I just finished chapter 8 in Chris Anderson's The Long Tail, where he talks about the changing economic pressures that the "long tail" of e-commerce evokes.

Basically, his premise is that, since e-commerce doesn't increase cost with inventory and marginal cost of increasing variety of inventory (ie. you don't have to carry more copies of an album to sell more of them, because you can just digitally copy the music file and adding a second album doesn't take up much room on the server's hard-drive), there's no longer "scarcity", but abundance (this I don't disagree with) and that traditional economics can't understand that.

This isn't true. Economics is the study of, in short, how people share (or don't share) scarce resources. Economics doesn't break down when there's abundance; it stops caring. In fact, a great interest of mine is the economics of air purification on space stations built and maintained by private industry, like in the movement driven by the X-Prize Foundation. Air on Earth is abundant; it's not useful to economize it or to apply Economics to rationing it. Air in space, where it must be actively purified when it's used and resupplied at great cost when it leaks into space, is another story and Economics has a greater interest in understanding the social forces involved there.

He also states that the reason that Economics fails to understand abundance (which it doesn't) is because it assumes a "zero-sum" game and, to support this, he cites the two worst (well-known) economists in the field, Malthus and Marx. The failure of their predictions is entirely rooted in this false assumption. Economics doesn't assume that there's a fixed amout of money in the world. There may be a fixed number of, say, chairs, but there isn't a fixed amout of value. If the market suddenly wants a lot more chairs, the value of those chairs has increased on its own and didn't do so at the expense of the value of everything else. In fact, the main point of Economics is to ensure ways that the number of chairs in the near future will go up, so there isn't a fixed number of chairs indefinitely. The current "abundance" is simply taking the time factor away.

And taking the time factor away is a big deal. The abundance we enjoy in the American economy is a result of good Economics to produce abundance; the internet provides those forces the ability to move their their theoretical conclusion instantly. The question now becomes: what is scarce? It doesn't make sense to price that which isn't scarce, because there's nothing to be rationed and rationing is the purpose of prices. So, what needs to be rationed? "Mind-share" is a term being thrown around, meaning that marketing is now the new pricable commodity. But a large part of The Long Tail is devoted to the, correct, premise that the new, most reliable key to mind-share is now word-of-mouth and recommendations by trusted recommenders, which can't be controlled and probably won't be sold at a price.

In the end, my instinct is that "quality" is going to be the biggest rarity in this age of plenty. When everyone can participate, the barriers of being heard are no longer the publishing of material, but in publishing something so good that people are willing to sacrifice to obtain it. And for the majority of music listeners, now that music is plentiful, it is no longer just the music lovers who have access to it. And only the music lovers will still be willing to pay for it. So, while music may be plentiful, what is widely available is likely to be worth the price paid. While the old industry infrastructure is still in place, but before we have good controls on piracy and copying copyrighted material, we will see some quality still, but declining. Everyone will have what won't be worth having and, judging by what is being produced today, no one will notice. When I first heard Metallica's S & M (yes, a play on words, it's actually "Symphony & Metallica"), I swooned. I had to pull over while the radio played it and then was late getting home because I rushed to the music store to buy the disc. I don't hear anything like that on KBPI in Denver; I'm not even convinced these musicians even know how to change chords. While there isn't any money in recording because it's "abundant", none of it will be worth listening to.

Maybe this is a matter of me not taking advantage of the "long tail's" recommendations system, where I could find music being made that compliments my own strange criteria. However, Economics doesn't break down with abundance. And there is still scarcity, but the scarcity that exists has moved and industry is still investigating where that is and how to exploit it. In meantime, stay away from the radio.

On another note, I know I promised to post on Unstoppable Global Warming, but I didn't have the time. I'll get to it soon.