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Economic Impact of Space Based Resources/Automation - Drashner1 - 05-19-2020
This is somewhere on the line between OA General Setting Discussion, Real Life, and Off-topic, but decided to post it here.
In RL economics, as it applies to raw materials/commodities, the rest of the universe beyond Earth is functionally non-existent.
By this I mean that the values of various materials are driven by their abundances on Earth, not in the Solar System as a whole. There could be asteroids containing cubic km of gold or platinum or rare earths out there right now, but since we don't have the means to actively get to them right now (we could create the means but that's not generally considered) it doesn't impact their prices per ounce or kg in any way.
But what if that were to change?
What happens if/when some kind of significant survey is done of the asteroid belt or the moon(s) or the like we find out that there are some large multiples more (orders of magnitude more?) of the elements we run our civ on just 'floating around out there'? What about if/when the means to mine and transport space based materials to Earth becomes available/feasible?
Do we see the price of some materials crash through the floor? Or not so much? What are the economic impacts of such discoveries and then capabilities on prices on Earth? Gold is apparently $1722/ounce today - what happens if we go into space and find so much that the price crashes to a penny per ounce? Same for all other 'rare' elements.
Moving on from there - and perhaps closer to home - automation is already impacting labor costs and pay when it becomes cheaper to use a robot than a human. So far this seems to look good for 'the owners and shareholders' but not so much for the workers. But what happens if/when automation gets so cheap that it costs only a fraction of current prices for any and all labor costs? Do the owners/shareholders just ignore this and continue charging increased prices for things? Or does it reach the point where they are forced to cut prices because they can't justify charging X dollars per hour if the robot is actually only costing Y pennies per day to work?
Can automation become so cheap that it starts forcing companies to push their revenue projections downward?
Does automation eventually become so cheap and common that the entire concept of paying for labor starts to seem ridiculous?
Thoughts?
Todd
RE: Economic Impact of Space Based Resources/Automation - Rynn - 05-19-2020
There's a lot of variables in questions like this that make it virtually impossible to find a "correct" answer, but it is possible to find some likely and unlikely answers
so sketching out some ideas with no pretense that these are definitive:1) How does abundance of "inaccessible" materials affect price?
Hypothetically lets imagine an asteroid of gold/oil/chocolate or whatever that contains the desired product in a quantity many times that of current global supply. Whether or not it affects prices depends on how inaccessible it is now and also for how stable that inaccessibility is predicted to be over time. If costs more than the current market price per kg of gold to recover a kg of asteroid gold then it's unlikely to affect supply, for the simple reason that no one is likely to fund that project because it's a net loss. But if there was confidence that some new developments were on the horizon, such as news of a new super heavy launcher being deployed "soon", the price might start to slowly decline as people look to sell off their gold before some inevitable glut in supply. You'd probably first start seeing this in the futures market which consists entirely of people betting against each other as to whether or not prices will go up in down in time. For example: I might buy grain on the futures market that hasn't even been grown yet for $1/kg because I speculate that by harvest time the market cost will have risen to $1.50/kg. A farmer might take that trade because they don't think the price will rise, or are unwilling to take the risk that it will fall.
The extent to which this causes an issue depends on the commodity in question. Gold has always been valuable but no country uses the gold standard anymore so no national economies are based on it. Given the time frame of asteroid mining there would be a lot of build up before supply started increasing so there would be a slow deflation rather than a crash. Then again I'm sure there is a plausible scenario where an over-leveraged market (i.e. one racking up a lot of debt) experiences some shock and comes tumbling down. Some one like Charles Stross could probably write a decent economic sci fi story along these lines.
The pro of all of this is that because increasing supply is unlikely to rapidly crash prices and globally there are no specific resources that the economy is so tightly based on (at least that we can find in space) there shouldn't be any large scale problems to decreasing costs. The opposite in fact. That's not to say there couldn't be local issues; if you're a developing country that has been financing its development based on rare earth mines then a steady increase in space resources over a decade or two could be a real crisis for you. Can you make enough money to diversify before your key industry starts losing money?
2) What about labour?
Supply and demand affect labour value as much as they do any other commodity. The more qualified STEM specialists there are the lower the average wage in STEM fields. The lower the demand for human taxi drivers the lower the average wage for taxi drivers. In ideal (read: impossible in real life) situations the number of professionals as well as the average wage would reach an equilibrium representing optimal supply and demand. If the value of labour starts falling globally rather than just in specific industries and locations then we have a problem in so much as the demand for labour goes down, the price for it goes down and overall people would be poorer if there aren't other opportunities opening up for them. The knock on effect of this would make for a lower demand in many goods and services, if one person's income goes down by a significant fraction then they'll stop buying certain luxury goods (as a start). Thus the demand for them goes down and in theory the price (if possible).
There could be a situation in which the shrinking value of labour is offset by decreased demand incentivising innovation to reduce price. For example: Alice makes $500 a week and has $450 dollars in expenses including savings. Every friday she uses the remaining $50 to buy a new video game for the weekend. Some machines are then brought into her industry that reduce the average wage, she now earns $480 dollars a week and can no longer afford a weekly video game. Either the game developers can lose that sale or they could reduce their price. At $30 she could still buy a weekly game, but if their breakeven point was >$30 they can't do this. To get Alice's sale they'd need to innovate, perhaps introduce new machines of their own to get the break even down to <$30 so that they can reduce price and sell to Alice.
There's one wrinkle in this though: Bob. Bob owns the company that makes the new machines being installed everywhere. He also likes to buy a weekly game. Before the roll out the game developers would get $50 from Alice and $50 from Bob. After Alice stops paying they could either reduce to $30 to make $60 in total, or they could charge Bob $100. If Bob is rich enough that he's happy to pay at that price then Alice is sod out of luck. She doesn't have the same demand as Bob. Eventually a company might start innovating to entice Bob and that could lead to a scenario where Alice can afford to buy again, but it won't happen instantly.
3) Does this mean a future where shareholders get richer?
Probably or a bit, I don't think it's inevitably always true. In scenario two whilst Alice is priced out of the market eventually innovation [i]should/[i] bring the price down again. As companies compete for Bob's money by lowering prices and eventually reach a price point Alice can afford again. For video games this isn't a huge problem, if it's weekly food then it is. On top of that there are a host of complexities that this really simple analysis can't take account of.
IMO with my optimistic hat on if we get to this level of increasingly general automation and we don't end out civilization through self destructive means capitalism, socialism and a whole host of economic models will get thrown in the dustbin of history. Because at the end of the day all of these systems are just tools designed to deliver on what we value. We value happiness, health, freedom from nature's restrictions, convenience, safety, knowledge, creativity etc. If we had very capable generally intelligent machines we could just tell them directly "Take control of the economy, figure out what we all want and deliver it in the most optimal way".
There's a vast scope of diversity to be explored in that idea but it short cuts the need for an abstract layer of human rules and social institutions that are designed to do the same, and don't necessarily apply when you don't need humans to follow the rules.
RE: Economic Impact of Space Based Resources/Automation - The Architect - 05-20-2020
(05-19-2020, 09:31 AM)Drashner1 Wrote: Do we see the price of some materials crash through the floor? Or not so much?
My guesstimate is you take how much of the materials you can get in one go to a processing facility (probably in Earth orbit at first, and then progressively anywhere in solsys) and then you divide that by how much it cost to bring it to where it can be transformed into something else. Add a certain percentage of profits if capitalism survives this long and that's it.
Of course, that begs the question of how much it would cost and how much you can bring back. But I think I've seen articles. Anyway there's always this as a starting point:
https://en.wikipedia.org/wiki/Asteroid_mining#Economics
(05-19-2020, 09:31 AM)Drashner1 Wrote: what happens if we go into space and find so much that the price crashes to a penny per ounce?
Golden toilet seats will be the new hype
(05-19-2020, 09:31 AM)Drashner1 Wrote: But what happens if/when automation gets so cheap that it costs only a fraction of current prices for any and all labor costs? Do the owners/shareholders just ignore this and continue charging increased prices for things? Or does it reach the point where they are forced to cut prices because they can't justify charging X dollars per hour if the robot is actually only costing Y pennies per day to work?
I've heard Scottish economist Mark Blyth say that automation could lead to the end of capitalism if there is no UBI because robots don't spend money, so who is going to buy the products if their job has been replaced by a robot and they are now unemployed? I think a half-assed UBI like in The Expanse and work as a privilege is more likely at this point.
(05-19-2020, 09:31 AM)Drashner1 Wrote: Can automation become so cheap that it starts forcing companies to push their revenue projections downward?
Yes, especially if people have little or no money to consume what they produce. What I could imagine is the buying of competition and giant mergers so that there would be just a few manufacturers left (I know there are laws against this in certain countries, but are they actually followed?). So each manufacturer would make more money than ever, but they would be the only ones. Whether they will control the government or be controlled by government is anyone's guess, but if I extrapolate the current trends, it will likely be the former.
(05-19-2020, 09:31 AM)Drashner1 Wrote: Does automation eventually become so cheap and common that the entire concept of paying for labor starts to seem ridiculous?
I think there is a possibility of that, but at this point it seems unlikely. Making getting paid for labor a privilege seems more likely at this point.
RE: Economic Impact of Space Based Resources/Automation - Rynn - 05-20-2020
(05-19-2020, 09:31 AM)Drashner1 Wrote: Does automation eventually become so cheap and common that the entire concept of paying for labor starts to seem ridiculous
I missed this last question in my reply above. I would say yes, other than in edge cases. If we assume generally competent automation (i.e. a machine or set of machines that can replicate any job to an equivalent degree to humans) then for any given service a human won't be able to compete on price. The machine doesn't need to make a profit, it just needs to generate enough revenue to to offset its maintenance cost. A person wanting to use their local fabricator to make a product only needs to pay the cost of the materials, energy, the rental time and some factor for maintenance. Whereas a human paid to do the same needs all that plus the cost of their labour.
There likely would be edge cases and the type and frequency really depends on cultural factors. IRL there's a rising phenomenon of social media "influencers" whose job consists of being popular and getting paid for it. When people watch other people play video games and donate tips to them they're doing it because they find the person entertaining. This might persist in niche groups where the appeal is having a real person's personality. Then again synthetic personalities customised for ones interests might completely replace this too.