Scarcity Economics: Value and Non-Zero Sum Games

It seems that “theories of value” have been hot, lately. I posted a rumination on “the ultimate refutation of Karl Marx” just a few days ago, that seems highly relevant: Blackmail Reminders: and the ultimate refutation of Karl Marx

Phil Cubeta wonders about “value” and I agree that there are many non economic ways to view it. And some mystical ways that pretended to be about economics, such as Marx’s Labor Theory of Value.

And yet... always contrarian... On another site. It was pondered whether the attention economy... if all other human needs are satisfied (say by nanofactories) ... might that bring about a surprising result? If all other scarcities vanish, except that of scarce human attention, then human TIME becomes the highly valued desideratum. In that case, might the quaint notion of Karl Marx's labor theory of value come true, after all?

Tell you what. I’m going to attach below a posting made by Chris Phoenix recently on another (Predictions Markets) group. A guest screed that I think sets things in very useful perspective. He uses the notion of Zero-Sum and Positive Sum games, which Robert Wright expresses very well in NONZERO: The Logic of Human Destiny. It seems a powerful insight to help explain why some valuable entities are best protected by a hierarchical “guardian” like the state... while others will be hampered or destroyed if they are valued in that way.

Interstingly, I have found that negative, zero and positive sum games are also very useful in appraising human personalities! Negative sum people would harm themselves if only to get at their enemy. Zero sum types see life as a series of win-lose wars. (And such people dominate ALL political wings, because of their zeal and intensity.)

Cynical zero sum people simply cannot comprehend the infinite problem-solving enthusiasm of those who are wired for positive-sum thinking, and vice versa.

Want an excellent litmus for quickly diagnosing which “sum” dominates another person’s personality? Try Asking: What would you wish for, knowing that your worst enemy would get twice as much of whatever you got?”

One negative-sum person immediately answered “I’d ask to go blind in one eye.”

One guy gave an answer which was maybe zero... or positive sum... or just clever. ”I’d ask for a mate who was all the woman a guy could possibly handle.” (*snort*)

Here is that riff by Chris Phoenix:

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CP: Follow-up to the type-of-economy and scarcity issues that were discussed a few days ago, and the intriguing phrase "scarcity economics":

A trusted friend is house-sitting for you. When you get back from vacation, your friend tells you, "I borrowed your kitchen table, but it fell off my truck and got smashed. How much do I owe you?" You shake your head and name a figure.

A second friend says, "I picked up your father's funeral urn, and dropped it. How much do I owe you? There's no good answer--there's something wrong with the question.

A third friend says, "I watched two of your DVDs while I was here. How much do I owe you?" The answer of course is "Nothing--what are you talking about?"

The discussion on what kinds of economy are most suitable for what kinds of resource has been focused too small. Some resources are monetizable, and can participate naturally in an economy. But some resources are not easily monetizable, and those are of two different kinds. Each kind of resource needs a different kind of handling. If one kind of resource is handled as though it were another kind, bad things happen.

Some resources, though in theory monetizable, in practice will not change hands without coercion. A nation's territory is an example of this. Such resources are guarded by systems that promote stasis. Interestingly, the guardian systems are also useful for enforcing property rights, preventing involuntary (win-lose) transactions of priced goods. Win-lose transactions are usually an overall loss, as when a stolen car goes a chop shop, so should be minimized.

Win-win transactions should be optimized and maximized (unless they have hidden costs). The commercial system--very different from the guardian system--has evolved to promote such transactions. Since many possible transactions are not mutually beneficial, the commercial system promotes honesty. Since the general welfare improves with each good transaction, the system promotes inventivness. Since resources can make more resources, the system promotes thriftiness. (Readers may recognize Jane Jacobs' Systems of Survival here. But she didn't talk about the third system.)

The trouble with Communism was that it applied a zero-sum Guardian administration to tradeable goods, precluding any positive-sum outcome. In fact, it actively destroyed positive-sum opportunities.

The third kind of resource can be used without consuming it, and copied without scarcity. Obviously there are incidental costs to any activity, but if those are sufficiently small, and the value created is large and unrelated to the costs, it seems fair to call the transaction "unlimited sum." Many instances of information fall in this category, especially since the development of networked digital computers. The Free Software and Open Source movements rely on the insignificant cost of copying text, and the high value of that text. Note that creation of significant value is likely to create incidental benefits all around; if the incidental benefits to me from an "unlimited-sum" transaction are likely to outweigh my incidental costs, then it is in my best interest to encourage as many transactions as possible without trying to meter or monitor them.

For more on the "Three Systems," see THREE SYSTEMS OF ETHICS FOR DIVERSE APPLICATIONS, by Chris Phoenix

Now, about scarcity:

Information-type "unlimited sum" resources are not naturally scarce. They may be made artificially scarce, as by intellectual property law. (Some IP law is stimulatory, some is protectionistic. The US software industry did better without software patents, but software copyright was probably a good thing.) In this information-rich age, it's easy to think that everything should be non-scarce. A little thought will show that that's impossible.

There's another type of non-scarcity that I'll call non-shortage until an economist tells me the real name for it. That's when there's enough of a thing available that the cost is driven down to a level just high enough to prevent profligate waste--in normal circumstances, for typical uses, a person in a Western nation never has to think about the cost of a glass of tap water. As manufacturing and material handling improve, more and more things can be placed in that category.

It is tempting to think that non-shortage implies that a thing should be free. Humans like free lunches. But if a material good were actually free, it would be wasted until it became scarce. If food (and janitorial services) on the Star Ship Enterprise were truly free, people would fill each other's rooms with vanilla pudding as a prank. That doesn't mean that in real life, a food dispenser would need a coin slot to prevent waste. The limit might be imposed by social mores or by programming in each food dispenser rather than by direct monetary transaction. But the limit would be there.

Conversely, it is tempting to think that goods should never move into non-shortage status. What would happen if people had all the ___ they needed, without having to pay for it? Wouldn't that be an immoral free lunch? Well, scratch the surface of that, and you'd find that a major part of the resistance comes from the "lost" revenue to the companies that have provided the expensive good. Another aspect of the resistance comes from simple fear of change. I don't have much use for either of those motivations--let the creative destruction roll!

Will there always be some things that are scarce? Yes. Will they always be the same things? No. Are there some things that should never be scarce? Yes.

So can we have a society without "scarcity economics"? No. Can we have a society without shortages of basic resources? Yes. Can we have a society that makes profligate use of every resource? No. Can we have a society that continually improves, sustainably? Yes. Can people rationally give things away without calculating their reward? Yes, but only the "unlimited sum" class of things.

Can we have a society in which all people are satisfied and productive, and rarely if ever conscious of scarcity? That depends on human psychology, but I think so: Develop the economy until all basic needs are in the non-shortage category, and focus human activity on the unlimited-sum categories. Will the weakening of profit and capitalism cause economic instability and regression? I don't know--there's probably a balance to be struck. Can such a society be created through redistribution and ideology, as the Communists tried to do? NO! That approach is corrosive at every turn.

-- Chris Phoenix cphoenix@CRNano.org Director of Research Center for Responsible Nanotechnology