Is The Zero Marginal Cost Society The End Of Capitalism... Or A Way To Fix Capitalism?

Economics

from the interesting-book,-questionable-premise dept

Tue, Apr 1st 2014 1:06pm — Mike Masnick

As regular readers here on Techdirt will know, I've been talking about the importance of understanding what happens to economic equations when the marginal cost of something is zero for over 15 years already. It's a very common theme around here. One of my complaints has been that those who came out of an economic world viewpoint in which economics is entirely about dealing with the efficient allocation of scarce resources, tend to fall into a weird intellectual black hole when they try to put a zero in the equation. But I've long argued that this is the wrong way to look at things. The basic equations still work fine, it's just that you have to recognize the flip side of zero is infinity. When you have a zero marginal cost item, you are creating an infinite good -- a resource that can never run out. When you begin to realize that you have a new form of resources -- inputs in economic terms -- suddenly you realize that you're massively expanding the pie, allowing incredible new things to be created from that limitless pool of resources. That's powerful stuff.

So, as you can imagine, I was excited when the publisher of Jeremy Rifkin's new book, The Zero Marginal Cost Society: The Internet of Things, the Collaborative Commons, and the Eclipse of Capitalism, reached out to send me a promo copy a few weeks ago. I am only halfway through it, so I'll probably write more about it when it's done, and there's an awful lot of really interesting examples and profound thinking going on. So I'm really enjoying the basic part of it. However, there's one aspect of the book that I have trouble with, and it's exemplified in Rifkin's op-ed in the NY Times a few weeks ago, called The Rise of Anti-Capitalism. You can probably already suspect the problem I'm seeing, based on the title. The explanation of zero marginal cost and how more and more of our economy is heading there is spot on. And, as we've been noting for over a decade as well, this goes way, way beyond just "content" like music and movies. It's going to impact nearly every important industry in our lives:

The first inkling of the paradox came in 1999 when Napster, the music service, developed a network enabling millions of people to share music without paying the producers and artists, wreaking havoc on the music industry. Similar phenomena went on to severely disrupt the newspaper and book publishing industries. Consumers began sharing their own information and entertainment, via videos, audio and text, nearly free, bypassing the traditional markets altogether.

The huge reduction in marginal cost shook those industries and is now beginning to reshape energy, manufacturing and education. Although the fixed costs of solar and wind technology are somewhat pricey, the cost of capturing each unit of energy beyond that is low. This phenomenon has even penetrated the manufacturing sector. Thousands of hobbyists are already making their own products using 3-D printers, open-source software and recycled plastic as feedstock, at near zero marginal cost. Meanwhile, more than six million students are enrolled in free massive open online courses, the content of which is distributed at near zero marginal cost.

Frankly, I think the power of zero marginal cost goods -- or, as I prefer to call them, infinite goods -- is almost entirely ignored in energy, manufacturing and education (and, importantly, also in healthcare and finance). So it's certainly encouraging to see Rifkin highlight where this is all heading. Where I run into trouble, however, is his belief that this then leads to "the end of capitalism" or "anti-capitalism." To be clear, he explains how what comes out of this, a more collaborative society, will be a great thing. And, again, there's some agreement there. I just think that it's still very much capitalism. Capitalism does not mean that collaboration does not happen. In fact, collaboration is a key part of a well-functioning capitalist society. Ronald Coase famously laid out his theory of the firm in 1937, which explains how transaction costs are a key element in leading people to create long term collaboration. A zero marginal cost world will change the nature of those transaction costs, and will certainly change the nature of collaboration and companies, but it's not anti-capitalist. It's actually more exactly capitalist, where collaboration takes place with more transparency and more information. Those who believe that collaboration is anti-capitalist tend to misunderstand capitalism -- either as extremist Randian Objectivists, or those so opposed to capitalism, often based on believing capitalism is what Randian Objectivists say it is.

Take, for example, this aspect of Rifkin's argument in the NY Times piece:

THE unresolved question is, how will this economy of the future function when millions of people can make and share goods and services nearly free? The answer lies in the civil society, which consists of nonprofit organizations that attend to the things in life we make and share as a community. In dollar terms, the world of nonprofits is a powerful force. Nonprofit revenues grew at a robust rate of 41 percent — after adjusting for inflation — from 2000 to 2010, more than doubling the growth of gross domestic product, which increased by 16.4 percent during the same period. In 2012, the nonprofit sector in the United States accounted for 5.5 percent of G.D.P.

[....]

This collaborative rather than capitalistic approach is about shared access rather than private ownership. For example, 1.7 million people globally are members of car-sharing services. A recent survey found that the number of vehicles owned by car-sharing participants decreased by half after joining the service, with members preferring access over ownership. Millions of people are using social media sites, redistribution networks, rentals and cooperatives to share not only cars but also homes, clothes, tools, toys and other items at low or near zero marginal cost. The sharing economy had projected revenues of $3.5 billion in 2013.

Except, when you look, the most successful and disruptive examples of this "collaborative" approach are not non-profits or civil society, but rather perfectly capitalist companies, that have actually unlocked tremendous potential for revenue not just for themselves, but their users. Things like AirBnB, Uber, Lyrt, Sidecar, FlightCar, RelayRides, Zaarly, LendingClub, AirTasker, Kickstarter, LiquidSpace and many, many more are disrupting all sorts of industries, but doing so in ways that are actually about the more efficient use of resources, unlocking potential that had previously been locked up (often because the transaction costs were too high). But they're not anti-capitalistic at all. They're making capitalism much better. They're helping to move away from power being held by just a few large companies, towards ones where individuals have more power directly.

These aren't non-profits or civil society creating these disruptions, and it seems odd for Rifkin to imply that's what's happening. That's not to knock non-profit organizations or civil society groups -- both of which do great things in many cases. But it conflates a variety of different issues to argue that the response to a zero marginal cost society and infinite goods is that non-profits and civil society "take up the slack." Instead, what we are seeing is that new forms of (very capitalist) companies are forming. They're disruptive -- but disruptive in a good way. They're often about providing more economic freedom and power out to users, such that the transactions are actually beneficial to all players, rather than having a few large companies hoarding the power in the middle.

But having companies hoard power has never been true capitalism in the first place. It's always been the problem that occurs when you have transaction costs that are too high, sometimes driven through political and regulatory capture, allowing certain firms to gain monopoly or oligopolistic control over certain markets, allowing them to create economic friction, increase transaction costs, and keep most of the value created, rather than distributing it to the end points. However, the new disruptive players in the market are often reversing that trend. They're increasing trust, decreasing transaction costs, spreading much of the value to the end points, and simply taking a small cut of the transaction along the way. That's not anti-capitalist, or the "end of capitalism" -- it's about a better recognition of what true capitalism is supposed to be about: more efficient transactions, with minimal friction, where all parties benefit from the transaction.

So there's plenty that I find compelling in Rifkin's book and theories, but I think that he makes a leap too far in arguing that it somehow goes against capitalism, or that civil society and non-profits are somehow "the solution" to a problem that's not clearly a problem.

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Filed Under: capitalism, economics, efficiency, infinite goods, jeremy rifkin, non-profits, peer economy, sharing economy, transactions, zero marginal cost

87 Comments

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Ninja (profile), 1 Apr 2014 @ 12:15pm

It's interesting. We are going to have to review the current market settings if we want to go through as a species. The environment, the resources can't keep up with the ever decreasing product life-cycles. On one front, things will get expensive enough that serious recycling efforts will actually be feasible. And on the other environmental collapse will cause enough losses that will force people to cooperate and go environmentally correct for real - that considering the collapse can be reverted before serious, irreversible harm to us as a species happen.

I can also see the shift towards a more services-centered economy. It is already happening. Some services got insanely expensive because people see them with prejudice (go to college or you'll be a loser, the gardener is a loser even though he has a $90k car and you are struggling to get a job despite of your degree). And then you have entertainment which is the part that is currently boiling with activity. When you see it as a service and not a product things star making more sense.
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James Jensen (profile), 1 Apr 2014 @ 12:39pm

Perhaps the problem is "capitalism"
The term "capitalism" is one of those terms that seems to mean whatever the speaker needs it to mean to make their point, leading to wildly different connotations, with "an ideal free market," "real-world corporatism," "strong property rights" being some of the main contenders. For that matter, at least twice now I've seen the USSR described as capitalism with only one capitalist ��once by a conservative and once by socialist.

Someone opposed to one of these types of capitalism might entirely embrace another. Kevin Carson's "free-market anti-capitalism" is a good example.

So maybe both of you are right. Infinite goods will both destroy capitalism and fix capitalism. It just depends on which sort you're talking about.
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Mason Wheeler (profile), 1 Apr 2014 @ 1:22pm

The problem, as you suggested, is the Objectivists. For decades they've been a very influential voice defining capitalism as the twisted monstrosity Ayn Rand had in mind, to the point where today, people espousing the actual theories and principles of Adam Smith get accused of being dirty commies. And if infinite goods is gonna destroy that capitalism, where do I sign up?

Objectivists are a blight on society, and while I hesitate to use terms like "guilty until proven innocent" even as hyperbole, they need to be regarded with the same "treat as suspicious by default" viewpoint as Scientologists, and for the same basic reason: a key defining characteristic of practitioners is their religious adherence to an ideology that is actively and maliciously harmful to those around them.
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John Fenderson (profile), 1 Apr 2014 @ 1:38pm

Re:
I can't click "insightful" enough for this comment.
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mr. sim (profile), 1 Apr 2014 @ 1:40pm

the only way to fix capitalism is to remove corporate person hood, and to update the laws so that when CEO's and other corporate executives that commit, allow or order crimes to be committed they can be prosecuted up to and including capital offenses.
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Nevian Caernarvon, 1 Apr 2014 @ 1:47pm

Re:
The best solution is to give the Objectivists what they want; to be sent away from the rest of society.

The problems with a philosophy are not obvious to those who subscribe to it until they experience it in isolation.
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Anonymous Anonymous Coward, 1 Apr 2014 @ 1:51pm

Two Forces
First we have the old-guard-entrenched-military-industrial-espionage-entertainment-government complex control freaks who claim they are trying to 'turn' the big ship, but it keeps on returning to the known course as there might be icebergs out there. Darn the ship.

Second we have the free-minded-open-source-get-rid-of-the middle-man-what-can-the-Internet-do-for-me-today crowd who keep screaming, "The water is warm, no icebergs", as they swim in lucrative waters.

The first does not recognize the second as there is no 'control freak' in them, and that is simply not normal. The second sees the first as the embodiment of many things that should not be, and are dazzled by the audacity of the former. Finding lines of communication between such disparate groups is indeed a daunting task.
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ChrisB (profile), 1 Apr 2014 @ 2:00pm

Re:
In this world of rampant government spending and debt, regulatory monstrosities that create bubbles and then bail out the bad players, and huge unfunded entitlements that will destroy future generations like a tsunami, I think a little Objectivism might help.

Some government is required, of course. But the government we have now is not that. Just look at the tax code to see what governments tend to do: choke their host.
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ChrisB (profile), 1 Apr 2014 @ 2:02pm

Re:
Why do people keep saying this? Do you really want the owner of a flower shop to be personally liable if someone pricks their finger? The economy would collapse if employees are personally financially responsible for the firms liabilities.
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JohnDonohue (profile), 1 Apr 2014 @ 2:02pm

Re: guilty
Well, I guess that I am guilty, since I am an Objectivist for 50 years. Please inform me of my exact sins under "an ideology that is actively and maliciously harmful to those around them" and I will attempt contrition.

Miss Rand will have to atone on her own for defining capitalism as a "twisted monstrosity."
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OldMugwump (profile), 1 Apr 2014 @ 2:04pm

Capitalism is all about cooperation
Many years ago Eric Drexler (http://metamodern.com/) pointed out that competition in capitalism is about which firm can cooperate best (with customers and suppliers).

The whole "cooperation is better than competition" thing misses this point. The entire goal of the competition is to cooperate better than the other guy.
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JohnDonohue (profile), 1 Apr 2014 @ 2:04pm

Excellent
Yes, take the personhood away. Then companies will not have to pay any taxes.
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Anonymous Anonymous Coward, 1 Apr 2014 @ 2:09pm

Re: Re:
Citizens United might be a good place to start. I don't think that most people think of small businesses, incorporated or not, as being at issue. Big businesses with lots of power, money, influence (some call it graft) legislative tie-ins, and a complacent relationship with the government where they can settle yet "Take no claim of actual responsibility" is where they get their shorts all a-twisted.
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OldMugwump (profile), 1 Apr 2014 @ 2:13pm

Re: Capitalism is all about cooperation
Commenting on my own post--

Way too many business people miss this point, and focus their energies on hurting their competitors instead of helping their customers.

(Also, Jeremy Rifkin has some seriously strange ideas about thermodynamics and entropy - not exactly a poorly-understood part of physics. Take that into account when reading his stuff...)
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Mason Wheeler (profile), 1 Apr 2014 @ 2:19pm

Re: Re:
Typical Objectivist obfuscation.

update the laws so that when CEO's and other corporate executives that commit, allow or order crimes to be committed they can be prosecuted up to and including capital offenses.

Do you really want the owner of a flower shop to be personally liable if someone pricks their finger?

Since when is that a crime?

The economy would collapse if employees are personally financially responsible for the firms liabilities.

Maybe, maybe not. It probably wouldn't "collapse," but there's almost certainly some truth to the fear there. But no one was talking about holding employees financially liable for their firms' financial liabilities; the proposal was to hold executives and decision makers criminally responsible for their firms' crimes. If you honestly can't tell the difference... doesn't that kinda validate what I said about Objectivism above?
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The Mighty Buzzard (profile), 1 Apr 2014 @ 2:19pm

Re: Perhaps the problem is "capitalism"
It's pretty simple to see on both the income redistribution front and the paid for protectionism that we are NOT a capitalist society.

Were we a capitalist society, a zero marginal cost world would mean nothing at all to capitalism. There is always something scarce to sell, even if it is only good service for an infinite good. Capitalists do not piss and moan that nobody buys buggy whips, they start selling them to mistress spanks-a-lot then realize she uses a lot of other leather items and sells her those too.
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Beech, 1 Apr 2014 @ 2:24pm

Re: Re: Re:
Any business that would collapse if the CEO was held personally liable for wrongdoings is a business I would very much like to see collapse.
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Mason Wheeler (profile), 1 Apr 2014 @ 2:25pm

Re: Re: guilty
Gotta love the standard of proof here, considering I've never met you and know nothing of your history.

I think we need a new Internet Law for this scenario. You've heard of Internet debate rules such as Godwin's Law. In the same vein, allow me to offer up Wheeler's Law: in any long-running debate, the probability that one party will realize that they have no case and turn to mockery as an attempt to distract the readers approaches one.
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The Mighty Buzzard (profile), 1 Apr 2014 @ 2:26pm

Re:
I'm an objectivist of sorts and I see zero problem with infinite goods and zero marginal cost distribution. Value of a product or service comes from the purchaser not the seller because capitalism and objectivism demand free exchange of equal value. If nobody values your shit, you'd better rethink your business plan.

Objectivism isn't about businesses, it's about individuals. The people you're thinking about are fucktards, not objectivists, no matter what they call themselves.
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mr. sim (profile), 1 Apr 2014 @ 2:33pm

"Do you really want the owner of a flower shop to be personally liable if someone pricks their finger?"

someone pricking their finger is not a crime. i love how you come up with a civil matter that would be laughed out of the court as a reason to exclude executives from being forced to confront their criminal actions.

for example, a CEO ordering a private security officer to beat someone half to death, as a coercion tactic is something they get away with all the time. These CEO's came closer every day to bringing this country down than the hijackers on Sept 11 and not one of them is facing criminal charges. all the while the government is destroying the foundations of this country to bring "criminals and terrorists" to justice.
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Anonymous Coward, 1 Apr 2014 @ 2:34pm

Re: Excellent
They are not paying taxes anyway. They might pay a token tax here or there, but they get more back in tax breaks, subventions and so on.
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John Fenderson (profile), 1 Apr 2014 @ 2:38pm

Re: Re:
No True Scotsman
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John Fenderson (profile), 1 Apr 2014 @ 2:40pm

Re: Re:
The corporate veil and corporate personhood are different things. You can have one without the other.
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John Fenderson (profile), 1 Apr 2014 @ 2:40pm

Re: Excellent
How does that follow?
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Anonymous Coward, 1 Apr 2014 @ 2:41pm

Re: Re: guilty
It's been a while since I investigated Objectivism, so correct me if I'm deluded. It seems that Miss Rand had a very hard time dealing with this exact issue of non-scarce resources. Her writings seemed to push for very strong (eternal?) patents/copyrights.
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Anonymous Coward, 1 Apr 2014 @ 2:46pm

Re: Re: Re: guilty
Implying you didn't open with mockery bereft of substance...
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Anonymous Coward, 1 Apr 2014 @ 2:50pm

Re: Re: Re:
I don't think you understand what corporate personhood means if you believe that as it us literally the mechanism by which you can hold a corporation responsible without piercing the veil.
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Anonymous Coward, 1 Apr 2014 @ 2:52pm

Re: Re: Re:
Isn't the argument being made here. The argument being made here is that some people are outspoken idiots who assume the kennel 'objectivist.'
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Anonymous Coward, 1 Apr 2014 @ 2:56pm

Re: Re: Excellent
Personhood is the mechanism by which taxes are assessed. You really don't know what it us at all do you? Any time the law treats a corporation as a single entity that's corporate personhood.
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The Mighty Buzzard (profile), 1 Apr 2014 @ 2:58pm

Re: Re: Re:
Humorous but untrue. Objectivism is easily looked up in the dictionary or understood from Rand's works, as opposed to what constitutes a True Scotsman. In every one of her works you'll find extreme individualism and disgust with government protectionism of any kind.
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Mason Wheeler (profile), 1 Apr 2014 @ 2:58pm

Re: Re:
In this world of rampant government spending and debt, regulatory monstrosities that create bubbles and then bail out the bad players, and huge unfunded entitlements that will destroy future generations like a tsunami, I think a little Objectivism might help.

If you really think that, I got two words for you: Alan Greenspan.
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The Mighty Buzzard (profile), 1 Apr 2014 @ 3:10pm

Re: Re:
Yes, yes I do. That is a problem for tort reform not an argument for hiding behind "just doing your job".
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The Mighty Buzzard (profile), 1 Apr 2014 @ 3:11pm

Re: Re: Re:
You keep using that word. I do not think it means what you think it means.
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John Fenderson (profile), 1 Apr 2014 @ 3:12pm

Re: Re: Re: Re:
Yes, but the same can be said of every other philosophy (or religion). It's still a classic example of the No True Scotsman fallacy, just as it is when (for example) some Christians try to say that certain other Christians aren't "true" Christians because they behave in ways antithetical to their understanding of Christianity.

You may disagree with some people's implementation of Objectivism, but they're working from the same basic philosophy as you are and are therefore Objectivists. That you and they disagree about details doesn't change that.
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John Fenderson (profile), 1 Apr 2014 @ 3:14pm

Re: Re: Re: Re:
Then please enlighten me.
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The Mighty Buzzard (profile), 1 Apr 2014 @ 3:17pm

Re: Re: Re: Re: Re:
Except that they're plainly not when they go directly against one or more of the major tenets. Shall I now start calling myself a liberal because I like the color blue?

No. In this world many things are grey areas but this is not one of them because the entire philosophy is simple enough to be written on one page. Double spaced in a 16pt font even.
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John Fenderson (profile), 1 Apr 2014 @ 3:21pm

Re: Re: Re: Excellent
The term "corporate personhood" means something rather different now than when it was used in establishing how corporations work. Originally, it just meant that corporations are treated like people are for a very few simple things, such as the ability to enter into contracts. That personhood was never required in order to tax them.

It has expanded way beyond that now, in any case. Now corporations are treated much more like people -- they have first amendment rights, for example. It is that variety of corporate personhood that I'm talking about.

The entire thing is a legal fiction, of course, and that the phrase "personhood" was originally used was unfortunate as it later became construed to mean things it was never meant to mean. In this respect, the phrase is quite a bit like "intellectual property".

Being legal fictions, there is no inherent reason why the concept of "personhood" needs to be involved in order to allow corporations to exist. We could have made up an entirely different concept to achieve the same goal.
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Jay (profile), 1 Apr 2014 @ 3:31pm

Confirmation bias?
Except, when you look, the most successful and disruptive examples of this "collaborative" approach are not non-profits or civil society, but rather perfectly capitalist companies, that have actually unlocked tremendous potential for revenue not just for themselves, but their users.

Uhm... Isn't it easier to create a capitalist organization than it is one with a different model in mind? Valve's success comes from its unique structure. There's advantages and disadvantages, but after reading his story, it seems that what he's saying is that the type of organization will not have the profit motive as in capitalist organizations.

While BnB, Uber, Lyrt, Sidecar, FlightCar, RelayRides, etc are pandering to the customer now, what stops them from becoming Google, Apple, Samsung, etc?

Joseph Schumpeter basically explained that as one group of capitalists rolled over another, the cycle would continue for those groups to become a monopoly. It's actually similar to how capitalists such as Facebook bought out the Oculus to prevent competition in a market. I'd argue that's the main problem with Hollywood which keeps the movie studios somewhat weak so that they don't have to compete with movie sales. And they destroy those markets eventually unless something comes to prevent that chaos.

But they're not anti-capitalistic at all. They're making capitalism much better.

Honest question... How can we know this when there's no data to back this up? I know of co-ops as alternatives to capitalist organizations where co-ops do better than capitalist organizations. Stefano (pdf) has shown similar research and John Pencavel (pdf again...) have such research which show the effectiveness of another type of organization.

Instead, what we are seeing is that new forms of (very capitalist) companies are forming. They're disruptive -- but disruptive in a good way. They're often about providing more economic freedom and power out to users, such that the transactions are actually beneficial to all players, rather than having a few large companies hoarding the power in the middle.

Okay, but is it really fair to just name a lot of capitalist organizations and have nothing to compare them to? It's easier to have a capitalist organization than others. If we really want to see the effectiveness of different forms of organizations, we would want to look at the strengths and weaknesses of them. Something like Valve's "democracy" version and EA's hierarchical structure. I'd think we want to do that before just saying capitalism wins, don't you agree?

But having companies hoard power has never been true capitalism in the first place.

How so? AT&T was taken apart by the state and Reagan helped to form the monopoly again through effective lobbying for the past 40 years. They also lobby to control politics and maintain a control over democracy so that they make more in profits. The eventual endgame of capitalism is cronyism which destroys democracy for private profit. Even Adam Smith cautioned that those in the same market would collude for higher prices against the public. But even then, his was an incomplete review of capitalism.

In short, perhaps Rifkin's use of "nonprofit" here is better used by some other term. This is definitely something to look into because I think better words would be "co-op" or possibly "Worker Self Directed Enterprise" where the workers decide on the organization of the enterprise.
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Jay (profile), 1 Apr 2014 @ 3:34pm

Re: Re: Re: Re: Excellent
Actually, the corporate personhood was a headnote and has never been ruled on.

It's an imagination of the Supreme Court based on a ruling from a corrupt reporter for corporate interests.
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Jay (profile), 1 Apr 2014 @ 3:36pm

Re: Re: Re: Re:
Socialist, liberal, conservative...

Everyone blames everyone else and we don't get anywhere.

The problem is that everyone on every side of the spectrum can't take ten minutes to actually hash out their differences and find out a solution through actual debate.

That's the problem. Not about who wants to pick up the "No True X" debate to defend their position.
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The Mighty Buzzard (profile), 1 Apr 2014 @ 3:49pm

Re: Re: Re: Re: Re:
Mostly because the debate essentially boils down to "It is okay to take what I have not earned or paid for" vs "Fuck that noise". All the jabber is just to confuse the issue so nobody has to take a long, hard look at what they fundamentally believe.

And no, I'm not just dissing liberals here. That applies to corporate protectionism and plenty of the current conservative platform items too.
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Anonymous Coward, 1 Apr 2014 @ 4:19pm

Zero does not exist
It might be a small fraction of a fraction of a cent, but it's not zero. There's always a cost, no matter how small, because thermodynamics.

And since there's no zero, you aren't dividing by zero. Infinity is a limit. You don't have an infinite good, you have an unbelievebly (sp?) huge good.

Take Wikipedia. At the small incremental cost of a few electrons and maintenance cost of the Internet lines, you enrich the whole world. Every single page multiplies by millions of readers.

(Was my impression of a Word Salad Philosophy good?)
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art guerrilla (profile), 1 Apr 2014 @ 4:38pm

Re:
(parasitizing off your post)

seeing as how the recent study on the irrevocable downfall of industrial society only put that about 15 years out, we're whistling past the graveyard...
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jimb (profile), 1 Apr 2014 @ 9:27pm

If you think capitalism is going to have a problem dealing with zero marginal cost goods when they are mostly intangibles ("content") imagine what happens when nanotech actually gets functional. It is inevitably coming, because the first movers get incredibly low production costs, but when it is available to everyone, the whole society of scarcity goes out the window. When you can shovel in dirt and take out medicines, clothes, food, appliances, everything... the economic basis of our current world is disrupted. Whether in 10, 100, 200, or 500 years, it is coming. Look back 200 years compared to now, for manufacturing, and imagine what it looks like 200 years forward.
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My Name Here, 1 Apr 2014 @ 11:18pm

misleading?
I agree with the anonymous coward, there is no infinite goods, as by nature there is still some cost and effort required to move these goods around. I sort of get that he was trying to be facetious, but it is really true,. There is always some sort of marginal cost, often it disappears because we attribute costs in other ways and don't consider the true cost. An example would be a pirated download, you still have the cost of your ISP, electricity, wear on your computer, and so on to consider. Most of us can't quantify it, but there is a marginal cost even in the act of piracy. It's the same reason people will spend $10 of gas to drive across town to save $5 on something. We don't properly attribute costs.

It should also be said that human history has shown us that while capitalism is perhaps not the best or cleanest model, it generally gets more done in the longer run when compared to other models. Socialistic models tend to lead to leeching and people doing the least amount possible within the framework, while still expecting the same as everyone else. Except by force, almost every socialistic model fails over time because it has no true productivity driver.

Essentially, working hard in a socialist system is for suckers, and when you run out of suckers, your system collapses. It's similar to free business models such as freemium or the expensive second product sale. Each of them relies on a certain number of people to do something that most won't do, carrying the weight for leeches. In music it's concert tickets and hoodies, in software it's the people willing to shell out actual real world currency for in game 'gold'. Without enough suckers willing to overpay to support the masses, your model fails.

Things like AirBnB, Uber, Lyrt, Sidecar, FlightCar, RelayRides, Zaarly, LendingClub, AirTasker, Kickstarter, LiquidSpace and many, many more are disrupting all sorts of industries, but doing so in ways that are actually about the more efficient use of resources

Most of these companies are examples not so much of disruptive models, as much as models that are predicated on getting around existing laws and restrictions to make things go. AirBnB is currently facing the reality of having to charge and collect hotel room taxes in more and more places. Many of these types if businesses also run without true consideration for the laws in place regarding safety and security, such as not requiring appropriate insurance or certification for the people who provide services. In the US where liability lawsuits fly fast and thick, most of these business models seem only one disaster away from total failure.

What is more likely to happen with these disruptive models is that they will be regulated back into meeting the standards of the existing businesses, such as requiring people who rent rooms to have a license to do so if they rent a room for more than X days a year as an example. Taxi / ride share deals will face similar liability issues as many places have limits on who can offer rides for hire, or require certifications and safety checks for vehicles used in such a business. Requiring that of incumbent businesses while not enforcing it on the disruptors is not likely to be something that is tolerated for long. Since widespread deregulation of these industries is unlikely, it's not hard to see where they are going.

Also, many of the ride share / room share / bnb deals are predicated again on people not calculating their real costs and risks properly. If they truly operated like a real business and not a source of extra coin, most of them would be bottom line losers for the end providers, which would in turn destroy the disruptive models.

The real economic issue facing capitalism is the size of the mass of people living below average and having to take more from the system than they provide into it. The social aspects of universal health care, minimum wages, guaranteed minimum income, and various other systems to help the weak seem to be good on the surface, but they do tend to be a negative economic driver. When people figure out that they can live just about as well on welfare as they do working for minimum wage, they stop trying. Give them all of the things they need for a good enough life, and you remove their desire to do any better. It's the modern version of bread and circuses, in many ways. Capitalism is much more likely to fail or be seriously impaired when a big enough number of people are not participating in the economy in any meaningful way.

The risk in a world of everything for nothing is that the desire to produce over time is lost. Why produce when you can just get it from someone else? There will be some who will do it for fun or whatever, but history shows that most people just grind to a halt, lean back in their chairs, and take take take. What are the true implications of that?
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James Jensen (profile), 1 Apr 2014 @ 11:41pm

Re: Zero does not exist
While I think Mike hasn't been entirely clear on the subject, there's a sense in which the marginal cost is zero.

The problem is that every good has both scarce aspects (the materials and processes involved in creation/distribution/storage) and a non-scarce aspect (the pattern of the good). The marginal cost of the scarce aspects are always non-zero. But the cost of the non-scarce aspect is zero absent any artificial scarcity.

While I can't actually make a copy of a movie for literally zero cost, nothing naturally compels any of that be payment for the movie's pattern.

Of course, the thing that really makes this a living issue is that the scarce aspects of duplication have also come arbitrarily close to zero. So it's easy to gloss over the distinction most of the time.
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Jim, 2 Apr 2014 @ 1:02am

Re: misleading?
It's always funny when this blog wanders off the tech tracks and tries to get into economics. Now the post was good, but the comments have turned into a libertarian vs. objectivist amusing knife fight, with a dose of insightful realism thrown in.

And this post...riotous! The poster gives the exact same reason for the failure of American Capitalism, which is as brutal as it gets, but not brutal enough for some however, and for the "failure" of a system that hasn't actually been tried. (I have to agree with the previous poster who said that these types need to be ejected from society, and see how they fare in a real jungle.)

The real economic issue facing capitalism is the size of the mass of people living below average and having to take more from the system than they provide into it...Essentially, working hard in a socialist system is for suckers...When people figure out that they can live just about as well on welfare as they do working for minimum wage, they stop trying.

That's because you can't get ahead, even if you work hard. And God forbid if this rabble have to audacity to want to eat and have a decent place to live, right? How about an economic system, with different assumptions discussed in the post, where people can earn more than minimum wage?

Tons of recent studies have shown there is no economic, generational mobility in this country. So, under American Capitalism, you're right, working hard is for suckers.

Clearly this post, among many others are corporate/PR flack, but I had to respond to this reportable laughfest.
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Mike Masnick (profile), 2 Apr 2014 @ 1:11am

Re: misleading?
An example would be a pirated download, you still have the cost of your ISP, electricity, wear on your computer, and so on to consider. Most of us can't quantify it, but there is a marginal cost even in the act of piracy.

Those aren't *marginal* costs (with the *possible* exception of electricity). The cost of the ISP is fixed, not marginal. The wear on the computer is fixed, not marginal. People always make this mistake, but *marginal* cost has a meaning and your examples are not marginal. Even the electricity claim is likely not a marginal cost if you assume the computer would likely be on anyway. Then it's a fixed cost.

Most of these companies are examples not so much of disruptive models, as much as models that are predicated on getting around existing laws and restrictions to make things go. AirBnB is currently facing the reality of having to charge and collect hotel room taxes in more and more places. Many of these types if businesses also run without true consideration for the laws in place regarding safety and security, such as not requiring appropriate insurance or certification for the people who provide services. In the US where liability lawsuits fly fast and thick, most of these business models seem only one disaster away from total failure.

That is... unlikely at best. Take for example, the infamous "XXX Freak Fest" story that hit Airbnb a few weeks ago. That's exactly the sort of "disaster" you're talking about. But, all of the evidence suggests that Airbnb responded in a way that has actually *increased* trust.

http://www.fastcompany.com/3027798/the-secret-to-airbnbs-freakishly-rapid-orgy-response-scenar io-planning

And that's really why many of these are actually disruptive. They're not routing around regulations because of some great advantage, it's that the regulations themselves were poor proxies for systems where there was inherently less information sharing. These new systems rely on greater information sharing, creating greater levels of trust, which make the regulations appear to be very poor proxies. Instead, the trust systems built up by these services do a MUCH better job protecting consumers and producers alike.
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Ninja (profile), 2 Apr 2014 @ 2:28am

Re: Re:
It's not that the industry will die. We'll only have to adapt.
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My Name Here, 2 Apr 2014 @ 3:15am

Re: Re: misleading?
Then it's a fixed cost

We agree, but you missed the point. They are all costs related to obtaining the free product, and has nothing to do with marginal costs. What it means is that the marginal cost model does not work in this situation, because that is not the post of cost. For what it's worth, ISP costs are more like a bread that goes stale, use it or lose it.

Remember too, those same costs exist on the provider side as well. Your infinite thus free concepts don't seem to be able to handle what happens when the fixed costs are the main driver. What models do you think apply to business that have large fixed costs but little in the way of marginal costs, say like a cloud hosting provider or a software distribution firm?

They're not routing around regulations because of some great advantage, it's that the regulations themselves were poor proxies for systems where there was inherently less information sharing.

Many of the business models work only by not adhering to regulations in order to offer a better price point or to offer a service that is otherwise not permitted by law. If AirBnB renters first had to have their premises safety inspected, certified by the city, insured with commercial liability, and licensed as at minimum a bed and breakfast, then the pricing model would be different and thus their competitive advantages lost.

Protecting the consumer is more than just responding to outrageous situations. I was thinking more along the line of straight rip-offs, injury insurance claims, fire hazards, and the like. Protecting the consumer is as much about protecting them from harm and risk, as it is about answering their problems on the run.
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Anonymous Coward, 2 Apr 2014 @ 4:16am

Re: Re: misleading?
> Even the electricity claim is likely not a marginal cost if you assume the computer would likely be on anyway. Then it's a fixed cost.

Sorry but I have to disagree. An idle computer uses less power. It doesn't matter that it would be on anyway. Ever since we left DOS behind, the CPU does a HLT instruction on the idle loop, and modern (as in anything which can run a non-EOL Windows) computers also reduce or gate their clocks when idle, and lower the voltage too.

And if you use your hard disk drive, seeking to read or write consumes more power, see any decent HDD datasheet and it's there complete with precise average values.

If you send or receive a packet, the NIC has to use more power to run the transceiver. But for a NIC it's not usual to have that on the datasheets.
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Anonymous Coward, 2 Apr 2014 @ 4:24am

Re: Re: Re: misleading?
But I see your thinking, if the computer is powered by a solar panel the power is a fixed cost.

But it's a limited fixed cost, you can't serve everyone with a solar panel, if you add too many people you have to add more solar panels. That's the marginal cost.

You have a ISP, your link has a bandwidth limited by physics. It can serve a number of people, to serve more people you have to add another link, which then can serve another number of people. There's your marginal ISP cost, the cost per person can be arbitrarily low but never truly zero.
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Chris Rhodes (profile), 2 Apr 2014 @ 5:24am

Re: Re: Re: guilty
Not to mention the protagonist of The Fountainhead blows up a residential building because someone didn't build it like he designed it. I think it's fair to say she takes IP-maximalism to the ridiculous extreme, which is one reason I ultimately moved away from Objectivism to anarcho-capitalism (thanks to Kinsella for that!).
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Chris Rhodes (profile), 2 Apr 2014 @ 5:35am

Re: Confirmation bias?
"The eventual endgame of capitalism is cronyism which destroys democracy for private profit."

Capitalism is an economic system where the means of production (the capital) is privately owned. I.e. it is a system of private property.

Capitalism devolves into cronyism when an organized gang (read: a government) is given license to use violence and threats thereof to stop people from using their private property ("Pay me a million dollars and you can use your car as a taxi, plus I'll block out competitors!")

This corrupt blending of corporate and state interests is very profitable for both parties, but is not an element of capitalism, nor it's inevitable end, anymore than the ability to drop poison into a bucket of clean water implies that having clean water is impossible.
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Anonymous Coward, 2 Apr 2014 @ 5:51am

Re: Re: Re: Re: Re: Re:
I have to agree. This entire argument isn't about a True Scotsman, it's about a poor definition of "Objectivism" which is then beaten like a strawman. There's a little intellectual dishonesty in that.
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Mike Masnick (profile), 2 Apr 2014 @ 6:35am

Re: Re: Re: misleading?
We agree, but you missed the point. They are all costs related to obtaining the free product, and has nothing to do with marginal costs. What it means is that the marginal cost model does not work in this situation, because that is not the post of cost. For what it's worth, ISP costs are more like a bread that goes stale, use it or lose it.

Almost nothing in this paragraph makes sense. We only care about the marginal costs in these situations. That's why the book itself is called the zero marginal cost society. The fixed costs are a different issue entirely. No one has ever said the fixed costs go away.

Remember too, those same costs exist on the provider side as well. Your infinite thus free concepts don't seem to be able to handle what happens when the fixed costs are the main driver. What models do you think apply to business that have large fixed costs but little in the way of marginal costs, say like a cloud hosting provider or a software distribution firm?

I've outlined the details for this multiple times. The point is that even when you have large fixed costs, you're almost certainly creating scarcities where you can charge (you leave the infinite free, and charge for the scarce). Generally speaking that often means charging for the *service* but leaving the product free (which is what most cloud hosting firms do already). For software, it depends on the software, but look at firms like IBM and Red Hat who make a shit ton of money giving software away for free, but making money on service.

Many of the business models work only by not adhering to regulations in order to offer a better price point or to offer a service that is otherwise not permitted by law. If AirBnB renters first had to have their premises safety inspected, certified by the city, insured with commercial liability, and licensed as at minimum a bed and breakfast, then the pricing model would be different and thus their competitive advantages lost.

Did you ignore my whole point? Why, yes, you did. First, that's not necessarily true, but even if it was, the point here was that the only reason why you need regulations for safety inspections, commercial liability and licensing is because of the lack of information in the traditional system. However, with AirBnB, where there is tremendous transparency, and a system of clear reviews, it takes care of itself. A place that is not clean or safe gets low ratings and no one is willing to rent it. Information flow and a trust model takes care of the need for regulations, thus making those regulations obsolete for such services.

Protecting the consumer is more than just responding to outrageous situations. I was thinking more along the line of straight rip-offs, injury insurance claims, fire hazards, and the like. Protecting the consumer is as much about protecting them from harm and risk, as it is about answering their problems on the run.

Traditional regulations tend to have little to actually do with that, and a lot more to do with keeping out the competition.
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Anonymous Coward, 2 Apr 2014 @ 10:24am

Re: Re: Re: Re:
Or these mega corporations like JP Morgan would have to break up into manageable pieces so that a CEO could no longer use the excuse that the company is too big and complicated for them to be responsible for the actions of a few bad actors.
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Anonymous Coward, 2 Apr 2014 @ 10:33am

Re: Re: Confirmation bias?
Oppressive dictatorships/regimes wasn't and element or an end goal of communism but that's what happened. It's pointless to argue about theory when reality is staring at you right in the face. Cronyism and monopolies are the natural progression of humans working through the ideal system of capitalism. Yes, that's not what capitalism actually is, but that is what it becomes when filtered through actual human behavior.
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Anonymous Coward, 2 Apr 2014 @ 10:40am

Re: Confirmation bias?
Great post. I wish when there was a discussion of capitalism people would discuss capitalism as it actually exists, and has existed in the world, rather than capitalism the ideal. Crony capitalism and monopolies have popped up over and over again in this country and in other capitalistic countries, yet that's decried as not capitalism. If it keeps popping up over and over again in capitalist societies then it's not a bug, it's a feature.

"Joseph Schumpeter basically explained that as one group of capitalists rolled over another, the cycle would continue for those groups to become a monopoly."

That's something I don't understand either. The blind optimism that these new start up companies are different than the entrenched, bloated corporations they are trying to replace seems incredibly naive.
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Anonymous Coward, 2 Apr 2014 @ 10:48am

Re: misleading?
Yes, lets starve people more and give them more suffering as good encouragement to go out and get jobs that don't exist at companies that wouldn't even hire them if they did.
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Anonymous Coward, 2 Apr 2014 @ 10:56am

Re: Re: Re: Re: misleading?
"However, with AirBnB, where there is tremendous transparency, and a system of clear reviews, it takes care of itself. A place that is not clean or safe gets low ratings and no one is willing to rent it. Information flow and a trust model takes care of the need for regulations, thus making those regulations obsolete for such services."

"Traditional regulations tend to have little to actually do with that, and a lot more to do with keeping out the competition."

I want these two statement to be true but I guess I'm too skeptical about the depravity of human nature to fully believe that.
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JohnDonohue (profile), 2 Apr 2014 @ 1:09pm

Re: Re: Confirmation bias? Things as they are...
Go ahead and discuss "things as they are." However, your claim that the current cartelism is a natural feature and your suggestion to not examine capitalism "in its essentials" sets up the drift to things as they are, which is not capitalism.

Moreover, there was a long period in history, the Golden Age of Capitalism from roughly the Civil War to World War 1, when crony capitalism (aka government-coerced monopolies) was kept somewhat at bay. It does not have to be like it is today.
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nasch (profile), 2 Apr 2014 @ 1:19pm

Re:
My favorite description of objectivism is "I'm on board, you can pull up the ladder".
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JohnDonohue (profile), 2 Apr 2014 @ 1:20pm

corporations pay taxes, a lot
Corporations pay 28% of the Federal Tax collected, namely 11% directly and half of the 'payroll tax.'v

http://nationalpriorities.org/budget-basics/federal-budget-101/revenues/

Also, executives and investors in corporations pay a significant portion of the 'individual' tax revenue. 47% of American citizens pay no income tax, as famously now understood.
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nasch (profile), 2 Apr 2014 @ 1:22pm

Re: Re:
The economy would collapse if employees are personally financially responsible for the firms liabilities.

Limited liability for accidents, poor business decisions, failure of the business, and so on is great. Limited liability for crimes I'm not so sure. When the company actively and intentionally defrauds people, or takes actions that decision makers know will lead to deaths, it's executives at the top deciding to do that. Why should they not be held accountable? Or perhaps they theoretically are, but it's a high court / low court situation?
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nasch (profile), 2 Apr 2014 @ 1:27pm

Re: Confirmation bias?
I don't think his point is that capitalism is better, it's that zero marginal cost doesn't preclude capitalism from operating successfully.
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nasch (profile), 2 Apr 2014 @ 1:30pm

Re: Zero does not exist
It might be a small fraction of a fraction of a cent, but it's not zero. There's always a cost, no matter how small, because thermodynamics.

If you're having a discussion about physics, sure. If you're discussing economics, we can keep saying "so close to zero that it cannot be measured and so might as well be zero" or we can just say "zero" and understand that it means effectively zero, not actually zero.
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nasch (profile), 2 Apr 2014 @ 1:37pm

Re: Re: Re: misleading?
Ever since we left DOS behind, the CPU does a HLT instruction on the idle loop, and modern (as in anything which can run a non-EOL Windows) computers also reduce or gate their clocks when idle, and lower the voltage too.

And if you use your hard disk drive, seeking to read or write consumes more power, see any decent HDD datasheet and it's there complete with precise average values.

If you send or receive a packet, the NIC has to use more power to run the transceiver.

I would be surprised if you could even measure the difference in energy usage of downloading, say, a feature length movie. That is, take 1000 measurements of the computer doing what it would ordinarily be doing (whatever that is), and 1000 measurements of the same length while it's doing those things plus downloading a movie. How many extra milliwatts do you suppose it uses, and how much does a milliwatt-hour cost? Is 1000 measurements even enough to bring the signal of the extra download out of the noise of variability?
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Jay (profile), 2 Apr 2014 @ 5:40pm

Re: Re: Re: Confirmation bias? Things as they are...
Go ahead and discuss "things as they are." However, your claim that the current cartelism is a natural feature and your suggestion to not examine capitalism "in its essentials" sets up the drift to things as they are, which is not capitalism.

Name one time that capitalism hasn't failed. We've had two Major Depressions in 75 years and recessions every 3-4. The system is very chaotic with a very large strain on a populace when everyone merely worries about commodities and pricing.

And no, the Civil War to WW1 was tumultuous and chaotic just as capitalism was chaotic from WWII to now. Capitalism is mainly kept at bay when the workers stopped allowing austerity to be inflicted upon them.
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Jay (profile), 2 Apr 2014 @ 5:46pm

Re: Re: Confirmation bias?
Capitalism is an economic system where the means of production (the capital) is privately owned. I.e. it is a system of private property.

Yes, classical capitalism. However, the Keynesian version of it with the government regulating has different entry points in trying to allow the state to regulate, equaling state capitalism in some form or fashion. And to believe that the government staying out of regulating is mere folly, particularly when the state is an entity responding to demands of different kinds of people, be they rich or the entire public.

This corrupt blending of corporate and state interests is very profitable for both parties, but is not an element of capitalism, nor it's inevitable end, anymore than the ability to drop poison into a bucket of clean water implies that having clean water is impossible.

We have 300 years of capitalism. The system has a lot of history for making a select number of people very wealthy while leaving others out in the cold. And for all intents and purposes, we have a 6 year recession that is being felt by the masses while the rich and elite get richer. So I find it odd when you say that the end result of merged corporate and state interests don't intertwine when you can look at the Railroad monopolies, the Treaty of Versailles, or the elimination of Glass Steagall and see that this system eventually leads to the monopolization of resources by the select few.
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JohnDonohue (profile), 2 Apr 2014 @ 6:43pm

Re: Re: Re: Re: Confirmation bias? Things as they are...
Both depressions were caused by state intrusion into private enterprise. So don't blame capitalism for them.

I suggest you visualize the state of the world if you remove REAL capitalism -- private transactions freely entered into using absolute trade or hard money. In otherwords 1350 A.D. or so. Do you want to return to feudalism? Communism? Or what?
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my name here, 2 Apr 2014 @ 8:26pm

Re: Re: Re: Re: misleading?
the point here was that the only reason why you need regulations for safety inspections, commercial liability and licensing is because of the lack of information in the traditional system

I had to read that twice to imagine you even wrote it. Are you suggesting that things like vehicle inspections, mandatory driver training, and properly liability insurance requirements are a lack of information? Are you claiming that inspections by fire marshalls to assure that short term rental rooms have appropriate smoke detectors, emergency exit plans, and unencumbered safe exits is a question of information?

Traditional regulations tend to have little to actually do with that, and a lot more to do with keeping out the competition.

I think you are confusing cause and effect. Regulation by definition tends to raise the bar or cost of entering into a field, but generally those regulations aren't created with the sole intent of blocking competition. You don't inspect taxis for safety to keep out competition, you do it to keep the public safe. You don't require smoke detectors and safe exits in a hotel to block competition, you do it to keep people safe. The effects certainly do raise the bar, but that is an effect, not an intention.
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Jay (profile), 3 Apr 2014 @ 2:29am

Re: Re: Re: Re: Re: Confirmation bias? Things as they are...
Both depressions were caused by state intrusion into private enterprise. So don't blame capitalism for them.

I can and will. When Andrew Mellon was giving money to his friends in all the high places while Hoovervilles were forming, I will blame the economic system that caters to the rich and powerful.

I will also state that the unregulated private markets do a lot of harm since the Big Banks have gotten larger and they're now gambling more. The devastation of the derivatives markets is the same in both time periods and nothing has changed save for capitalism eliminating the regulations and exposing how it will work to undo the regulations, requiring a new system that doesn't cater to the rich and powerful.

I suggest you visualize the state of the world if you remove REAL capitalism -- private transactions freely entered into using absolute trade or hard money. In otherwords 1350 A.D. or so. Do you want to return to feudalism? Communism? Or what?

I don't know why you have this obsession with "real" anything. This is the market based economy as shown through Adam Smith's labor theory of value along with that of David Ricardo. IE "The price of a good or service in the market is thought to be determined by the amount of labor devoted to its production". When you have neoclassical thought (liberal and conservative economic theory), they are focused on markets and prices as you can see from Mike's posts. But there is something... Missing from such an analysis. What is missing is the dichotomy of employer and employee and how they interact.

An employee needs inputs to labor with so that he has the necessary skills in an enterprise. Likewise, the employee becomes skilled in his labor, making things faster and then doing it more productively. When he does, he is creating an "extra" or surplus. That's where this issue is needing to be figured out. The point of my argument is that this surplus can cause a lot of conflict within an organization as people begin to find out that their surplus is going to their employer and these people can feel ripped off. They aren't producing for themselves or appropriating for themselves and that creates conflict.

And honestly, it's not about private transactions or absolute trade or whatever...

Markets aren't in all aspects of society. Just look at your home for two minutes. Let's say that you went home for Thanksgiving and your grandmother decided on how you were going to cut up the turkey. Everyone gets some of the food and it's time to clean up. Your mother asks you to clean up and you want to do it for $5.

How is that market transaction supposed to work? If you're a part of my family, your dad reaches out and smacks you across the face, telling you how this is a family. Nothing is done by the private market.

The point here is the fact that you can change the organization and have different variables that are in play here. What I've just described was a more feudalist method for Thanksgiving while you can have a more democratic organization in the workplace. Looking for one form of socio-economic theory to rule them all ignores that you can have a better theory form which allows for more democratic ways of doing business so long as all participants decide on it.
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Anonymous Coward, 3 Apr 2014 @ 1:15pm

Capitalism has no future.
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Anonymous Coward, 3 Apr 2014 @ 1:16pm

Re: Perhaps the problem is "capitalism"
When I say capitalism I'm referring to money.
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Pragmatic, 4 Apr 2014 @ 9:32am

But having companies hoard power has never been true capitalism in the first place. It's always been the problem that occurs when you have transaction costs that are too high, sometimes driven through political and regulatory capture, allowing certain firms to gain monopoly or oligopolistic control over certain markets, allowing them to create economic friction, increase transaction costs, and keep most of the value created, rather than distributing it to the end points. However, the new disruptive players in the market are often reversing that trend. They're increasing trust, decreasing transaction costs, spreading much of the value to the end points, and simply taking a small cut of the transaction along the way. That's not anti-capitalist, or the "end of capitalism" -- it's about a better recognition of what true capitalism is supposed to be about: more efficient transactions, with minimal friction, where all parties benefit from the transaction.

Definition of capitalism:

...an economic system in which trade, industry and the means of production are controlled by private owners with the goal of making profits in a market economy. Central characteristics of capitalism include capital accumulation, competitive markets and wage labor.

That's what has always happened, but their next sentence is mere fantasy:

In a capitalist economy, the parties to a transaction typically determine the prices at which assets, goods, and services are exchanged.

This pretends that all of the parties have an equal opportunity to set the value of the goods or services being exchanged. However, in an economy in which this airy-fairy unicorns-and-rainbow scenario is accepted as a fact, what actually happens is that any bad behavior is deemed an anomaly (remember OOTB's rants about it?) and any attempt to make people behave is derided as Socialism, unwarranted Gubmint interference in the market (how dare they attempt to protect consumers!), or even theft/infringement of property rights.

That's where the problems we're experiencing come from. This is not to say capitalism is evil in and of itself, but I don't think it's only way to do things.

Funnily enough, whenever I see people trying to defend Socialism or even Communism, the best they can say is that the leaders, etc., are doing it wrong. And they came about as a reaction to Capitalism so it seems that becoming the exact opposite of the thing you hate isn't the answer, either.

What I'm saying is, I don't think that any one ideology, by itself, is the whole answer. It'd have to be a mix of one or more, according to what works for the people. The place for capitalism is as part of the solution, not all of it.
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dug, 6 Apr 2014 @ 8:29pm

Response to: Mason Wheeler on Apr 1st, 2014 @ 1:22pm
"religious adherence to an ideology" Have you ever heard Ayn Rands views about religion and about collectivism in general?
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Pragmatic, 7 Apr 2014 @ 3:13am

Re: Re:
This applies to most (if not all) political philosophies. I don't do the "Blind adherence" thing because few (if any) of them anticipate abuse or make allowances for worst case scenarios. Without the flexibility required to handle unforseen circumstances, most political philosophies will fall short when their adherents try to use them as a key to resolving them. This is because either they or their adherents are inflexible, and this is particularly true where ideological purity is demanded as a condition of acceptance in the inner circles.
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Pragmatic, 7 Apr 2014 @ 3:14am

Re: Re: Re: guilty
Maximalists = Objectivists? That explains everything.
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Pragmatic, 7 Apr 2014 @ 3:19am

Re: Response to: Mason Wheeler on Apr 1st, 2014 @ 1:22pm
@ dug, both of them appear to have freaked her out. Mind you, she was coming from a background of flight from Communism.
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john hall, 7 Apr 2014 @ 8:01am

This is just another one of Rifkin's tactic's to make money
by having people pay money to buy his book.He wants us to
think that goods and services are becoming free,but they're
not.Everything has a price.Take those so-called online free
courses.So you're not paying tuition,but what about the cost
of using the internet to pay for access to these courses?
Same thing with music,tv & movies.Systems like Netflix and
Hulu charge a subscription price.And the danger of having a
product or service that is cheap means the quality will be
just as cheap.This could mean trouble in the long run.
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RayBright (profile), 7 Apr 2014 @ 8:24am

Cooperative/Competitive
I don't know how this article fails to use, even once, the word competition. Much of the trouble w/capitalism comes from 'accumulated advantage' which, while giving the illusion of actual competition, masks one of this pernicious consequence of - capital concentration.

Rifkin may be writing the eulogy of cut-throat competition, not capitalism.

Ray Bright,
The Tuke Massive
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Chris Rhodes (profile), 8 Apr 2014 @ 6:01am

Re: Re: Re: Confirmation bias?
"We have 300 years of capitalism."

And the state. How does that invalidate anything I said?
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RayBright (profile), 8 Apr 2014 @ 8:52am

Re: Re: Re: Re: Re: Confirmation bias? Things as they are...
We're living under corporate feudalism right now.
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Anonymous Coward, 5 May 2014 @ 7:45am

Re: Re: Re: Re: Re: misleading?
You're a fucktard, horse with no name.
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Ray Bright, 7 May 2014 @ 6:47pm

Re:
Entertainment has one of the lowest material cost to revenue of any industries
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Tom Street (profile), 27 Jun 2014 @ 3:07pm

Capitalism
The ZMCS brings power away from the centralized concentration of capital to the user as producer. Ultimately, the user or prosumer is able to produce his own products without employing the traditional tools associated with capitalism. Capitalism focuses on the use of capital to reduce costs, especially labor costs. As it becomes more efficient, it reduces the importance of labor to the extent that it does not need to employ anything near the laborers who are available for work.

Capitalism destroys itself by reducing costs to the extent that it no longer serves a valuable purpose for society. The emerging tools like 3D make it possible to produce goods at the village or individual level. This is contrary to the massive resources and organization required to produce the current automobile, for example.

Rifkin doesn't think that capitalism will completely disappear as there will be certain functions where its traditional modus operandi will be necessary.

Taking one example of a near zero margin cost product, solar electricity, capitalism is still required to produce the panels in an efficient manner but the actual operation can occur at the consumer level with almost no input or cost. However, the question is, will it really be possible to produce panels efficiently in a near zero marginal cost scenario.

We shall see how this plays out. I am not certain that 3D printing, for example, has the promise that the author thinks it does. But there will be situations where capitalism, including private ownership of capital, is not necessary to produce certain required goods and service. We have government provided roads which cost billions of dollars. No one expects to have to directly fund his own roads except to pay gas taxes, general taxes, and in some cases, user fees to the government.

I don't think capitalism will completely disappear but I think it will be much different that it is now. Collaboration will not necessarily occur within a capitalist context.

There are all sorts of arguments for its superiority as an economic system. Superiority, however, depends upon one's value systems. Most of us operate within a universe where we are happy to forego capitalism in one area in our lives but recognize it efficacy in other areas of our lives. It doesn't have to be all or nothing.

Part of the reason that socialism is such a bogeyman is because of how it went wrong in the Soviet Union. The basic centralized structure stayed the same but did nothing to help people determine their economic destiny on a local or individual level. Lack of empowerment of the individual is a problem whether one is in a socialism or capitalist system. The zero marginal cost society will enable empowerment at a level closer to the individual.
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