[p2p-research] Artificial Scarcity Is Subject To Massive Deflation | Techdirt

Michel Bauwens michelsub2004 at gmail.com
Fri Nov 6 20:48:25 CET 2009

Hi Ryan,

this relates a critique against infinite elasticity  of demand with the
potential of creating post-scarcity relative abundance


 Roberto Verzola: Finite demand makes relative abundance
[image: photo of Michel Bauwens]
Michel Bauwens
31st January 2009

 A very *important contribution to abundance
* by Roberto Verzola<http://rverzola.wordpress.com/2009/01/21/finite-demand-makes-relative-abundance-possible/>

*“It is almost by definition that economists predominantly focus on
scarcity, when they define economics as the study of “the most efficient
ways to allocate scarce resources to meet infinite human wants”. If, indeed,
people had infinite wants, then not even all the resources of this finite
world will be enough for a single person.*

*But I contend that consumer demand is not infinite. There exist physical,
physiological, psychological and cultural limits - both actual and potential
- to consumption which can keep individual as well as collective needs and
wants within finite bounds.*

*If demand is finite, then satisfying this demand becomes a real
possibility, and relative abundance is within reach.*

*The following three concepts will help show that demand can remain within
finite bounds:*

*Satiation. Economists define satiation as the consumption level which the
consumer most prefers. *

*The closer he is to this level, writes economist Hal Varian, “the better
off he is in terms of his own preferences”.This satiation level is also
called bliss point. Beyond it, the consumer becomes indifferent towards
getting more of the same good or may even prefer to have less of the good.
While many economists still cling to the hedonist principle that “more is
always preferred to less,” some acknowledge, at least in theory, that a
satiation level exists for some, if not most, goods. Varian, in particular,
says that most goods have a satiation point and that “you can have too much
of nearly anything,” which contradicts the “infinite wants” assertion in
most definitions of economics.*

*Saturation. While satiation may apply more to the psychological attitude of
a consumer not wanting more, saturation is more about the physiological or
physical incapacity of a person to consume more. *

*Beyond the saturation point, one’s body will either become incapable or
involuntarily reject additional servings of food and drinks. One can only
wear so many clothes, or shoes. One can listen to only so many CDs or watch
only so many videos. There are only twenty-four hours a day after all.*

*To reach the brain, a sense stimulus takes around 10-20 milliseconds. To
respond in a conscious way, neuro-scientists have found out, the brain takes
longer - around 500 milliseconds (half a second).2 This suggests that our
brain can only enjoy at most two distinct events every second or about
170,000 every twenty-four hours. For a world with some six billion people,
that adds up to maximum of one quad (i.e., quadrillion) consumption events
per day. That is a huge number, it is true, but finite nevertheless. Most of
us will probably be too saturated long before that point.*

*However, the concept of saturation as distinct from satiation is missing in
consumer theory and most economists still cling to the “infinite wants”

*Satisficing. Even before we reach our satiation or saturation levels, we
may already reach our “satisficed” level, in which the quantity we have of a
particular good or bundle of goods already suffices to satisfy, and beyond
which we would only weakly prefer more.*

*The idea that consumers satisfice rather than optimize when fitting their
wants to their budget was first raised by psychologist Herbert Simon, who
subsequently won the Economics Nobel Prize in 1978.*

*Any of these “sat” concepts - certainly all of them, together - are
sufficient to argue that individual and likewise aggregate demand have
finite bounds.*

*This justifies the following assertion: some consumers have a satisficing
level for some goods. We will leave to future research the debate whether
the weak assertion of “some consumers” and “some goods” can, in some
contexts or periods, be changed to a stronger assertion of “some consumers
for all goods”, “all consumers for some goods”, or even “all consumers for
all goods”.*

*The above assertion leads directly to a formal definition of abundance: when
a person can afford enough quantity of a good to reach his/her satisficed
level, then the person enjoys a state of abundance for that good. *

*The concept is not new. Gandhi must have been referring to abundance when
he said, “the Earth has enough for everyone’s need”. This definition also
allows a good’s state of abundance with respect to one person to be
quantified. For instance, if a person’s satisficing level is five pairs of
shoes, but s/he can only afford two pairs, then s/he enjoys a state of
abundance of 40% (two out of five) with respect to shoes. This makes it
simple to relate abundance to its inverse, scarcity: the person needs three
pairs more to reach the five-pair satisficed level. Thus s/he faces a
scarcity level of 60%.*

*Economics usually assumes that business firms maximize their profits by
producing until their marginal cost (the cost of the next additional unit)
equals their marginal revenue (unit price of the good). If, in addition to
this behavioral assumption, we also assume diminishing returns or decreasing
returns to scale, this will eventually result in increasing marginal costs.
Thus business firms will, in theory, reach their satiation level when they
reach their maximum profits.*

*This also means, however, that profitable firms employing technologies with
constant or increasing returns to scale will face constant or decreasing
marginal costs. They will therefore have no profit maximum and likewise no
satiation level. These firms will conform to the theoretical hedonist image
for whom “more is always preferred to less”, and whose desire to purchase is
limited only by their budget and nothing more. They will also try to keep
increasing their scale of operations, as they go after higher and higher
profits - making them an engine of globalization. Here is a possible answer,
by the way, to what some economists consider a mystery, that “neoclassical
theory has no full explanation of why firms grow at all, nor why it is that
the typical pattern of the growth rates of firms seems to lead inexorably
towards persistently increasing aggregate business concentration.”*

On Fri, Nov 6, 2009 at 2:31 AM, Ryan Lanham <rlanham1963 at gmail.com> wrote:

>  On Thu, Nov 5, 2009 at 1:59 PM, Kevin Carson <
> free.market.anticapitalist at gmail.com> wrote:
>> As people
>> are able to meet present needs outside the cash nexus, with less
>> labor, they won't discover enough new needs to keep working the same
>> number of hours to buy additional kinds of stuff; they'll just work
>> less.
>> I still tend to think there is infinite elasticity of demand for high end
> services--restaurant food for instance--but I even begin to see how that
> could wane.  But the point is clearly taken on stuff.  There is a clear
> moral shift on climate change that is also impacting this discussion.  It is
> no longer fashionable to be a conspicuous consumer.
> The way I thought this would work has been tied to technology
> acceleration.  I've always wondered...what happens when you build the best
> possible diesel locomotive and then start finding ways to make it cheaper
> and cheaper.  In a sense, the IP can go on for a while, but the relative
> value of the IP is the question.  The marginal value (utility) of IP is
> clearly falling as technology accelerates.
> It is difficult to build a better X now, and the rent value of an X (say an
> email system) will fall over time as technology improves in related
> domains.  It begins to become an interesting question to ask what if all
> corporate information services came from Google?  Would that be a license
> for corruption or the advent of the free economy?  Leading pundits are
> saying both things.
> Personally I cannot reconcile the IP world's obvious changes with changes
> to the service world.  I suppose robotics makes that leap.  What is the
> value of a French restaurant if my robot cooks a perfect French meal on
> demand--after going shopping for the necessary ingredients at the optimal
> prices?
> As a recent strong skeptic, I am prepared to say something is definitely
> afoot and that it is accelerating.  I didn't see the beginnings of it as
> many here did, but I am clearly impressed that the outlines of the thing
> people here have been calling "post-scarcity" is starting to take real
> shape.  For the first time in some years, a logical economic progression
> toward something is beginning to emerge in my own mind...the last time this
> happened was about 1984 when the first Macintoshes fell into my hands and I
> realized computing was going to become ubiquitous and commonplace.  Now with
> that obviously in hand some 25 years later, I can now see a path to widely
> deployed post-scarcity 25 years from now.  I share strongly the balance
> concern that Reasons cited about value decay of productivity versus market
> force needs.  It could still end very badly.  Maybe today I am less
> pessimistic though.
> Ryan
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