you add up all these microeconomic curves for an infinite demand by people for each product if it was only cheap enough, you get a macroeconomic curve for our society that is the same shape reflecting an infinite demand for all products. It is easy to see limited demand for any specific good on a microeconomic level (my free iPhone example below, showing eventual market saturation), but the macroeconomic implications are easily handwaved away for any specific produce, even as the big curve depends on adding up the little curves — essentially, there is some slight of hand here by mainstream economists, where the sum of macroeconomic demand is somehow greater than the microeconomic parts. 🙂

However, if you instead assume limited demand (or, at least, demand growing more slowly than productivity, which has essentially the same effects) for all products added over all of an emotionally healthy society, where that tail of the curve on the Supply and Demand graph touches the X-axis at some point of material saturation (or service saturation) the macroeconomic implications are very different from classical economics. If that was true, that the curve touches the X-axis, then there would *not* be an infinite demand for goods and services, and so there would not be an infinite number of jobs as productivity increases so less people can produce more goods. So, rising productivity (given a stable population) would mean rising unemployment, either directly by layoffs or indirectly by “jobless recoveries” as we have already experienced in the USA. There would be no classical way for these unemployed people to get jobs, because there would be no demand for more goods and services beyond what were already being produced by other people augmented by machinery. And, with exponentially increasing technological capacity, including the development of ever more human-like robots, this jobs situation will only get worse from here on, as Marshall Brain talks about in “Robotic Nation” and “Manna”.

There are at least four possible interpretations of the implications of limited demand (beyond mass unemployment). These interpretations, or paths of future development for our global society, are not necessarily mutually exclusive, although our society may tend more towards one depending on social movements.

A first interpretation is that there should then be a basic income, so everyone can have access to this productivity of goods and services by the few with jobs in a society. This is point made in the Triple Revolution memorandum in 1964, as well as Marshall Brain’s Manna. For decades, there have been social movements towards this end; related laws were passed by the US House of Representatives (but no the Senate) during the Nixon administration, and there are several other historic and ongoing examples of this (like Canada, the Netherlands, Brazil, Namibia, and South Africa).

A second interpretation is that, at some point, the few can produce so much for the many, that it is easy to find a few who will produce just because they enjoy producing or do it because they want the results themselves, and thus we can have a gift economy. Debian GNU/Linux is a good example here, with a few hundred core maintainers providing free software used by a few hundred million people every day (including through Google searches). This is an example of a million-fold increase in value, with a few people mainly producing software for themselves but making possible a vast digital abundance of free and open source software and content due to extremely cheap (essentially free) duplication costs. We are just starting to see the beginnings of that in the physical world too, like with RepRap, CupCake CNC, [email protected], and other 3D printers under free licenses. This is a digital side of peer production.

The third intepretation is that at some point of productivity (probably already reached with CNC machines, 3D printers, agricultural crop diversity, permaculture, and the internet), it makes more sense to focus on the enjoyability of the work as play (Bob Black’s point in “The Abolition of Work”) as well as to emphasize the social nature of the work, even if productivity is not maximized (thus, leading to a reorganization of social relationships towards some joyful goal). E.F. Schumacher talks about this in “Buddhist Economics”. An example is various sorts of physical peer production done for a medium of exchange or barter, so, a local bicycle repair shop participating in a local currency system is an example of that, as would be all the other local community businesses also participating in this local economy. This physical side of peer production has different rules than the digital side because of high duplication and materials costs, but the digital and physical versions might converge as 3D printing and other types of digital fabrication spread, and as cradle-to-cradle design makes local recycling and resource extraction and more feasible in an environmentally responsible way.

The fourth interpretation is pathological IMHO. There are several related aspects to it, which essentially define our dominant culture today both in the USA and many other places. It is the thinking that demand needs to be stimulated by ever more advertising to get people to buy goods and services they don’t really need and which don’t really make them more happy. It is the thinking that production needs to be sabotaged by destroying equipment (by intelligence operatives or even unions) or that peer production needs to be slowed by suppressing ideologies of sharing and abundance (like shutting down the old Napster). It is the ideology of making production harder by extending copyrights and expanding patents in scope. It is the thinking behind creating day prisons to keep young people from producing things as well as dumbing them down to the point where they can only be mindless consumers, compliant but unproductive and uncreative workers, and where they will be obedient soldiers destroying abundance of lives and infrastructure when ordered. It is the thinking that creates a university PhD system putting out “Disciplined Minds” who can’t examine these questions for ideological reasons or because they have not been assigned to do that. It is also to plan for the excess goods to be removed through war preparation (stockpiling arms) and eventually war making (using arms to destroy abundance). In this fourth state of mind, a global nuclear war to wipe the Earth clean of messy abundance would be a very good thing, because the capitalism could start over again with scarcity, thus preserving the ideological underpinnings of our capitalist (and imperialist) society by avoiding the part of the Supply and Demand curve that is drawn in error. (James P. Hogan’s novel “Voyage From Yesteryear” has a character think that for a moment.)

So, abundance threatens this fourth world view, but it is this fourth world view that is dominant in many parts of our society, and may well have been time and time again in the past (see Daniel Quinn’s writings). And, the irony is, the people who most support this world view to date have had the most access to post-scarcity technologies to spread, enforce, and realize this world view — so they wield post-scarcity technologies like biotech, nuclear tech, computers, robots, nanotech, bureaucracy, the internet, the printing press, and many other things to suppress a post-scarcity society, by using post-scarcity technology to create and maintain artificial scarcities. The use of guns, germs, an steel to destroy most of the abundance based societies of the Americas in the second half of the second millennium (1500 to 2000) were an example of this. Einstein saw part of the problem when he said: “The release of atom power has changed everything except our way of thinking…the solution to this problem lies in the heart of mankind. If only I had known, I should have become a watchmaker.” But he missed that even mainstream watchmaking fits into this problem, both in how it is done in centralized factories now and in the nature of portable timepieces in relation to social control (see Philip Zimbardo’s recent work on “The Time Paradox”). 🙁 But, Einstein got the big picture part about the change of heart right. 🙂

So, “limited demand” is the theoretical underpinnings of what makes each of these first three possibilities a path that *should* to be pursued as mainstream economics generates “divide by zero” errors from limited demand; otherwise, some people will be tempted to continue along the fourth path that results from scarcity fears from trying to make a system work that is built around a flawed assumption, which probably leads eventually to somewhere most of us don’t want to go (global war to destroy abundance, to make the facts fit the theory).

Still, as I said at the start, all four paths are not necessarily mutually exclusive, and our society is currently pursuing all four of them at once in different ways. What we can at best hope to do is shift the emphasis away from the fourth path (post-scarcity technology used to create artificial scarcity) and towards the first three (a basic income, a gift economy, and/or peer production — all using post-scarcity technology to create abundance).”

1 Comment Classical capitalism, peer production, and the consequences of limited demand

  1. Michelle

    If you are weary about the effect of new technological advancements like 3D printing, take a look at what they can do before you make any serious judgment calls about their impact of society and business. 3D printers have revolutionized rapid prototyping in such a way that it makes this important ability accessible to almost anyone.

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