IN CAMBRIDGE last week, Federal Reserve Chairman Ben Bernanke bemoaned high unemployment and low inflation, while promising that the short-term interest rate will remain, in the near term, near zero. This is an outrage to ordinary Americans, who have come to believe that a quarter of a percent is too much to pay for anything.
To heck with near zero. We want fully free, and that, not the housing crisis, is what’s continuing to hobble the economy.
The economist Milton Friedman insisted there was no such thing as a free lunch, but then he passed away, and a year later the US economy wilted in grief. To console ourselves, we shopped at Dollar Tree and bought uplifting melodies on iTunes for 99 cents. Later, we downloaded free books on our Kindles, and watched free lectures from MIT, and read free newspapers and magazines on the Internet, in between making free long-distance calls on our cellphones (free with a two-year contract). Thanks to cellphones, we don’t need to buy cameras anymore (our phones come equipped with them, for free!), and we occasionally put them down to watch free movies on Hulu, sitting on the free couch we got off Craigslist.
“Everything’s a dollar!” the dollar stores exult, but that’s a lie. Everything’s a dollar or less, including, it seems, the worth of an individual in a high-tech culture.
In his latest book “Who Owns the Future?” Silicon Valley guru Jaron Lanier argues that technology is murdering the middle class, one JPEG at a time. “At the height of its power, the photography company Kodak employed more than 140,000 people and was worth $28 billion. They even invented the first digital camera. But today Kodak is bankrupt, and the new face of digital photography has become Instagram. When Instagram was sold to Facebook for $1 billion, it employed only 13 people. Where did all those jobs disappear? And what happened to the wealth that all those middle-class jobs created?” Lanier asks.
The cheap music we enjoy on iTunes also has a cost much greater than the slashed earnings of the big music companies, whose profits fell by half between 1999 and 2009. Lost also were the middle-class jobs that $10 records and $20 CDs supported: the designers and packagers, the truck drivers, the sales clerks (although presumably some could take jobs selling cellphones and digital cameras). Technology, Lanier gloomily asserts, has cost ordinary Americans more than it delivers. Meanwhile, the deflation of everything (save taxes, gas, and lattes), makes Americans unwilling to pay full price for anything, which may be why only 47 percent of Americans have full-time jobs, Priceline thrives, and the Dollar Tree continues its ascent on the Fortune 500.
What Harvard’s Nicco Mele calls “radical connectivity” is convulsing the economy in ways we only dimly perceive. Twenty years ago, we’d happily pay $20 for a CD that contained only one song that we really wanted to hear; now we’d no more do that than pay $5 for a carton of fabric softener that’s a buck at the Dollar Tree. Would anyone use Facebook if it weren’t free? Mark Zuckerberg doesn’t want to find out.
But cheap as we consumers have gotten, so too are our cyber overlords. The tech companies that commandeer the wealth in the new economic landscape — the Googles and the Facebooks among us — expect to harvest their users’ value for free, making billions by collecting and selling information about Americans and our browsing habits.
Lanier believes a Great Moderation could come about in a fair exchange of value: i.e., Zuckerberg should distribute a few bucks periodically to those who earned it for him. Don’t spend it just yet. “In every society, however it is organized, there is always dissatisfaction with the distribution of income,” the ever relevant Friedman wrote.
In “Free to Choose,” he gave three functions of prices: to transmit information, to provide incentives to produce goods more efficiently, and to determine who gets how much of the product. What happens when everything’s free? We all live in homes shingled with ads and furnished by Craigslist.
I think I’ll just pay for my lunch, thanks.