Understanding The Essential Difference Between Scarce And Infinite Goods

Photo Credit: julianrod

In the ever changing Music Industry we are all well aware the traditional model no longer works. If we look around at how the internet has changed the landscape we can see many people collectively agreeing on new models. The sheer majority of industry commentators, and artists are not only advocating and using this model, but also succeeding with it. Over the next few months I’m going to explore in great depth how this works, and how you can use it.

Before we begin

Firstly, lets get a few extremely important concepts down. Everything essentially stems from these. For the sake of clarity and simplicity, this article will not stretch to broadly out of the scope of internet economics and the music industry. Other industries, like news and blogs can apply this model, however as there goods are different and consumed differently. For example the music industry would have some difficulty with this model, but even there it is still viable.

Before we begin, we need to understand what scarcity is. Scarcity is the name given to the problem of infinite human needs and wants, in a world of finite resources. We as a whole, want more than the world has to offer. Some people want and/or need something more than someone else, as such are willing to pay extra to get it. Therefore scarce goods can be controlled, and by controlling scarce goods one can profit.

Conversely, abundant goods, or to be specific to internet economics here infinite goods, can’t realistically be controlled. As we cannot control the distribution of them, we cannot profit directly from them. They are however just as, if not more valuable than scarce goods.

In general the rule can be assumed as follows:

Scarce/Non-Abundent Good = Controllable Distribution
Controllable Distribution = Great potential to exploit

Whereas:

Infinite/Abundant Good= Uncontrollable Distribution
Uncontrollable Distribution = Very small if non-existen potential to exploit

Remembering that the word “exploit” is more of less a legalese (legal word) term for something that (in this context) can in some way be profited from.

Scarce goods/Tangibles

A scarce good, or tangibles as I refer them, is one that has a defined quantity and is scarce. That is, I have 100 T-shirts, if I sold all of those T-shirts, I would have no more. I would then have to create more of this scarce good. Most of the time scarce goods are tangibles; things that exist in the world of atoms, things you can touch see and smell. But often they are not, VIP access is an example or a scarce intangible good.

A concert or gig is a scarce good. The experience of being there, is a scarce good. Whilst it can be captured and recorded and have an infinite good derived from it (a recording), ultimately the actual event is fleeting. It is finite, only so many can occur, and therefore is a scarce good.

Scarce goods have an inherent cost associated with it, typically creation a distribution. Distribution is not only controllable, but cannot be successful for the creator unless it is in someway controlled by the creator. Returning to our example of T-shirts, to distribute them, we need to ship them out to stores or customers homes.

The key attribute to note is distribution. It is a possible to control it. Controlling it ads another level of scarcity that can be altered and manipulated for monetary gain. This is called Artificial Scarcity, however when employing it be careful not to stretch over into Protectionism.

So to recap, a scarce goods distribution can be controlled and therefor profited from.

Infinite good/Intangibles

A non-scarce good that can be copied, duplicated, recreated, transmitted, transferred or otherwise distributed with little to no cost, effectively free. It has an infinite capacity for distribution.

They are intangibles like ideas, music, art, writing, software and data. You can’t touch them, they are just information. They are memory. Our memories can be recorded though, we can store them as bits. 1’s and 0’s that form a representation of our intangible product. In fact any data on a computer, or anything that can be written down, or encoded in some way (like a location, or design) is an intangible, and therefore an infinite good. Information is to put it lightly, infinite.

Infinite goods do not, have the burden of scarcity to restrain them. Thomas Jefferson said on the topic of infinite goods “it is the action of the thinking power called an idea, which an individual may exclusively possess as long as he keeps it to himself; but the moment it is divulged, it forces itself into the possession of everyone, and the receiver cannot dispossess himself of it.” The full quote in context is below, but now lets just focus on this excerpt.

An infinite good once set free, becomes completely and utterly uncontrollable. Once it is released into the wild it can never be round up again. This can be as small as playing a song to one person or as large as releasing an album onto the internet. But once its loose in the wild it can go anywhere someone wants it to. You can attempt to create an Artificial Scarcity of an infinite good, but ultimately its theoretically and empirically impossible.

Heres the full quote from Thomas Jefferson:

If nature has made any one thing less susceptible than all others of exclusive property, it is the action of the thinking power called an idea, which an individual may exclusively possess as long as he keeps it to himself; but the moment it is divulged, it forces itself into the possession of every one, and the receiver cannot dispossess himself of it. Its peculiar character, too, is that no one possesses the less, because every other possesses the whole of it. He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me.(Thomas Jefferson to Isaac McPherson, 1813)

As Jefferson says the person receiving an infinite good from someone else, can never deprive the person of that good. Not even in part, just like a flame. Strangely enough, just like a flame as it spreads, it grows in value. Two copies can be more valuable than one. More people can see it, it lights up more of the dark. It brings double the heat, and therefore double the attention from people left out in the cold.

For musicians, as well as many online content creators, infinite goods always have the potential to complement and add incredible value (in many, many different ways) to their scarce goods. A band t-shirt is great, but without knowing the bands music or story (both of which are infinite goods) the shirt is only worth what its made from. To a random person on the street it is just another t-shirt. However approach someone who has prior knowledge, or to be specific has consumed and liked the infinite goods from the band, and you have a t-shirt worth far more than just the materials.

Next we will explore just how infinite goods add value to both you, and your scarce goods.