Tuesday, January 29, 2019

Market economics in Star Trek

Rick Webb's essay, The Economics of Star Trek: The Proto-Post Scarcity Economy, is kind of dumb. I agree with Webb: we want to transcend our scarcity-based economic paradigms such as capitalism, and it makes little sense to understand economics by "resolving obscure trivia references" in a fictional television show. What we see on the show is dictated not by economic reality but by the demands of narrative: The producers, directors, writers, and actors must put on an entertaining and profitable show in a capitalist economy to capitalist viewers. There is no more underlying economic reality than there is an underlying engineering reality of warp drives and transporters. I don't think the economics of Star Trek make any sense at all, but so what? I don't watch the show as an economist, I watch it as a science fiction fan. I think Webb's whole venture is futile. The best we can do from watching Star Trek is find out what Gene Roddenberry and his successors thought about economics, not about the economics of a real "proto-post scarcity" economy. Unfortunately, Webb does just what he says he wants to avoid, and resolves obscure trivia references to impose a capitalist paradigm on the non-existent non-economy of a fictional television show. It's a confused, incoherent jumble of economic superstition filled with trivial logical fallacies.

*He has since expanded the essay into book form, which I have not read.

For the reasons listed above, it's a waste of my time as an economist to talk about what the Star Trek economy really is, since Star Trek isn't anything more than a surface. And it's not even that useful to talk abstractly about a proto-post scarcity society, i.e. a society where productive technology has advanced to make most ordinary needs abundant, but there are still larger scarcities. (For a fictional treatment of a true post-scarcity society, see Iain M. Banks' Culture series.) The problem is that political-economic systems are fiercely historically contingent. The political economy of any given proto-post scarcity society will depend on the specific historical details of how they got there.

However, I can perhaps correct some of Webb's more egregious misconceptions about political economy.

Webb associate markets with individual choices and central planning with the lack of choice. This association is incorrect. Markets and central planning are both very specific, detailed economic mechanisms. Saying that the Federation economy is market-based because people have choices is like saying that transporters use internal combustion engines like cars because like cars, transporters move people from place to place. So it's worthwhile to talk about how markets actually work in the real 21st century world.

Economics is about the study of scarcity. How can we choose best, as individuals and societies, when choosing to have one thing prevents us from having something else? If there's no trade-off, there's no economics. For example, we simply have no economic system at all for managing the quantity of atmospheric oxygen and carbon dioxide for animal and plant respiration. (Of course, global warming is another matter.) I don't have to buy oxygen in a market, nor is there any government telling me how much oxygen I can consume or how much carbon dioxide I must produce. So most people in Star Trek are just not economic actors in any sense, and there is no need for any economic system, markets, central planning, or anything else.

When we do have systematic scarcity, we have to carefully manage how we allocate what is scarce. The primary and most important scarcity is labor. We have found that human beings can vastly improve productivity by cooperative specialization. Instead of each household making everything they need themselves — growing their own food, building their own houses, weaving and sewing their own clothing, etc. — it is more productive to have individuals each doing one thing, and exchanging their products. Thus, I produce economics education, and I exchange that education for food, shelter, clothing, etc. Unfortunately, the people who consume my education do not grow food, build house, or manufacture clothing, so simple barter will not work. We have to have a more sophisticated system in place to allocate scarce labor, to make sure people specialize in the most productive endeavors.

A market economy is an institution for managing the allocation of labor to production and the allocation of surplus to increase productivity. The critical, essential feature of a market economy is the negotiation of money prices to maximize money income.

The simplest model of a market economy is just the interaction of households. Each household specializes in the production of one commodity for exchange. The households negotiate a money price with other households and exchange their commodity with those other households for money. The households then use the income from selling their own commodity to purchase commodities from other households, also with negotiated money prices. Each household chooses what and how much of its commodity to produce and, more importantly, the price of that commodity, to maximize household income. Stuff that other households produce is scarce, so each household has to carefully ration what they buy from other households to get the most "utility" from their purchases.

Households have a "choice" of what to produce and a "choice" of what price to require in the sense that no one points a gun at their head and tells them what and how much to produce and what price to sell it at. However, because a market economy exists to manage scarcity, a household cannot simply choose to produce whatever they please at whatever price they please, at least not for long. To maximize income, they have to produce the most in-demand commodity they can, and set the price to maximize their income: if the price is too low, everyone will want to buy it, but they won't make enough money; if the price is too high, no one will want to buy it. It turns out that to maximize its income, given its particular endowments (land, climate, skills, quantity of labor) there is usually exactly one commodity that a household "should" produce and exactly one price it "should" negotiate for that commodity.

It's provable that given a few assumptions (which are unrealistic in a complicated economy), this model will always produce a general equilibrium and a Pareto efficient distribution of subjective utility.

We can extend this simple model in various different ways to model things like managing a surplus of subsistence commodities or complicated multi-stage production, but these extensions must keep the negotiation of prices to maximize income (or net income, i.e. profit) to stay market-like.

By definition, when there's no scarcity, people will not use any mechanism, markets or otherwise, to optimize production or consumption. They do not choose what and how much of some commodity to produce in order to maximized their money income. They do not choose what to consume to make the most of their money income. They produce what they want to produce, and they consume what they want to consume. There's no market in a society like the Federation because there's no need for a market.