Prices in a Post-Scarcity Society

I have written before about how we live in a post-scarcity society. And yet, things still cost money. What is going on?

Thirty years ago my father, a private in the US Army, was deployed to China. Ordinary Chinese people couldn't afford cars back then. The streets of Beijing were filled with bicycles instead. My father's salary, meager by American standards, made him extraordinarily wealthy by Chinese standards. He bought himself a bicycle for less than one day's salary. When my father returned to the US, he gave his bicycle to a Chinese friend. It was like giving his friend a car.

This week I bought replacement parts for my bicycle at Bike Works. I bought used panniers for \$35, used pedals for \$5 and used hand grips for \$2. Bicycles last a long time. I have been riding the same bicycle for fifteen years. Bicycle paths are free to use. Not counting food, it costs me maybe \$300 per year to ride my bicycle. That's less than \$1 per day for transportation.

Seattle's minimum wage for adults is between \$13.50 per hour and \$16.69 per hour[1]. In theory, I could pay for the material costs of my transportation by working an average of 4 minutes per day. At a software developer salary it's more like 1 minute per day. The material costs of my primary transportation round to zero even though I have a better bicycle than a 1990s Chinese cyclist. My bike has a titanium frame and rechargable lights. I wear better clothes too.

The typical American drives a car instead of riding a bicycle. Transportation in the US costs money because our standards have gone up. If electric vehicles + ridesharing + self-driving cars + fusion energy made cars as cheap as bicycles then the typical American would spend his/her transportation budget on personal helicopters and private jets. Jeff Bezos spends billions of dollars on spaceships.


So far I've been discussion transportation in utilitarian terms. But cars are about more than getting from place $A$ to place $B$. They're also a tool for signalling wealth. Owning a sports car is a classy way to signal "I am so rich I can afford to spend \$$X$ on a sports car".

The wealthier a society gets the more (in absolute material terms) it costs to win competitions. It costs about as much (in units of labor) to impress someone today as it did a thousand years ago.

There are many kinds of competitions.

Rent Seeking

The traditional way to extract value without producing any is by owning land. Thanks to the invention of intellectual property, you no longer need physical land to extract rents.

Insulin in the US costs somewhere on the order of \$175 to \$300 per vial. It costs somewhere between \$35 and \$40 per vial in Canada. Does that mean you can earn money and save lives by importing insulin from Canada to the US? Of course not! Doing so is illegal. The American healthcare industry is a textbook case of regulatory capture. Federal laws protect the profits of large incumbent corporations by outlawing competition.

The American tax system is even worse.

Bicycles are cheap because there is a free market for them. Bicycles would be expensive if a single large bicycle manufacturer outlawed competitors under the guise of safety.

Copyright protection is another case of regulatory capture. The duration of US copyrights keeps getting extended due to Disney and other major media interest groups.

Could we solve the problem of rent-seeking by passing the right laws? Politics is a competition. Housing is expensive in San Francisco because homeowners support zoning laws that artifically restrict supply. Mexicans in Mexico do not get to vote on the immigration laws which artificially restrict the US labor supply.

Manufactured Demand + Artificial Scarcity

If we eliminated competitions and rent-seeking would there be enough value to go around?

Nope! It is possible to invent a supply-demand curve entirely from scratch. Heroin, collectable trinkets, unused aspirational purchases (like gym memberships), NFTs and mobile games' in-app purchases are just a few examples. Addictive products are the final frontier of capitalism.

[1] The exact rate depends on things like the size of the employer and whether medical benefits are included.