Review (Guest): The Zero Marginal Cost Society

3 Star, Capitalism (Good & Bad), Change & Innovation, Information Society, Information Technology
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Amazon Page

Jeremy Rifkin

3.0 out of 5 stars BOOK REVIEW: ‘The Zero Marginal Cost Society': Welcome to the Brave New Workerless World, April 1, 2014

ByDavid KinchenSee all my reviews

“The Capitalists will sell us the rope with which we will hang them.” –Vladimir Ilyich Lenin (1870-1924) First Leader of the Soviet Union

Marginal cost is the term used in the science of economics and business to refer to the increase in total production costs resulting from producing one additional unit of the item. Zero marginal cost describes a situation where an additional unit can be produced without any increase in the total cost of production. Producing another unit of a good can have zero marginal costs when that good is non-rivalrous, meaning that it is possible for one person to consume the good without diminishing the ability of others to simultaneously consume it as well. –Wise

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Maybe economists like Jeremy Rifkin will stop writing books like “The Zero Marginal Cost Society: The Internet of Things, the Collaborative Commons, and the Eclipse of Capitalism” when they are replaced by robots who can do the same work as human economists at far less cost.

This is already happening in academia, as many prestigious teachers are offering online courses for free or for a modest fee, he writes in a book that will probably discourage the hell out of many people already at the end of their job-seeking tether. At the same time, Rifkin's book is that rarity, a book about economics that general readers can understand and enjoy, even.

Brick and mortar universities will be replaced by massive open online courses (MOOCs) that also operate at near-zero marginal cost, he predicts. And young social entrepreneurs are establishing ecologically sensitive businesses, crowdsourcing capital, and even creating alternative currencies in the new sharable economy. As a result, “exchange value” in the marketplace — long the bedrock of our economy – is increasingly being replaced by “use value” on the collaborative Commons.

Rifkin describes how zero marginal cost economics has already changed the face of manufacturing and has contributed to the jobless “recovery” from the financial meltdown of 2008 in a book that further confirms my view that economics is truly “the dismal science.”

The rope that Lenin spoke of is probably manufactured in an Asian country by automated machines, with only a few people around to make sure they're functioning properly.

Shades of Charlie Chaplin's dystopic 1936 movie “Modern Times” — said to be inspired as his iconic “Little Tramp” character struggles to survive in the modern, industrialized world. According to the Wikipedia entry on “Modern Times”: “The film is a comment on the desperate employment and fiscal conditions many people faced during the Great Depression, conditions created, in Chaplin's view, by the efficiencies of modern industrialization.”

In his 1995 book “The End of Work” Rifkin said that “more sophisticated software technologies are going to bring civilization ever closer to a near workerless world.”

Unemployed “Little Tramps” need not apply!

Rifkin quotes himself on page 122 of his new book, adding : “In the interim years, the projections I made back in 1995 of IT-generated automation leading to technology displacement in virtually every sector of the economy became a troubling reality, leaving millions of people unemployed and underemployed across every country in the world. If anything, the original forecast proved to be a bit too conservative.”

Is that dismal enough for you?

He goes on to cite statistics on the people in the U.S. and worldwide who are unemployed or underemployed, who have given up looking for jobs that have disappeared. (Chapter Eight “The Last Standing Worker” Pages 121ff.).

Retailing will change drastically. If you've been in a Walmart recently, you've probably seen the self-checkout stations (I refuse to use them, hoping that at least some jobs will remain!). It's no secret that the Walmart management people — and other retailers — would like to see workers disappear, with customers doing all the work.

Rifkin writes that many people — especially younger consumers who are already buying most everything online — are using big-box stores to try on garments that they will later buy online,. And stores are reacting by charging them to use the fitting rooms — or convincing them to use their own online service, making the store distribution center, he tells us.

The capitalist era that Lenin hoped to see disappear inevitably will do so, Rifkin writes. Replacing it will be a new global collaborative Commons that will fundamentally transform our way of life.

Ironically, capitalism’s demise is not coming at the hands of hostile external forces. Rather, “The Zero Marginal Cost Society” argues, capitalism is a victim of its own success. Intense competition across sectors of the economy is forcing the introduction of ever newer technologies.

Rifkin explains that this competition is boosting productivity to its optimal point where the marginal cost of producing additional units is nearly zero, which makes the product essentially free. In turn, profits are drying up, property ownership is becoming meaningless, and an economy based on scarcity is giving way to an economy of abundance, changing the very nature of society.

Rifkin describes how hundreds of millions of people are already transferring parts of their economic lives from capitalist markets to global networked Commons.

“Prosumers” are producing their own information, entertainment, green energy, and 3-D printed products at nearly zero marginal cost, and sharing them via social media sites, rentals, redistribution clubs, bartering networks, and cooperatives.

For Rifkin's 1999 speech “The Third Sector — and the Rebirth of Civil Society”: […]
I was particularly intrigued by Chapter Ten, “The Comedy of the Commons”, where Rifkin discusses Garrett Hardin's 1968 essay “The Tragedy of the Commons” and law professor Carol Rose's re-examination of the ancient principle of the commons in what Rifkin calls a “salvo” entitled “The Comedy of the Commons.” This chapter also includes an account of Elinor Ostrom's publication of “The Governing of the Commons” in 1990. Ostrom (1933-2012) won the Nobel Prize in Economics in 2009 — the first woman ever to receive the honor, Rifkin writes. Ostrom was associated with two universities: Arizona State and Indiana University.

In this new era, identity is less bound to what one owns and more to what one shares. Cooperation replaces self-interest, access trumps ownership, and networking drubs autonomy. Rifkin concludes that while capitalism will be with us for at least the next half century, albeit in an increasingly diminished role, it will no longer be the dominant paradigm. We are, Rifkin says, entering a world beyond markets where we are learning how to live together collaboratively and sustainably in an increasingly interdependent global Commons.

I have some issues with this: I don't think utility companies will be giving away their electricity or natural gas anytime soon. I expect my electric utility company –TXU, based in Dallas — will continue to send me bills every month, despite all the talk in Rifkin's book about the Internet Commons. TXU and other utilities will be among the biggest holdouts, if I'm correct in my guesses.

Without jobs, consuming will decrease and companies will find themselves without customers. Despite the “Internet of Everything” that Rifkin describes, customers are vital. When they're gone, the company disappears.

It almost happened to Ford Motor Co. when they stopped making the Model T, and took months to develop the Model A in the fall of 1927. Ford never regained its position as the biggest of the Big Three automakers. Bill Bryson describes Ford's blunder in his excellent “One Summer: America 1927” (Doubleday, 2013), which I've just read and which I recommend without reservation. I love Bryson's books.

I suspect that most people will continue to be consumers, buying cars, houses, cell phones, TV sets, instead of renting them. Sharing bikes and cars won't be the norm outside of a few cities. Corpus Christi, TX, the nearest large city to where I live on the Texas Gulf Coast, is not Portland, OR: People there will need cars to get around a sprawling metro area with no rapid transit — unlike the excellent Portland system, my favorite on the West Coast.

On my first reading of Rifkin's tome, I was reminded of the predictions trumpeted by Popular Science and Popular Mechanics magazines when I was in grade school, in the 1940s and '50s. You know the ones: Every suburban house with an autogyro in the driveway…expressways where cars moved like trains, etc. etc. On further reflection, I recalled the disappearance of three places in the town I live in where you could rent a DVD of a movie. Netflex and video on demand killed them, leaving fogies who like to play DVDs limited to the handy Redbox kiosks at a couple of locations.

My own profession, journalism, is not immune to the zero cost marginal society.

In an article on “robo-journalists” ([…]) “Computer algorithms are already being used to manufacture news stories about earthquakes and other data-rich issues and this same process could soon be employed for sports games and eventually more complicated news stories – rendering many journalists obsolete.

“Human editors would probably still be needed to check stories before publication, but the actual process of writing articles could be handed over completely to artificially intelligent software programs.”

The story goes on to say, citing a report in The Vancouver Sun, “that the Los Angeles Times is already using robo-reporters for some of its content, thanks to a computer program developed by the newspaper’s digital editor Ken Schwencke.” The L.A. Times is where I worked for more than 14 years, from 1976 to 1990.

“The article explores the ethical concerns of assigning “routine news tasks” to robo-reporters, which would ‘lighten the load for everybody involved' according to Schwencke. Alfred Hermida, associate professor at the University of British Columbia, concluded that if the computer algorithm was created by the reporter, the generation of news stories by a robo-reporter would be acceptable.”

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“O, brave new world
that has such people in't!” ― William Shakespeare, The Tempest

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