Competitive Consumption

Partisans of molecular nanotechnology keep coming back to the theme of the devastation that they say will be caused to the world’s economic systems when it becomes possible to manufacture anything at no cost. Surely, they say, when goods cost nothing to make, then the money economy must wither away? I don’t accept the premise of this argument, but even if I did I think it is based on a misunderstanding of how economics works. The laws of economics, inasmuch as anything in that discipline can be described as a law, are really observations about human nature, and as such are not likely to be overturned on the basis of a mere technological advance. The key fallacy in this way of thinking is very succinctly put in an excellent book I’ve just finished: A nation of rebels: why counterculture became consumer culture, by Joseph Heath and Andrew Potter.

This book is mainly an entertaining polemic against the counterculture and the anti-globalisation movement. What’s relevant to us here is its gleeful demolition of the idea of postscarcity economics, as proposed by Herbert Marcuse and Murray Bookchin. This is the idea that once machines were able to take care of all our material needs and wants, we would be able to form a society based not on the demands of economic production, but on fellowship and love. It’s very easy to see the connection between this and the arguments made by the proponents of molecular nanotechnology.

The key concept in understanding what’s wrong with these ideas is the notion of a “positional good”. Positional goods get their value from the fact that not everyone can have them; people pay lots of money for an expensive and rare sports car like an Aston Martin, not simply because it is a nice piece of engineering, but explicitly because possession of one signals, in the view of the purchaser, something about their exalted status in society. The whole aim of much advertising and brand building is to increase the value of artefacts which often cost very little to make, by associating them with status messages of this kind. Very few people are immune to this, unless they live in cabins in the wilderness; for most of the middle class majorities of rich countries their biggest expenditure is on a house to live in, which by virtue of the importance of location and neighbourhood is an archetypal positional good.

When one realises how important positional goods are in market economies, the fallacy of the idea that molecular manufacturing would cause the end of the money economy becomes clear. In the words of Heath and Potter:

“What eventually led to the undoing of these views was the failure to appreciate the competitive nature of our consumption and the significance of positional goods. Houses in good neighborhoods, tasteful furniture, fast cars, stylish restaurant and cool clothes are all intrinsically scarce. We cannot manufacture more of them, because their value is based on the distinction they provide to consumers. The idea of overcoming scarcity through increased production is incoherent; in our society, scarcity is a social, not a material, phenomenon.”

7 thoughts on “Competitive Consumption”

  1. Great article !
    I’ve been read your blog for a while and would try to post a pertinent addendum…
    So IMHO, in the same way that you describe above, business models in the near future tend to be more concentrated on information content:
    matters of production processes; what have been done; the “data weight”; products are not defined in physical terms anymore (almost, and without chimical/physical needs to store information of course) but in informations that characterized them.
    This is the full abstraction of the product concept which is afterwards branded and sold…

    The creation of a global network (like a quantum network, if it would be possible) could make it a quite more closer to us. So…

  2. Richard,
    I dont think that the folks in the MNT community are saying that a nano-factory will eliminate all scarcity. As you pointed out there is limited space in the beautiful places like Hawaii. The limited time and attention of individuals is probably the most important fundamental scarcity. The total amount of solar energy that you can use with out causing massive habitat destruction is limited. The total amount of waste heat that the environment can absorb is limited. And then there is the giant political conflict brewing: politically powerful groups using the coercive power of government to create artificial scarcity.

    But even given all of the above, if nano-factories can be created they will have a very profound economic impact. First of all you seem to forget that there are billions of poor people who face real material scarcity every day. People who are not drinking clean water, who dont have a decent home to live in, who dont have adequate clothing, or supplies of food. Secondly, with nano-factories making more nano-factories you have a situation in witch you always have an over-capacity of productive equipment.

    Will nano-factories eliminate economics? No, but if nano-factories can be created, will they change many of the rules of the game? Definitely, yes

  3. I agree with Jim on this one. There’s several ways of looking at the ‘post-scarcity’ term. A common one among many I’d label ‘wild-eyed theorists’ would aim for nanotopia – what I’d expect them to define as a perfect place brought about by a perfect technology, nanotech. This is IMO unrealistic in a human lifetime, unless work on ‘curing’ human aging has much greater effect than I personally expect. (‘Course, I’ve been wrong before. *grin*)

    Another definition which I’d consider a bit more reasonable would involve the end of scarcity in the basics for human life – shelter, food, warmth, medicine, I’d even throw communications onto the list. This is IMO a more realistic goal in a human life time, even based on a relatively simple nanotechnological capability along the lines of hydrated diamondoid. (If (big if!) the tech goes beyond this point, the workload gets easier)

    Note that this would put a large amount of people out of work, if it comes to pass – bulk goods other than foodstuffs would be knocked for a loop. This would affect not only factory workers, but also truckers, chain stores, and many of the other people working the process from raw materials to purchase.

    This won’t kill industry totally, however, as Richard points out. However, it WOULD greatly affect the balance of power people take for granted today. And that IMO would likely bring many to dig in their heels and fight nanotech development solely from an interest to maintain their own personal power base(s). (Not what they’ll claim to be their motives to fight nanotech, ‘course – but what my understanding of human nature brings me to expect may well occur.)

    However, there’d be a few new power blocs forming to fill the potential void – the designers of nanotech ‘templates’ (whatever their form), the purveyors of nano feedstock(s), and those with large areas of otherwise unusable land in temperate or warmer environments might well come to be the new barons of the age. Of course, there’ll be a socioeconomic battle between the current and future blocs, of which I believe we’re beginning to see the initial moves.

    To close the loop – no, there won’t be a perfect lack of scarcity even given truely universal assemblers and unlimited templates of things to make, much less what seems more likely in the next couple generations. However, this technology DOES have a significant chance of kicking the pins out of the current economic situation, leading to a new status quo that has radically different choke points and power blocs.

    -John

  4. Daylon: yes, with or without nanotechnology manufacturing is becoming a smaller and smaller part of the world economy, being replaced by much less tangible ways of adding value. Of course, it won’t go away entirely, as we’ll still need artefacts, but the amount of effort that needs to be devoted to making them will get rather small. This is exactly the same thing that happened to farming when the industrial revolution came; in a developed country the fraction of the economy devoted to agiculture is very small (though of course that doesn’t mean the sector isn’t important; we still have to eat).

  5. Jim, John, I agree with some of what you say. But, although you are quite right to raise the important point of the many people without access to the necessities of life, it isn’t completely obvious that this situation is simply a result of material scarcity. There’s a big argument amongst development economists about this, with people like the Nobel Laureate Amartya Sen rather persuasively arguing that the link between material scarcity and poverty isn’t as direct as it may seem. To grossly caricature a sophisticated argument, the reason people die in famines isn’t because there isn’t enough food, it’s because poor people don’t have enough money to buy it. In this sense, you can argue that also in the third world scarcity is a social, not a material, phenomenon.

    On the other hand, the scarcity of clean and sustainable energy is very real (and given abundant energy, pretty much all other material needs can be met). I’ve argued elsewhere that nanotechnology of all kinds are going to be very important in solving this problem. It’s true that the total amount of solar energy available without great environmental damage is limited, but that limit is large, certainly big enough for 10 billion people to live comfortably on. I don’t really understand your argument about waste heat. The earth currently is in a rough energy balance – solar energy comes in (in the form of short wavelength light and UV), and the earth radiates an equal amount of heat back out into space (in the form of infra-red). I don’t see that what we do to the solar energy in the meantime alters that balance. In truth, what we are doing when we are harvesting solar energy isn’t so much collecting energy, but exploiting the low entropy of the incoming solar radiation to do useful work before expelling the energy back into space in a higher entropy form.

  6. Richard, your point about “positional goods” is valid, but not the complete story. People will pay lots of money for positional goods. Thats why Louis Vitton bags and the like are popular. However, if the cost of making things does drop through the floor in the manner that the nanotech people think it will, it becomes much easier to “drop out of the system” (i.e. not buy positional goods) and, yet, have a good standard of living. For example, I like the budget adventure (lonely planet) travel thing. If “nanotech” makes it easy for me to do this while having to spend very little time working to make money, there will be more than a few people who will do this.

    Also, the emphasis on positional goods varies between societies. One of the things I do appreciate about Europe and Europeans (even though I’m a hard-core Ayn Rand capitalist) is that the Europeans I have met seem to be less obsessed about the positional good consumption life-style than most Americans that I know.

    Another point: If nanotech turns out to be as good as it proponents predict, the O’neill space colony thing becomes ALOT easier to do and I suspect that lot of people are going to be into this as well. Who knows, maybe an Island three space colony made out of fullerines will become the ultimate positional good.

  7. Richard Jones wrote in part, “To grossly caricature a sophisticated argument, the reason people die in famines isnt because there isnt enough food, its because poor people dont have enough money to buy it.”

    *chuckle* That arguement’s two-edged. If that’s the case, what’s wrong with finding a way to lower the price of food until there’s a point at which everyone *can* buy it?

    I agree, there are social issues as well as economic issues involved in poverty. Throughout history we’ve tried a large numbers of different approaches to ‘solving’ the social issues. IMO, they appear to be highly resistant over the long term to externally derived solutions, but occasionally can be changed from /internally/ derived solutions. (Genocide being one of the few external ‘solutions’ that can have lasting effects)

    One way people MIGHT assist the appearance and/or growth of internal solutions is to make sure the people who’d have to make the changes – typically the poor and disenfranchised – have enough to eat, a roof over their heads, etc.

    And that might be do-able with nanotechnology. Stand-alone devices to generate nitrogen rich fertilizers “from nothing” (ie – solar powered, drawing materials from the air) alone might make a major difference for some of the areas in question, just to pick the first example to come to mind.

    -John

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