Wednesday, April 23, 2014

Is capitalism driving itself out of business?

 I found this interesting article on technological innovation, and the possible long run effect on capitalism. Here is an extract from the article:

"In his latest book, The Zero Marginal Cost SocietyRifkin argues that the private market's drive for efficiency and productivity has brought us ever closer to a world in which the marginal cost to produce just about everything will inch closer and closer to zero.

Picture factories run entirely by robots, powered by renewable energy sources like wind and the sun, creating products delivered by driverless vehicles, also run on renewable energy. Maybe these products won't even need to make any kind of journey at all. Perhaps they can simply be produced at your home or a few blocks away with the help of a 3-D printer.
Speaking of your home, in Rifkin's new world, your next one may very well be built by locally generated, 3-D-printed materials, in record time, removing the considerable expense of transporting construction goods. Rifkin cites an MIT lab that is working to develop a house frame in a single day "with virtually no human labor." An equivalent frame, Rifkin says, "would take an entire construction crew a month to put up."

That home will be powered by -- you guessed it -- increasingly cheap renewable energy, and it will be stocked with more sensors than you can imagine, all feeding data into a smart grid, so your house knows how much energy you need and when, and what needs to be repaired.

This is a technological utopia brought to you by the convergence of what Rifkin calls the Communications Internet (how information is shared), the Energy Internet (how energy needs are shared and energy itself is distributed), and the Logistics Internet (how products are built and delivered), all equaling the so-called Internet of Things.

Granted, the initial cost of building such a system will be substantial. But once it's up and running, Rifkin argues, the benefits will fundamentally reshape our economic order. "The Internet of Things is already boosting productivity to the point where the marginal cost of producing many goods and services is nearly zero, making them practically free," Rifkin writes. "The result is corporate profits are beginning to dry up, property rights are weakening, and an economy based on scarcity is slowly giving way to an economy of abundance."

Link to the article: http://management.fortune.cnn.com/2014/04/23/capitalism-economy-jeremy-rifkin/?iid=s_mpm

Do you agree with his argument? What effects do you think this will have on employment? Any thoughts, comments or questions?

2 comments:

  1. I posted a blog similar to this topic a week or two ago. Basically, I see the reduction in cost of goods and services will open the economy to newer forms of goods and services since we have more funds available. The reduction in the cost of agricultural production in the 18th century paved the way for the Industrial Revolution. Eventually, the cost of industrial production diminished, leading the way to a service-based economy in the 20th century.

    Yet, agricultural, industrial, and service production cost money. So long as scarcity exists, there will always be an economy. When there is an infinite amount of land, food, energy, etc., then an economy won't be needed.

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  2. I think the impact of emerging technologies will be profound. I have no doubt that in the future the production costs of goods will be dramatically lower than it is now. With that said, I don't think marginal costs would be completely zero because even with 3-D printing, you need input materials and inputs are scare (and hence valuable). We will never quite be able to escape scarcity because we will always have the law of conservation of matter, matter cannot be destroyed or created. The whole point of capitalism is to allocate scare resources in the most efficient way, as long as people in the future demand scarce goods and services I think we will continue to have some form of capitalism.

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