by Shane Ormond
On Sep 19, 2019
The Federal Reserve rate-setting committee cut rates by a quarter point yesterday, in an attempt to create a protective cushion for slowing economic growth. (Now all we need is a protective blanket and a protective play center and the global economy is all set.)
by Shane Ormond
On Sep 9, 2019
The director of MIT’s Media Lab stepped down over the weekend, after it emerged he accepted millions of dollars in donations from Jeffrey Epstein and taken steps to hide them (because, ya know, child sex trafficking and stuff).
For years I’ve looked for a passage from the Austrian tradition that clearly explains the nature of knowledge as a non-scarce good and its high value in pushing social and economic progress. Stephan Kinsella and I have found enough material to provide hints and suggestions, small examples and first thoughts, but never anything that really made the point super clear.
In all my speaking and writing for the past three years, I’ve gone to great lengths to spell out the difference between the physical world of scarcity and the world of ideas in which non-scarcity prevails, and suggested that this is a major reason for the great migration to the digital world. I’ve longed for a passage from some Austrian thinker who seemed fully to grasp the idea — not just in hints and suggestions but worked out and precise.
Well, last night, Steven Horwitz came across a passage from F.A. Hayek that is just gold. It is from the Constitution of Liberty (Chicago, 1960, 1978, p. 43). He puts it as plainly as one can possibly hope given that he was writing before the digital age.
The growth of knowledge is of such special importance because, while the material resources will always remain scarce and will have to be reserved for limited purposes, the uses of new knowledge (where we do not make them artificially scarce by patents of monopoly) are unrestricted. Knowledge, once achieved, becomes gratuitously available for the benefit of all. It is through this free gift of the knowledge acquired by the experiments of some members of society that general progress is made possible, that the achievements of those who have gone before facilitate the advance of those who follow.
Hayek goes on. He uses the fantastic phrase “fund of experience” — an analogy to capital theory in the physical world — as a way of explaining how the whole world and the whole of history can benefit from the success of one single firm or one innovator. “The free gift of the knowledge that has cost those in the lead much to achieve enables those who follow to reach the same level at a much smaller cost.”
This free gift is what I’ve called the socialistic side of capitalism. Every private producer, in order to market its wares, must necessarily give away that most precious thing, the evidence of its own success. That evidence, that knowledge, becomes part of the commons. That thereby inspires competitors to emulate the success. The profitable producer must, in turn, stay on the path of change and progress and never rest, generate ever newer and better knowledge.
So we see here how Hayek anticipated the great trend of our time, the steady and inexorable move of more and more of life from the realm of scarce to non-scarce: words, images, movies, physical objects with 3d printing, and now even money. This is all about the scalability, malleability, indestructibility, and immortality of ideas as non-scarce good. It is gratuitously available for the benefit of all — and this of course is what the markets “desires” in effect: the inclusion of the whole of the world’s population and resources in the great process of improving our lives in this world in which scarcity will always and forever be a feature — a feature to deal with realistically (and humanely) and also to overcome insofar as we are able.