I believe there is a growing battle between those who would like to see many goods become public, and those who would like to keep them locked up. I think this battle will only intensify in the coming years as technology continues to accelerate. To explain what I mean, I’d like to go over a few quick terms from economics.

Economists often classify goods according to two major criteria: how rivalrous they are, and how excludable they are.

A good is rivalrous when consumption by one person excludes simultaneous consumption by another person. An example is a painting. If I have an original painting in my house, you cannot also have that same painting in your house.

In contrast, a non-rivalrous good is a good that multiple people can use simultaneously. An example is a recipe. If I cook using a particular recipe, that in no way prohibits you from using that same recipe in your own kitchen.

A good is excludable if it is possible to prevent people from accessing the good unless certain conditions have been met (such as payment). Again, an original painting is a convenient example. If I want to exclude you from accessing my painting, I can just keep it locked up in my private studio until someone pays me what I consider an appropriate amount.

In contrast, a non-excludable good cannot easily be withheld from other people. A classic example of a non-excludable good is a lighthouse. Any ship within sight of a lighthouse can benefit from the lighthouse’s presence. It is not easy to include some ships and exclude others.

Why does all this matter? Because I think one of the recent effects of technology has been that it is taking many types of goods and doing this with them:

The first example we are all familiar with is music. Music used to come in the form of rivalrous, excludable goods like CDs. But once music made the transition to digital form, it became both non-rivalrous, and non-excludable. Digital music is non-rivalrous because if I copy a song from my friend, neither of us has to give up anything. We now both have equal access to the same song. Likewise, digital music is non-excludable, because its distribution is very hard to control.

Non-rivalrous, non-excludable goods are called public goods. One might argue that these are the best kinds of goods since we can all enjoy them with equal opportunity and without competing with each other. Examples of other public goods include nice things like fresh air, knowledge, and national defense.

And yet, somewhat understandably, the response from the music industry (and other similarly affected industries) has been to try to do this:

In other words, affected industries have made an effort to take public goods and make them excludable. They typically strive to accomplish this using a combination of intellectual property law and digital rights management.

Goods which are excludable and yet non-rivalrous are sometimes called club goods. Club goods include golf courses, movie theaters, and cable television.

The act of turning a public good into a club good is not always easy, as the music industry has found out. There has been a great deal of natural resistance to the idea of taking something which could be publicly available, and instead locking it up so that it can only be accessed by members of a private club. And this is where the battle breaks out.

Now, as long as this only applies to a few goods like music, one might ask “Who cares?” The answer is that as technology progresses we are going to see a lot more goods get moved into the lower right corner of this chart. And consequently a lot more businesses are going to fight to move those goods back into the lower left.

For example, if household 3D printers become widely adopted, we are going to see a lot of physical objects like tools move into the lower right corner. Or imagine: if the new Watson software ends up being runnable on smart phones some day, we could see even a normally expensive good like medical diagnosis move into the lower right.

Now step back and ask yourself: do you want a critical good like medical diagnosis, something we all need, to be treated more like fresh air, or like a golf course? Which is the world you’d rather live in? One where useful goods are ubiquitous and free for all, or locked up and under elite control?

Already today we have the potential to make all of the world’s books free for everyone on the planet. Google already has the infrastructure lined up to accomplish this. And yet they are prohibited from doing so. Why? Because of the demands of a few people in the publishing industry. If enlightened aliens came to visit us, do you think they would believe we are making the correct choice in this matter?

Traditional economic theory argues that the market will under provide public goods; therefore these goods need government intervention (i.e. intellectual property) to encourage their production. As with technological unemployment, I believe this is another area where conventional economic theory has simply failed to keep up with technological change. Computers are dramatically lowering the cost of creating many goods, and as such, the additional help provided by government is less necessary. The wealth of free, useful content on the internet, most of it produced by complete amateurs, is testament to this reality.

True, there are some public goods like street lights which still require government funding or else they would not exist. But we are seeing a vast explosion of new public goods—digital music, digital video, blogs, free apps—that I do not believe are susceptible to this traditional argument. People are naturally inclined to create, and once they have powerful computers, they seem to do so, with or without a government-backed monopoly.

My biggest fear is we will continue losing key battles in the war between public goods and club goods, and that the stakes will only increase as time goes on. As I pointed out earlier, music is one thing, but as physical objects and important services begin to move into the category of digital non-rivalrous goods, this battle will only become more heated and more critical. I sincerely hope that various industries will fail in their mission to turn public goods back into club goods. While this might help profits in the short term, in the end we will all be worse off.

This is part five of a multi-part series that seeks to answer the question: what resources will remain scarce in the future? Since economic activity is based on scarcity, by answering this question, we may be able to locate future areas of employment, if they exist…

SCARCE RESOURCE #4: ACCESS

In the previous article, I articulated some of the challenges involved in monetizing digital content. Technology has the capacity to create an abundance of all things digital. Thus, content creators must contend not only with piracy but with knock-offs and free competitors.

But even though technology enables an abundance of copies, people will not necessarily have access to those copies. If you can find a way to lock up your content, then you can charge people to access it.

This is the concept of artificial scarcity. It’s easy to imagine situations where the content in question doesn’t have to be scarce, but the creators have chosen to make it scarce in order to preserve the value. A good example is an eBook. Currently the technology exists for all of the world’s books to be scanned and available for free on the web. However, due to the demands of authors and the publishing industry, books today remain artificially scarce. This enables traditional business models (and associated jobs) to survive (at least for a bit longer than they otherwise would).

Is artificial scarcity a good idea? That is highly debatable. Making things artificially scarce seems somewhat counterproductive from the standpoint of promoting human knowledge and wellbeing. Also artificial scarcity causes a great deal of collateral damage. Our broken intellectual property system is a prime example. Exploring all of the problems with intellectual property is beyond the scope of this article, but suffice it to say that the list of gripes one might have is rather long: stifling of innovation, distorting of markets, privileging of wealthy elites who can afford to hire lawyers, and so on.

Perhaps a more relevant question to our discussion is whether artificial scarcity is even feasible over the long term. After all, content companies have been largely unsuccessful at stopping piracy. Both the legal system and digital rights management have failed to control the spread of illicit copies.

However, content creators have (slowly) begun to figure out that if they architect a friendly platform for legal content delivery and keep prices reasonable, people will still pay for digital content in relatively large numbers. The trick appears to be convenience. When the legal option is more convenient than the illegal option, many people choose the path of least resistance.

In addition, we cannot dismiss the possibility that a successful crackdown will still occur. Content creators have been putting a great deal of pressure on governments and platform developers to do something about unlicensed copying. This pressure is only going to increase as more industries become vulnerable to piracy. Who’s to say that the forces favoring artificial scarcity and IP maximalist policies won’t eventually get their way?

And so we arrive at a plausible (if perhaps undesirable) scenario for how capitalism and traditional jobs might continue. If capitalism needs scarcity to survive, then perhaps we can just continue to create that scarcity artificially. It doesn’t seem that far-fetched to imagine a future where many people are gainfully employed in the design and sale of artificially scarce information products. If anything, current social norms might lean in that direction.

In addition there are business models based around selling “access” that may be viable whether or not strong mechanisms of artificial scarcity are even in place. Up until now, I have focused on access to content. What about access to spaces (both physical and virtual)?

Let’s say instead of selling access to static information (which can be copied and distributed against my will), I am selling access to a dynamic community (which is constantly evolving and therefore cannot be easily duplicated). An easy contemporary example would be a pay dating site. You can’t pirate a dating site the same way you can pirate a television show. And yet the business model in both cases is somewhat similar, in that they both revolve around the sale of access to information. It’s possible we will see an ever increasing shift towards community-based information products. Massive multiplayer games. Collaborative storytelling projects. Virtual playgrounds. It would be impossible to list all the possibilities here.

In conclusion, as we consider the future of the economy it’s important to remember that creating new scarcities could be as easy as just deciding to lock certain things up.

Next Up: Positive Feelings