The New Service Economy

As our transition from agriculture to manufacturing shifted the focus from food to material wealth (commodities), we are undergoing a similar shift now where material wealth is becoming as cheap as food became during the industrial revolution (introducing similar problems of overabundance). As material goods were the most valuable things before the industrial revolution, ideas and information are what’s most valuable now–in other words, service industries. This has implications across the economy not just concerning which businesses will make the most money, but how most of that money will be made.

Why do we say that people “make money?” Why is that considered equivalent to saying a person is “earning” money? Because in recent times, the biggest fortunes have been literally created–not by taking or being given wealth from someone else, but by actually making the world net richer.

This wasn’t always the case. In the agricultural era, most money wasn’t made–it was inherited, pillaged, taxed, or hoarded. People made food, and sometimes they got paid for their food, but the net amount of money in the world (or rather wealth, crucially not the same thing) rarely increased.

In the industrial era, wealth could suddenly be created from practically nothing through technique. Ideas, inventions, and automation could provide net increases in value for society with minimal investment–and because ideas don’t get used up like food does, they could continue providing value indefinitely. Now that manual labor is no longer as important as it was then thanks to robotics and computerization, this is truer than ever: having new ideas is one of the few skills humans have left that we haven’t figured out how to automate. Which is great, because having ideas is what we’re best at and it’s what we enjoy the most! The problem is, we are still operating in large part under economic assumptions based on an economy of goods, not ideas (aka services)–meaning that new and booming service economies are being restricted by laws and philosophies designed to protect the stakeholders of the last generation’s consumer economies.[1]

In the new economy, ideas will be the source of value. (They always have been, but now they will be the predominant business model for the entire population, not just a select few). The creators of those ideas should be protected from exploitation and guaranteed fair reward, but how? Clearly, we need some sort of model that protects ideas similarly to the way our physical property is protected through property laws.

But…not that similarly.

The problem is that ideas and property are fundamentally different things. If you want to protect a piece of property, you can keep it under lock and key. But you can’t lock away an idea without rendering it useless. Unlike property, ideas become more valuable the more widely they are shared. A manufacturer whose products get copied by a more efficient competitor will go out of business–but for an artist or programmer, widespread imitation is perhaps the surest sign of success!

In the past, it was possible to protect ideas such as art by pretending that they were still commodities, because until very recently they could only be distributed as physical objects. Distribution was the bottleneck, so it made the most sense to control distribution with copyright–since the costs of distribution scaled linearly with volume, the more profitable (and hence damaging) a competing operation was the easier it was to regulate, thus ensuring that the artist received just compensation.

Independent of their physical manifestations, however, restricting the distribution of ideas is antithetical to their very nature.[2]  The purpose of an idea is to be widely distributed. In fact, free distribution of ideas is so important it’s protected in the very first amendment of our constitution. Aside from being an ideological necessity for any society that wishes to call itself “free,” the material wealth of that society also depends on the best ideas getting distributed as widely as possible. Clearly, we need to ensure that the creators of the best ideas are rewarded fairly, so that they can keep creating without getting bogged down in the minutia of, y’know, not starving. But how can we do this without limiting distribution? Ideas, having infinite supply, simply cannot be treated as a commodity–it leads to an undefined result when you try to calculate market value, because price = demand / supply, and when supply is zero the equation no longer applies.

The answer, simply, is to protect ideas the same way we protect all other services: through patents, trademarks, and attribution regulation, not through copyright. In a service economy, artists don’t make their money by controlling distribution of their “products.” They make their money by having control over their reputations, and it is artist’s reputations that we need to be protecting.


[1] Look for a future essay exploring how this applies to digital download and streaming services, for example.

[2] Even copyright law nominally recognizes the distinction between an idea and the form or expression of that idea–see the second paragraph here, for instance–but the problem is that for digital media, the distinction between an idea and its expression has nearly lost all meaning thanks to the computer’s tremendous versatility. It simply doesn’t make sense to treat a sequence of bits in memory as the manifestation of any single idea.


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