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Tuesday, January 27, 2009

Prices and the funciton of Money

A major function of money is to keep track of what things are needed; prices are determined by the supply/demand interaction. Consumers of things will bid their price up, this is vital information for those who would be producers, as they need to know whether or not they should invest the time and effort in supplying a thing to be consumed. This is super-basic economics, but part of the reason why communism was so unsuccessful; producers had now way to know what to produce because consumers couldn't send signals via their responses prices.

Now, enter the "new economy" paradigm, where things can be reproduced for almost zero cost. Anything digitizable falls into this category; all the cost is in the development. So how do producers of things like software or music survive when their product can be infinitely reproduced at no cost? The old solution is licensing, and that's still dominant. A newer solution is "Pay what you want."

The amount that people choose to pay for something seems like a very pure measure of its value to that person; They'll pay nothing if they don't value it, but they'll pay something if they do (and implicitly want to see more things of a similar nature).

This voluntary pricing system could provide very good information to producers, as long as it is openly available to all. So I propose a sort of reverse auction mechanism where the voluntary payments people make for things they consume are made publicly available. Some function of payment vs usage could determine a thing's expected value. Thus, producers could determine in advance how much they could expect to earn in return for producing something and offering it for voluntary payment.

This sort of economics is vital for creative endeavors; since artists must spend some major portion of their time working for a living if they aren't payed what their work is worth (which seems to be what happens most of the time). If a rich market for creative work was established along these lines, artists could spend more of their time doing creative work and less drudgery.

This thought was kicked off by a cincinnati musician's website, where he does the voulentary payment thing (Peter Adams, check him out).

I understand that Radiohead pioneered the idea, and I recently read on BoingBoing that a comic used the idea to great success (the sales of the comic were enormous even though it could be had for free).

Aftermath?

As a follow-up question to the end of my last post: What elements of our current culture are worth keeping? We can lament the shallowness of consumer culture with all its focus on empty status symbols. But out of that culture have come some great things, for instance the computer I've got on my lap. Such a thing could never have been "directed" to be created; its the product of lots of small inventions and wandering in the sea of potential things that might be worth making. Is it the case that all the ugly culture that we'd just as soon see die off is the inevitable by-product of worthwhile things?

Upheaval

My longtime friend Emily tried to comment on my depression question, but I had accidentally disabled commenting. Still can't get it to work for older posts, but its back on for new ones. Here's her comment (and my reply following):

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I was going to say that I agree with you on the topic of impending depression, except that for me (for some sick reason or something) it's accompanied by optimism, as if this might be the kick in the seat that we need.

The sense of community, at least between middle and lower class individuals, increased drastically during the depression (albeit accompanied by considerable suffering) as did the ever-depleting sense of locality. This country continues to be fear driven, and a lot of that fear is geared towards our peers. There is no "community" anymore (though arguably there has been a move away from community since the dawn of the Colonies). We are all taught to be individualistic, rather than individuals, with ideals that seem to often times include only ourselves. My hope is that we, as a people, can make the best of this depression and relearn to stick together, help a brotha out and lean on each other. I figure we'll either do that, or we'll all go crazy and kill each other.

Either way, we'll just have to wait and see how things turn out! We live in unique and ever-changing times: one that is likely to be a turning point not only for us as a country, but for us as a species as well! I've got me seat-belt on, my ideals firmly in place and I'm ready for the ride!

Em
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I feel the same strange sense of optimism about the coming disaster. So many bad habits have become ingrained in the fabric of society, and because they don't see any alternatives people accept them and follow them like scripts. A major upheaval will force people to examine the way they live their lives, some perhaps for the first time ever.

That sounds like a pretty good thing overall, but the downside is that a lot of people don't have any practice at that sort of self-examination, and when the societal structure they've come to rely on is snatched away, they'll be helpless. This applies to the person who's dependent on institutions to give them a purpose and direction for earning a living equally as well as the person who earns no living and is supported entirely by others. And thus, the "we all go crazy and kill each other" scenario might be a tragic reality for many people.

At the same time we learn to lean on each other, we also need to relearn how to support ourselves.

But doomsaying aside, I'm optimistic that humanity will pull through and continue to make progress. Maybe what we're seeing is just the welcome death of consumerism. Pity that the collapse will cause suffering, but pity it existed in the first place.