We Do Not Live in a Post-Scarcity World

6702William Anderson writes in today’s Mises Daily:

Some Austrian economic theory is in order here. Rifkin is making the same error made by the nineteenth century British economists like David Ricardo and John Stuart Mill, who believed that in the long run, the value of a good came from its costs of production. But Carl Menger pointed out in 1871 that the value of the factors of production comes from the value of the final product, and the value of that product ultimately will come from the profitability that good brings to the entrepreneurs who created it.

In Rifkin’s mind, zero or near-zero marginal costs mean zero or near-zero costs of production, which would mean that goods are being made nearly for free. That is not exactly true. Marginal costs are costs per the next unit, which means that each new unit of a particular good is very cheap to make, which also says something about the volume of goods being created.

Low marginal costs do not mean goods are free. Indeed, profitability of the firms making these goods depends upon the volume created and sold, and it also means that these firms are making huge capital investments (which hardly are free) in order to produce at high volume levels. The labor used in this process, too, is scarce and not free, and so on.

Comments are closed.