Felix Salmon over at Fusion has been strongly punting a new book called “Trekonomics“, which was being crowdfunded on Inkshares up until Sunday evening, when it hit its target of 1,000 orders.
I’m no Trekkie, but I was ±the 743rd of those crowdfunders (so I’m delighted that they hit the target). Here is the blurb that sold it:
In Star Trek, humanity has reached abundance. Thanks to scientific progress and good governance, the Federation has overcome the social ills commonly associated with the uneven distribution of material wealth. The citizens of the Federation no longer work to sustain and provide for themselves — they find meaning in more elevated pursuits. This state of economic bliss, however, is not without difficulties. For one, the Federation and its fire department-cum-diplomatic arm, namely Starfleet, operate in a galaxy where equally (if not more) advanced species do not live by the same altruistic motivations. Most notably, the ever-scheming Ferengis view the relentless acquisition of private wealth as their cardinal purpose in the universe.
Doesn’t that sound like something you’d want to read about?
I love the idea of an economics of surplus over an economics of scarcity.
This isn’t exactly a new idea – the thought experiment of what might happen when we “solve” the fundamental economic problem of unlimited wants and limited resources…
John Maynard Keynes, in particular, is relatively famous for his short essay in 1930: “The Economic Possibilities of our Grandchildren“.
Here are some extracts from that, which just go to show how incredibly consistent we are at being surrounded by Prophets of Doom:
We are suffering just now from a bad attack of economic pessimism. It is common to hear people say that the epoch of enormous economic progress which characterised the nineteenth century is over; that the rapid improvement in the standard of life is now going to slow down –at any rate in Great Britain; that a decline in prosperity is more likely than an improvement in the decade which lies ahead of us.
I believe that this is a wildly mistaken interpretation of what is happening to us. We are suffering, not from the rheumatics of old age, but from the growing-pains of over-rapid changes, from the painfulness of readjustment between one economic period and another. The increase of technical efficiency has been taking place faster than we can deal with the problem of labour absorption; the improvement in the standard of life has been a little too quick; the banking and monetary system of the world has been preventing the rate of interest from falling as fast as equilibrium requires.
The prevailing world depression, the enormous anomaly of unemployment in a world full of wants, the disastrous mistakes we have made, blind us to what is going on under the surface to the true interpretation. of the trend of things. For I predict that both of the two opposed errors of pessimism which now make so much noise in the world will be proved wrong in our own time – the pessimism of the revolutionaries who think that things are so bad that nothing can save us but violent change, and the pessimism of the reactionaries who consider the balance of our economic and social life so precarious that we must risk no experiments.
My purpose in this essay, however, is not to examine the present or the near future, but to disembarrass myself of short views and take wings into the future. What can we reasonably expect the level of our economic life to be a hundred years hence? What are the economic possibilities for our grandchildren?
From the sixteenth century, with a cumulative crescendo after the eighteenth, the great age of science and technical inventions began, which since the beginning of the nineteenth century has been in full flood–coal, steam, electricity, petrol, steel, rubber, cotton, the chemical industries, automatic machinery and the methods of mass production, wireless, printing, Newton, Darwin, and Einstein, and thousands of other things and men too famous and familiar to catalogue.
What is the result? In spite of an enormous growth in the population of the world, which it has been necessary to equip with houses and machines, the average standard of life in Europe and the United States has been raised, I think, about fourfold. The growth of capital has been on a scale which is far beyond a hundredfold of what any previous age had known. And from now on we need not expect so great an increase of population.
At the same time technical improvements in manufacture and transport have been proceeding at a greater rate in the last ten years than ever before in history. In the United States factory output per head was 40 per cent greater in 1925 than in 1919. In Europe we are held back by temporary obstacles, but even so it is safe to say that technical efficiency is increasing by more than 1 per cent per annum compound. There is evidence that the revolutionary technical changes, which have so far chiefly affected industry, may soon be attacking agriculture. We may be on the eve of improvements in the efficiency of food production as great as those which have already taken place in mining, manufacture, and transport. In quite a few years-in our own lifetimes I mean-we may be able to perform all the operations of agriculture, mining, and manufacture with a quarter of the human effort to which we have been accustomed.
For the moment the very rapidity of these changes is hurting us and bringing difficult problems to solve. Those countries are suffering relatively which are not in the vanguard of progress. We are being afflicted with a new disease of which some readers may not yet have heard the name, but of which they will hear a great deal in the years to come–namely, technological unemployment. This means unemployment due to our discovery of means of economising the use of labour outrunning the pace at which we can find new uses for labour.
But this is only a temporary phase of maladjustment. All this means in the long run that mankind is solving its economic problem. I would predict that the standard of life in progressive countries one hundred years hence will be between four and eight times as high as it is to-day. There would be nothing surprising in this even in the light of our present knowledge. It would not be foolish to contemplate the possibility of afar greater progress still.
Now it is true that the needs of human beings may seem to be insatiable. But they fall into two classes –those needs which are absolute in the sense that we feel them whatever the situation of our fellow human beings may be, and those which are relative in the sense that we feel them only if their satisfaction lifts us above, makes us feel superior to, our fellows. Needs of the second class, those which satisfy the desire for superiority, may indeed be insatiable; for the higher the general level, the higher still are they. But this is not so true of the absolute needs-a point may soon be reached, much sooner perhaps than we are all of us aware of, when these needs are satisfied in the sense that we prefer to devote our further energies to non-economic purposes.
I draw the conclusion that, assuming no important wars and no important increase in population, the economic problem may be solved, or be at least within sight of solution, within a hundred years. This means that the economic problem is not – if we look into the future – the permanent problem of the human race.
Thus for the first time since his creation man will be faced with his real, his permanent problem-how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well.
The strenuous purposeful money-makers may carry all of us along with them into the lap of economic abundance. But it will be those peoples, who can keep alive, and cultivate into a fuller perfection, the art of life itself and do not sell themselves for the means of life, who will be able to enjoy the abundance when it comes.
You should read the full thing here. It’s only seven pages long – and worth your time!
Rolling Alpha posts opinions on finance, economics, and the corporate life in general. Follow me on Twitter @RollingAlpha, and on Facebook at www.facebook.com/rollingalpha.
Rich September 15, 2015 at 16:31
I hope you are well.
I haven’t had a chance to read the full essay studying for board allowed me only enough time to read the excerpts. Really good though.
I have two questions and perhaps you can point me in the direction of an answer.
1. What would be the economic effect of free, or close to free electricity. Lets say in the next 50 years electricity becomes virtually free, technological advances in renewable’s or fusion results in electricity (energy) being as abundant as oxygen. How would the world react? Food prices would plummet. You can grow anything anywhere now with desalination plants and climate controlled tunnels. Fertilizer can be created chemically. In all other industries the cost of goods will come down. Would the economic problem Keynes noted be solved? Would the world just sit back and relax, most likely with high unemployment as machines would now cost nothing to run.
2. The narrative over the last few years has been one of rising food prices, 9 billion mouths to feed. Do you know of any readings about the economics of food. I am interested because as you know we just came out of the commodity super cycle which resulted in high commodity prices, however commodity prices are different to food prices. Commodity prices are more isolated in that they do not have direct knock on effects to the prices around them. For example if the price of steel goes up ,construction companies pay a bit more and investment in buildings etc. probably decreases slightly.
However if the price of food goes up, salaries will have to move with that movement or atleast partially. This will increase the cost of all goods. So do the profits of the farmer actually increase, as his inputs would have now moved with the increases of food prices. By inputs I mean fertilizer etc..
The fertilizer company will pay higher salaries as the cost of food has gone up therefore fertilizer will go up. Therefore the cost inputs for the farmer will have increased. I presume it won’t be a net sum game. Where if the cost of food increases the increases in salary won’t be matched. Therefore the percentage of the salary spent of food will increase.
And then we walk into the territory of riots over food prices etc. All in all I am just wondering what effect the increases in food prices will have.
Sorry for the wall of text.Reply