Supply First, Demand Later
(Up to: Knowledge Driven Economy Economics )
Prompted by various discussions over at Thought Storms.
The Economist's Argument (not, I admit, in entirety - merely a subset):
Free market theory allows compromises to evolve between value and cost, between supply and demand. This means that all parties involved get the best deal as part of a compromise, and thus all are as content as they can be whilst minimising infringement on the other parties.
This assumes that society takes a long-term, emergent view, and that this compromise will become more normalised as time progresses. HOWEVER, this assumes that there is some stability in the parties and the subject being negotiated.
Our economy inherently (as a result, or in parallel?) offers progress, technically. This means that the area of negotiation is undergoing constant flux, thus the rules of the free market are constantly changing. This flux detracts from the idea of an emergent compromise within the market. (Although it may well work for underlying, long-term assets such as oil, monies, et al - all of which have longer cycles than smaller, more dependent industries (see the dot com boom/burst))
This compromise should also arise more quickly as a result of having a greater number of competitors. Therefore, governments should hinder the establishment of these competitors as little as possible.
But this assumes that a large number of competitors can fight over ONE area. There are many other factors (such as?) that mean this may not be so, and it is in the "monopolist's" interests to ensure this remains the case (think BT).
This in turn assumes that resources to /create/ such competitors is readily available. But if the barriers to entry (either to set-up a firm, or to enter a market) are too much (due to the rise of technical progress, say, or because resources are heavily controlled by other larger companies whose interests maintain that competition is BAD for them), then competition starts to decline.
We have also not factored in other methods of competition. Small companies can be bought up more easily by larger companies.
As companies become larger, partially as a result of all of the above (plus mergers, etc), these barriers also get larger. The power held by these companies becomes large enough to corrupt the ideals of a "free market", and a minority of companies emerge. This can be seen as a "survival of the largest". Not only that, but the market /favours/ a tendency towards these large companies due to an exponential dispersion of finance and, therefore, power.
So.
What was the point of free markets? To provide a compromise, between provider and consumer. To benefit both sides as much as possible.
But are we confusing "provider" with "value"? Should we promote the value of a company behind a product, or the value of the product itself? Perhaps not, IF we are all producers. But is a free market heavily biased /away/ from production? If the point of setting up a firm is to PROVIDE, and there are barriers of entry in place (inherently in the system) against this, then are we sliding towards a state in which there are a vast majority of consumers, and only a minority of producing entities?
How can we get back in touch with this idea of benefitting the consumer more than the producer? Is it possible to invoke value /in its own right/ rather than value as a benefit to someone else?
I'm not sure it is. I think value by its self is like money with no banks - useless. In this, I recognise the initial arguments of the free market movement - that motivation for value has to come from somewhere, and as we are in a wholely human-constructed system, this motivation must come from humans.
So is there a way to produce value from the consumers? A feedback-loop that provides the system with new value when the existing produce is consumed? Or is attempting this akin to determining a machine that runs on infinite motion?
Perhaps OSS is a form of this "consumer-produced value". By releasing for free what one has produced in return for others doing the same, we have a system of bartering that requires consumers to produce. The GPL is a way of enforcing this, although the fact that it has take-up means that there is demand for such an idea. This approach to bartering adopts a "supply /then/ demand" approach, or "supply-first" style, as opposed to the "supply then demand" attitude sought by the capitalists. Can this reversal of the supply-demand chain only exist if goods are produced a). for free b). as a result of work desired by the original "consumers" (who are now consumer first still, but also producers as a side effect)?
a) is not a given. But it IS an essential if the system, or a product, is to have maximal uptake. By providing value for free, the value added by /other/ consumers/producers will be returned to the original releasers more quickly. Demand of the original supplied good is more efficient, and so it is in the first producers' interests to offer it for free in the first place.
Note that the "supply first" approach could be seen as less "lean" as the capitalist theory, i.e. there is more product within the market than is actually needed, and is therefore less efficient. However, as the market size increases, there is more chance that a product will gain acceptance /somewhere/. This is a scale problem, and is one that also crops up with competitive markets, as outlined above. The difference is that other consumers do not suffer under a supply-first approach, while the producers have nothing to lose, either.
So, questions from here:
- What are the long-term trends of such a "supply first, demand later" system?
- How can psychological effects be best used to increase the efficiency of such a system?
- There are barriers to adopting products that have been supplied, especially when referring to tangible goods, rather than simply software. Is such a system only applicable to "virtual" information, or can it be applied to hardware too? It is also harder to "improve" and "give back" these improvements in hardware products. How can we alleviate this?
(See also: Analysis Greed Why IDon TLike Capitalism Capitalism And Socialism As Cleaning Up )
