Economics of Abundance

Chris Anderson writes:

The Long Tail is all about abundance: the economic effects of infinite shelf space. Unfortunately, neoclassical economics has virtually nothing to say about abundance. Indeed, the economics of abundance is almost exclusively the domain of extropians, a few other transhumanists, and science fiction writers. How can this be?

Well, for starters the classic definition of economics is “the science of choice under scarcity”. That’s a warning sign right there. From Adam Smith on, economics has focused almost exclusively on behavior within constraints. My college textbook, Gregory Mankiw’s otherwise excellent Principles of Economics, doesn’t mention the word abundance. And for good reason: if you let the scarcity term in most economic equations go to nothing, you get all sorts of divide-by-zero problems. They basically blow up.

But clearly abundance (AKA “plentitude”) is all around us, especially in technology. Moore’s Law is a classic example. What Carver Mead recognized in 1970 when he encouraged his students to “waste transistors” was that transistors were becoming abundant, which is to say effectively free. The shift in thinking from making the most of scarce computing resources to “wasting” cycles by, say, drawing windows and icons on the screen led to the Mac and the personal computing revolution. To say nothing of the scandalous profligacy–a supercomputer used for fun!–of a Playstation 2.

Atanu Dey has posted a comment:

I believe that the essential confusion is between the abundance of the products and the abundance of the *factors* of production. Economics deals with the real scarcity of factors of production so as to maximize the production. The end result of that exercise may be an abundance of products (and consequently an abundance of choice) but that does not argue against the basic reality that factors of production are scarce and choices need to be made in allocating scarce resources for various (often conflicting) purposes.

Information is a public good (non-rival in consumption, etc.) but the production of that public good requires private goods (rivalrous in consumption) which have competing uses. This is well within the purview of standard economic theory. So while you see an abundance of digital products which increases the set of choices, the production of these require (at least some) non-digital factors that are limited.

Published by

Rajesh Jain

An Entrepreneur based in Mumbai, India.