Toward a Very Different Economy

To do this you needed money

Niall Ferguson has written a very interesting book, The Ascent of Money.

Reading it made me wonder if perhaps we are not now entering a transitive phase in the value of money.

This may seem strange, as our preoccupation is with the impact of massive over-leveraging, from Ireland to Spain to Portugal and God only knows what else is to come.

But on a smaller basis, the value of money seems, in a strange way, to be diminishing.

Let’s look at video, a place we know well.

There was once a great value based on the ability to create video. Very few people could do it and the market for it was fairly limited – a few TV networks, your occasional wedding and then a few corporations.

The advent first of VHS, then cable, then DVDs and finally the web exploded the need for video.

At the same time, a concurrent explosion of simple gear and people who wanted to do it completely devalued the skill while at the same time vastly expanding the output of content.

Interesting.

Making video was no longer so expensive, and as a result, there was a lot more of it.

A lot more.

The same thing happened to content online.

Once newspapers were expensive and complex and difficult to produce and the people who made them could rightly charge a fortune for the service.

But the rise of laptops and word processing and the web also reduced that to a flooded market of content at very low to free.

Interesting.

As free markets began to arise in the West after the Dark Ages started to subside, the influx of ‘content’, (ie, vegetables, hides, small metal works, etc…) at village fairs created a sudden need for money to allow fluidity of transactions.

But our new influx of content to new markets (ie the web) resists the need for money. In fact, the less money there is, the more fluid the market.

We have created non-monetized markets for goods that are of extremely little value.

Well, this is great if you are making blogs for fun, but what if y0u need to feed a family.

Well, this raises and interesting if ancilliary question: how much do you need.

For as the new markets begin to function with little to no money, and quite well, isn’t a certain percentage of our ‘needs’ being met by these new money free markets?

For example, my phone bill which used to be a major expense every month is now, with skype, pretty much free.

So is the ‘purchase’ of a newspaper, or content, or a lot of reading material, and a lot of video with more to come.

Youtube does not charge.

Does not pay, does not charge.

There are lots of legal services online I can get for free

Travel agents now cost nothing.

Admittedly, there is still the rent and food, but let’s say that 15% of what used to be my total expenses has now been eclipsed by free stuff online.

Is that a fair estimate?

Probably.

And let’s say that perhaps 50% of our economy is based on ‘intellectual property’ (ie, making videos, books, movies, music, contracts, documents, writing, deeds, wills, etc..)

Is that fair?

Probably.

So is it fair to project that at some point in the not too distant future 50% of my costs may be replaced by free services?

Could be.

And if that’s the case, are we headed for an economy that is structured in a very different way?

Possibly.

A peasant in 13th Century France looking at a village fair in his town saw perhaps a few centimes in his entire lifetime. He didn’t need them.

Even as late as the 16th Century, cash was something of an abstraction for most people in the world.

Perhaps we are looking at as major a change now, perhaps with the same incomprehending eyes.