The Lonely Savage

Why is the Mona Lisa so expensive and a can of Coca Cola so cheap? What is it that makes an Armani t-shirt cost more than a mass-produced one from your local retailer? Material and transportation costs aside, the only real answer to this question is scarcity. The more there is of a product, the lower prices one can expect it to sell for. Economics itself has been described as “the science which studies human behavior as a relationship between ends and scarce means”. This is why we (still) can’t charge for clean air; there’s simply too much of it. We can’t ask people to pay us for enjoying the sun in some spot; they’d just move to another spot and enjoy it there. However, we still try to charge for information, a resource whose amount may be the only one to actually increase as we consume it.

Scarcity is defined as the problem of infinite human needs in a world of finite resources. We have the possibility to want and need more than there is available. Thus, we have to make trade-offs. I will not buy the expensive car I want because my resources – in this case, money – are insufficient at this moment. Thousands of people starve every week because they lack resources – in this case, food. People sit for a long time waiting for surgery or healthcare because of lack of resources – in this case, doctors.

It seems like wherever we turn our heads, we can see some form of scarcity at work. That is; everywhere except in the field of information.

When it comes to information, the situation that exists today can best be described as a false scarcity or – better yet – an artificial scarcity. This is when a scarcity is entirely made up. It does not exist. Information is a non-rival resource; it does not disappear after one person uses it and more than one person can use it without any significant decrease in usability.

Note that I’m not talking about artificial scarcity of the sort where farmers are told to produce less or where Disney only sells a movie for a short period every seven years or so. While those are artificial ways of producing scarcity; the scarcity itself is very real. When it comes to setting a price on knowledge, however, the scarcity itself is artificial.

Piracy is a very hot topic right now, and rightly so. Copyright and the archaic definitions of ‘ownership’ are well overdue for a complete overhaul and I think the piracy debate is a good way to get that going. Piracy is also a very good example of artificial scarcity in effect. Let’s assume that I were to download the latest album by one of my favorite artists. Firstly, what has happened is not theft, no matter how loud the MAFIAA claim it is. Theft, per definition, is “the felonious taking and removing of personal property, with an intent to deprive the rightful owner of the same”. Note the word “deprive” in there. Since nobody has been deprived of “the same” nothing has been stolen.

Similarly, assume that a Brazilian football (I mean, of course, the ‘soccer’ type of football) player discovers a new way to dribble the ball to confuse his opponents. It’s a revolutionary move that is amazingly swift, simple and efficient. Nobody has ever done it before or even considered it to be possible. Within a few weeks, other players will have heard of it, tried it and even adapted it to their own way of playing. This is because the information was free to them to use and adapt however they wanted. Next up, however, a major shoe company decides to make a soccer shoe that makes this particular dribble easier to do without slipping. Since they own the patent to the design they are the only company allowed to create a shoe that even remotely resembles that particular model. This is because they own the sole rights to the information about how to create this type of shoe.

Let’s go back to the example of me downloading an album. What has actually happened if theft wasn’t involved? Since a copy was made, a product that was meant to exist in, for example, 100,000 copies now exists in 100,001 copies. If two of my friends were to copy it from me they would inflate the number to 100,003 copies. Within long, piracy could have inflated this number up well above a million. The only real limitation on piracy today (apart from availability, of course) is storage space, which many interpretations of Moore’s Law would have us believe is becoming cheaper, more accessible and – most importantly – larger at a faster rate than the availability of new information.

Artificial scarcities are said to be necessary in order to promote the further development of new goods. In the example of digital information, it may be ‘free’ to copy information, but it requires a significant investment to develop the information in the first place. The artist who recorded the album needed to buy the musical instruments, maybe pay for guitar class, pay for the studio time, pay for the mixing and mastering of the audio and so on. By copying the album, I am not adding to the sum of money heading back their way for their efforts. This does not motivate the artists to continue making music. However, the open source movement and several crowdsourced operations tell a different story:

In the absence of artificial scarcity, businesses and individuals would create tools based on their own need (demand). For example, if a business had a strong need for a voice recognition program, they would pay to have the program developed to suit their needs. The business would profit not on the program but on the resulting boost in efficiency caused by the program. The subsequent abundance of the program would lower operating costs for the developer as well as other businesses using the new program. Lower costs for businesses result in lower prices in the competitive free market. Lower prices from suppliers would also raise profits for the original developer. In abundance, businesses would continue to pay to improve the program to best suit their own needs, and increase profits. Over time, the original business makes a return on investment, and the final consumer has access to a program that suits their needs better than any one program developer can predict. This is the common rationale behind open-source software, such as Mozilla Firefox. (Wikipedia: Artificial Scarcity. Some grammar corrected)

How do you think this would work for movies, music and literature? Discuss!