Contra Rifkin (1): Food and Manufacturing will never be zero marginal cost

Excerpted from Eric Raymond:

“There are … holes below the waterline of Rifkin’s thesis. One is that atoms are heavy. The other is that human attention doesn’t get cheaper as you buy more of it. In fact, the opposite tends to be true – which is exactly why capitalists can make a lot of money by substituting capital goods for labor.

These are very stubborn cost drivers. They’re the reason Rifkin’s breathless hopes for 3-D printing will not be fulfilled. Because 3-D printers require feedstock, the marginal cost of producing goods with them has a floor well above zero. That ABS plastic, or whatever, has to be produced. Then it has to be moved to where the printer is. Then somebody has to operate the printer. Then the finished good has to be moved to the point of use. None of these operations has a cost that is driven to zero, or near zero at scale. 3-D printing can increase efficiency by outcompeting some kinds of mass production, but it can’t make production costs go away.

An even more basic refutation of Rifkin is: food. Most of the factors of production that bring (say) an ear of corn to your table have a cost floor well above zero. Even just the transportation infrastructure required to get your ear of corn from farm to table requires trillions of dollars of capital goods. Atoms are heavy. Not even “near-zero” marginal cost will ever happen here, let alone zero. (Late in the book, Rifkin argues for a packetized “transportation Internet” – a good idea in its own terms, but not a solution because atoms will still be heavy.)

It is essential to Rifkin’s argument that constantly he fudges the distinction between “zero” and “near zero” in marginal costs. Not only does he wish away capital expenditure, he tries to seduce his readers into believing that “near” can always be made negligible. Most generally, Rifkin’s take on production economics calls to mind the famous Orwell quote: “One has to belong to the intelligentsia to believe things like that: no ordinary man could be such a fool.”

But even putting all those mistakes aside, there is another refutation of Rifkin. In his brave impossible new world of zero marginal costs for goods, who is going to fix your plumbing? If Rifkin tries to negotiate price with a plumber on the assumption that the plumber’s hours after zero have zero marginal cost, he’ll be in for a rude awakening.

The book is full of other errors large and small. The particular offence for which I knew Rifkin before this book – wrong-headed attempts to apply the laws of thermodynamics to support his desired conclusions – reappears here. As usual, he ignores the difference between thermodynamically closed systems (which must experience an overall increase in entropy) and thermodynamically open systems in which a part we are interested in (such as the Earth’s biosphere, or an economy) can be counter-entropic by internalizing energy from elsewhere into increased order. This is why and how life exists.

Another very basic error is Rifkin’s failure to really grasp the most important function of private property. He presents it as only as a store of value and a convenience for organizing trade, one that accordingly becomes less necessary as marginal costs go towards zero. But even if atoms were weightless and human attention free, property would still function as a definition of the sphere within which the owner’s choices are not interfered with. The most important thing about owning land (or any rivalrous good, clear down to your toothbrush) isn’t that you can sell it, but that you can refuse intrusions by other people who want to rivalrously use it. When Rifkin notices this at all, he thinks it’s a bad thing.”

1 Comment Contra Rifkin (1): Food and Manufacturing will never be zero marginal cost

  1. AvatarAnna
    Rifkin’s talk to German bankers.

    1. Rifkin shows that privately owned cars are going the way of books and music. They are being shared because it makes more business sense, ie. It is cheaper for the consumer and more efficient for society as a whole. 2. Centralised energy production is giving way to a distributed digitalised renewable energy system, replacing fossil fuels. The EU has agreed to find the money to roll out a smart grid for the whole of Europe, 3. 3D printing is reducing the cost of many durables, maybe not to zero, but certainly making abundance a possibility. 4. Collaboration is happening through the Internet on a huge scale. There is a dark side to all of this scenario, which means there is no guarantee that we will survive as a species, in this era of species extinction.

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