Friday, September 4, 2015

99 percent Utopia and money

My good friend and co-author Leif Wenar, in his first tweet, asked this question: “Friends, a utopia query. Keep human nature fixed. Imagine the best possible world. Does money exist?”  I could not sleep last night so I decided to give it a thought.

Let’s start with money. What is its central function? To coordinate plans of individuals and companies and to pull resources in the “right” direction. When I go to Starbucks to buy coffee, and have money to pay for it, I know that  there will  be a person willing to make that coffee for me, and there would be companies delivering coffee grains because they all expect to get money from me. So money enables us to make our plans consistent, starting from the coffee growers all the way to the final consumer.  

Who is then  going to do the coordination in Utopia if there is no money? But, before we answer that question,  let’s go back and look at what is Utopia. I will use Marx’s definition given in  the “Critique of the Gotha program”: Communism is the situation where “the productive forces have increased with the all-around development of the individual, and all the springs of co-operative wealth flow…abundantly—[so that]…the narrow horizon of bourgeois right [can] be crossed in its entirety and society inscribe on its banners: From each according to his ability, to each according to his needs!”. Utopia is thus a situation where goods and services are absolutely plentiful, there is no scarcity, and we can take as much of them as we like.

Now, some may stop me right there: this will never happen, they will say. But let’s not go that fast. Notice that when I go to my local Starbucks I have already entered a bit the “coast of Utopia”. I can get there an unlimited quantity of water, ice cubs, water cups, paper napkins, honey and milk, all for free. They are all laid out for all customers (and even for those who are not customers but just walk in) to take in unlimited amounts.  There are other goods that have almost entered this cornucopia in our lifetimes: water, electricity. When I need to recharge my laptop I can count on getting free electricity from practically every store, train, or airport. There are of course other services like museums and open-air concerts that  one can enjoy for free but they are a bit different because somebody else has paid for them. But I want to mention it here because we shall find them useful in a moment.

So, there is, I think, already now a limited, but growing, number of goods and services whose marginal cost of production is so low that they are practically free. (The average cost of production is not zero, but to an individual consumer these goods appear as free.)  Consider now the behavior of people. Do they go to Starbucks stores and fill  their pockets with free paper napkins or grab free ice cubes? No. Do they go to free open-air concerts day after day and fight for the spots? No.  Once you know that such goods will be plentiful and free, you do not keep an unreasonable stock of them, nor do you fight to get them. You know they will be around when you need them.

So far we have I  think made two important conclusions: there are goods that fall into the category of “Utopian goods” and behavior that people exhibit towards these goods does not include hoarding, wanton destruction or wastefulness.

Can we imagine that with economic progress more and more goods begin to fulfil this condition of Utopian goods? I think we can. Surely 40 or 50 years ago, you had to pay for the smallest piece of paper or paper napkin, not get it for free as now. (There is still a difference between the US and Europe in this: European Starbucks stores make it more difficult to get  free paper napkins.)  You even had to pay for a cup of water in an inn on a dirt road. Not today. So perhaps one day we shall walk into a Starbucks store and be given as much coffee for free as we like in the expectation that we shall buy some other, new fanciful product. But notice that when this happens, coffee will have joined paper napkins and ice cubes on our list of Utopian goods. So the list will be growing.

Extend this many years forward and assume that lots of the goods that we consume today eventually become Utopian. But who is going to produce them? Will not people have to be given some money-like coupons showing how many hours of work they did, coupons that would entitle them to goods and services? This does not make sense however because all goods, in any quantity, will be free to all, so coupon or no coupon you can get as much as you like. This then means that labor has to be entirely voluntary and free, not “paid” in any form. That too is not impossible to imagine. I am writing this blog for free. Of course, I hope to enhance my reputation (or to drive into the ground) but there is not a single good or service that I will get from this writing. You will also read it out of interest, not for any pecuniary reason. Many activities can be done for free, simply because people like to do them. Many other boring, repetitive or hard jobs  that people do today will be done by robots. Controlling robots will require a minimum of work—perhaps writing a software code about how they (the robots) should do certain tasks, a thing, which I am sure, thousands of smart young people will compete to do for free.

When I go to a restaurant, who is going to make the food or serve me?  Partly robots, and partly people who like to be chefs or to provide good service. Actually, the quality of some goods and services may go up compared to what it is today simply because people do a better job at something which they like rather than at something they are (merely) paid to do.

But here I think we run into our first problem. There will be always better and worse restaurants simply because the chefs will not be the same. But since the price paid at every restaurant is the same (zero), there will  be no mechanism to distribute customers between better and worse restaurants except through queues. So we shall have shortages for certain goods and services. The shortages will be, like in a centrally-planned economy, “solved” through queueing..

The second problem appears at the level of jobs. We may be able to fill 90% of jobs by robots, 9% of jobs by people  who simply like to do these jobs, but 1% of jobs that are hard or done under unpleasant conditions and cannot be mechanized  will be always difficult to fill. So, we shall have to give something to people who do these jobs: we shall have to attract them to do the work. But how to attract them if everything is free anyway? So, money under the guise of some special coupons would reappear. Perhaps we could give these latter-day Stakhanovites coupons which would allow them to jump the queue in the restaurants. Perhaps something else. But whatever we do, a rationing mechanism, implied by money, will be back in that segment of the system.  

Finally, technological progress. If we assume that technological progress has stopped, I think the idea of moneyless Utopia is ultimately, at least conceptually, almost possible. But if technological progress continues with people inventing new things simply out of curiosity, that is without any material interest, these new goods, always  scarce in the beginning, will have to be rationed. So to ration them, we shall need money or quasi money too.

In a stationary economy, the range of goods that are available for free and in unlimited quantities, and the range of jobs that are performed for free can be very high. We may have a 99% Utopia. But not a hundred percent Utopia.

But in a growing economy, Utopia becomes much less realistic. The faster we grow the greater the number of Utopian goods and closer we seem to be coming to Utopia; but also, the faster we grow the more we invent new goods that are necessarily short in supply, and simultaneously the further we get from Utopia. Thus the fundamental nature of economic progress reveals itself in Leif’s question: economic progress is making us richer daily, but leaves us equally unsatisfied. For full happiness is possible only in stagnation.

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