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There's some fallacious reasoning in this article that is the economic equivalent of believing we've broken the laws of thermodynamics. Marginal costs aren't be

There's some fallacious reasoning in this article that is the economic equivalent of believing we've broken the laws of thermodynamics. Marginal costs aren't being magically erased. They're simply being shifted from one party to another, or sometimes diffused from one party to a handful of others. Column A shrinks, but Columns B, C, and D grow to account for the shrink in A. As consumers, we're often so far removed from B, C, D,…,N that we perceive the marginal costs to have disappeared into the ether. But the costs are still conserved within the total system, in one form or another, borne out by one party or more. And so it will be for the "internet of things." Someone's got to make all those things. Someone's got to lease and operate the EM spectrum. Someone's got to build, own, and operate the pipes. That infrastructure is pretty freaking far from cost-free. And it's going to get massively more expensive as we place exponentially larger demands on it. Net productivity and net value are being created, and so in total, the system is growing. We're getting a lot better at generating systemic upside. Economics is not zero-sum and mercantilist, the way it was hundreds of years ago. But so long as there are scarce resources, someone's got to pay for them. That someone is going to charge someone else for converting the input resources into higher-value output. TANSTAAFL still applies. It's just getting harder for us to understand who's eating the lunch, and who's picking up the tab.

to3m 13y ago
Yes. People have a tendency to want to be paid for their work, equipment usually costs money to acquire, and raw materials almost never come for free (if only because there are the aforementioned people and equipment involved). Even if it's proving easy to lower the cost of producing each additional unit, driving the fixed costs to zero will, I think, prove much harder. From the point of view of the producer (as I think is your point) the whole thing is moot. Your costs are £(fixed_cost+num_units*marginal_cost), broadly speaking, and if marginal_cost ends up zero then you still need to pay for the people and the equipment. The likelihood of each unit actually costing the customer zero are... well... zero. And to my eyes that means that overall nothing is going to change. This is unlikely to be news to anybody that runs a software company, which is a good example of a business that has long had large fixed costs and low costs per unit. However much each unit costs, you've spent money to make it, and that money has to come from somewhere. I'm sure Intel and the like have also got a good deal of experience of spending vast amounts on R&D and fab setup so that they can produce a chip for £0.10 that they then have to sell to you for £500 if they're to make any money out of it. But I suppose this could be news to people running a non-profit?
AdrianRossouw 13y ago
I actually had real trouble processing this article, because all the cognitive dissonance made it feel like I was reading something created by a bot that someone built to play buzzword bingo.

to3m 13y ago

Yes. People have a tendency to want to be paid for their work, equipment usually costs money to acquire, and raw materials almost never come for free (if only because there are the aforementioned people and equipment involved). Even if it's proving easy to lower the cost of producing each additional unit, driving the fixed costs to zero will, I think, prove much harder. From the point of view of the producer (as I think is your point) the whole thing is moot. Your costs are £(fixed_cost+num_units*marginal_cost), broadly speaking, and if marginal_cost ends up zero then you still need to pay for the people and the equipment. The likelihood of each unit actually costing the customer zero are... well... zero. And to my eyes that means that overall nothing is going to change. This is unlikely to be news to anybody that runs a software company, which is a good example of a business that has long had large fixed costs and low costs per unit. However much each unit costs, you've spent money to make it, and that money has to come from somewhere. I'm sure Intel and the like have also got a good deal of experience of spending vast amounts on R&D and fab setup so that they can produce a chip for £0.10 that they then have to sell to you for £500 if they're to make any money out of it. But I suppose this could be news to people running a non-profit?

AdrianRossouw 13y ago

I actually had real trouble processing this article, because all the cognitive dissonance made it feel like I was reading something created by a bot that someone built to play buzzword bingo.