(What's) Up With Capitalism?

Brad DeLong links to Jim arguing that technology won't destroy capitalism. I tend to agree, but I don't have quite the unclouded optimism that Jim has.

Jim is attacking a piece by Bruce Sterling. I have to be honest, though, I couldn't make myself finish the Sterling piece, so I don't quite get what Jim is trying to prove. He leaves a lot of things implicit, which makes it hard to know what he means. It reminds me of a global warming skeptic who appeared on the Daily Show:



Note his claim that polar bears can swim. Fair enough, but so what? What he leaves implicit is that polar bears won't drown because of global warming. Why would they drown - they can swim! If you confronted him with the fact that they can't swim forever, he would acknowledge it, and claim that he never said otherwise. He's counting on the fact that most people won't confront him, and many will take his implicit conclusion at face value (Jon Stewart certainly won't push him - this clip is good evidence of my long-standing belief that Jon Stewart is not good for the liberals).

Jim isn't nearly as bad, but it would be easy to come away from his post with the idea that technological progress doesn't threaten to make us worse off by destroying some markets that currently benefit us. If that's his point, then I think he's wrong.

The typical market involves exchanging some bundle of rights for money. I sell you a copy of my music CD without the right to copy and distribute it. Alternatively, for a much higher price, I might also sell you the right to copy and distribute. Now, imagine a technology comes along that makes music easy to copy and distribute, and that the law can't effectively stop the activity. I now have no choice about which rights to sell: all the rights have been "bundled," not because that's what I want but because it is now impossible to sell one thing without the other.

The effect has been huge so far - a rare high-quality Slate piece describes the changing music industry. Now, commerce still exists - which is all that Jim literally defends in his post - but society is (arguably) worse off because the market for music that can't be copied has been destroyed. Mutually beneficial transactions have been blocked. I assume Jim is against this generally - so why isn't he against it when the transactions are blocked by technology instead of by an intrusive government?

On balance I think technology is improving our lives. What needs to be recognized, though, is that this result is contingent. We face very real tradeoffs, as some markets are opened up and others are closed down. How you react to these tradeoffs is a personal thing, but it seems unwise to ignore them.