THE ECONOMICS OF ABUNDANCE
Enabled by the miracle of
abundance, digital economics has turned traditional economics upside down. Read
your college textbook and it's likely to define economics as "the social science
of choice under scarcity." The entire field is built on studying trade-offs and
how they're made. Milton Friedman himself reminded us time and time again that
"there's no such thing as a free lunch.
"But Friedman was wrong in two ways. First, a free lunch doesn't necessarily
mean the food is being given away or that you'll pay for it later — it could
just mean someone else is picking up the tab. Second, in the digital realm, as
we've seen, the main feedstocks of the information economy — storage, processing
power, and bandwidth — are getting cheaper by the day. Two of the main scarcity
functions of traditional economics — the marginal costs of manufacturing and
distribution — are rushing headlong to zip. It's as if the restaurant suddenly
didn't have to pay any food or labor costs for that lunch.
Surely economics has something to say about that?
It does. The word is externalities, a concept that holds that money
is not the only scarcity in the world. Chief among the others are your time and
respect, two factors that we've always known about but have only recently been
able to measure properly. The "attention economy" and "reputation economy" are
too fuzzy to merit an academic department, but there's something real at the
heart of both. Thanks to Google, we now have a handy way to convert from
reputation (PageRank) to attention (traffic) to money (ads). Anything you can
consistently convert to cash is a form of currency itself, and Google plays the
role of central banker for these new economies.
There is, presumably, a limited supply of reputation and attention in the
world at any point in time. These are the new scarcities — and the world of free
exists mostly to acquire these valuable assets for the sake of a business model
to be identified later. Free shifts the economy from a focus on only that which
can be quantified in dollars and cents to a more realistic accounting of
all the things we truly value today.
FREE CHANGES EVERYTHING
Between digital economics and the
wholesale embrace of King's Gillette's experiment in price shifting, we are
entering an era when free will be seen as the norm, not an anomaly. How big a
deal is that? Well, consider this analogy: In 1954, at the dawn of nuclear
power, Lewis Strauss, head of the Atomic Energy Commission, promised that we
were entering an age when electricity would be "too cheap to meter." Needless to
say, that didn't happen, mostly because the risks of nuclear energy hugely
increased its costs. But what if he'd been right? What if electricity had in
fact become virtually free?The answer is that everything electricity touched —
which is to say just about everything — would have been transformed. Rather than
balance electricity against other energy sources, we'd use electricity for as
many things as we could — we'd waste it, in fact, because it would be too cheap
to worry about.
All buildings would be electrically heated, never mind the thermal conversion
rate. We'd all be driving electric cars (free electricity would be incentive
enough to develop the efficient battery technology to store it). Massive
desalination plants would turn seawater into all the freshwater anyone could
want, irrigating vast inland swaths and turning deserts into fertile acres, many
of them making biofuels as a cheaper store of energy than batteries. Relative to
free electrons, fossil fuels would be seen as ludicrously expensive and dirty,
and so carbon emissions would plummet. The phrase "global warming" would have
never entered the language.
Today it's digital technologies, not electricity, that have become too cheap
to meter. It took decades to shake off the assumption that computing was
supposed to be rationed for the few, and we're only now starting to liberate
bandwidth and storage from the same poverty of imagination. But a generation
raised on the free Web is coming of age, and they will find entirely new ways to
embrace waste, transforming the world in the process. Because free is what you
want — and free, increasingly, is what you're going to get.
Chris Anderson (canderson@wired.com) is the editor in
chief of Wired and author of The Long Tail. His next
book, FREE, will be published in 2009 by Hyperion.
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