I got the idea for the title of this week’s piece from one of my favourite situation comedies – Seinfeld. Comedian Jerry Seinfeld and Larry David managed to make 180 hilarious episodes about nothing. My goal is more modest a short piece about nothing, nought, nil zilch and of course zero. The number zero has a long and complicated history. The Babylonians used it but it was ignored by both the Greeks and the Romans. It came back into use via Muslim Spain but was regarded with suspicion; the English monk and historian William of Malmesbury called the idea “dangerous Saracen magic”. For Christians it was easier to accept the idea of infinity, the idea if nothingness seemed somehow satanic. The West may have been late in adopting this useful number but it has certainly made up for lost time. In accounting, science and more recently Silicon Valley, in collaboration with one, zero has had a brilliant career. What I want to do is to look at the idea of zero or nothing in economics.
For example we often hear about the zero-sum game, which describes a situation in which a participant’s gain or loss is exactly balanced by the losses or gains of the other participants. If you add up the gains and then subtract the losses of the participants, the result will always be zero. In reality most economic transactions are positive-sum games but that is not how they are popularly perceived. For example, trade is often seen as zero-sum when it is normally beneficial to all sides. If you look at countries, which don’t participate, in international trade, you will find they tend to be very poor. There are many such nations in Asia, Africa, and Latin America who tried to keep out desperately needed foreign investments because they were afraid that foreigners would steal all their wealth. The Chinese immigrants in Southeast Asia were accused of exporting the host country’s wealth and they suffered attacks on their property. In fact, the Chinese had created new industries and were increasing their host country’s wealth. Julius Nyerere who presided over an economic disaster in Tanzania claimed that at least he had stopped foreign capitalists from robbing Tanzania’s wealth for their own profit. Such comments betray a terrible economic ignorance but many still applaud them.
Economists like to say there is no such thing as a free lunch. Obviously there are some things that are free but economists mean that everything has an opportunity cost – something else could be done with those resources. We do see a lot of things that are sold for nothing – Wikipedia, open source software etc. In the traditional view of economics to be in business it was necessary to make money, so free couldn’t really exist. What that view failed to grasp was how people would be able to make money as they gave stuff away. I am going to focus here on Google, which allows us free use of their search engine and other web applications such as Google Earth. Why? How have Sergei Brin and his cohorts been able to make millions by giving their product away? This is because Google isn’t attempting to sell its services to us. They are trying to attract our attention to their advertisements. In that way it sells an audience to its real customers, who are of course the advertisers. Google is buying our time and selling it wholesale. With so much available on the Internet and the brutal competition this time has become a scarce resource. Google needs to constantly offer more free things for its users in terms of such things as storage capacity for its e-mail accounts or ever more sophisticated applications. I still find it really hard to get used to all this free stuff. I can’t quite work out if this will be a short golden age or whether it is here to stay. It seems almost too good to be true. I remember going into WH Smiths and flicking through the daily papers without having to pay for it. Now I can do this from the comfort of my living room and I don’t get anyone tapping me on the shoulder, asking me to put the paper down.
But sometimes we have to be careful when things are given away for free. The whole idea of something for nothing is something that really gets us excited. You see this in all the pushing and shoving that goes on when farmers give away something as part of a protest. In his book Predictably Irrational Dan Ariely states:
“Most transactions have an upside and a downside, but when something is FREE! We forget the downside. FREE! gives us such an emotional charge that we perceive what is being offered as immensely more valuable than it really is.” Maybe we shouldn’t buy that particular electronic device because you get three free DVDs. Arielly also suggests that we want to encourage people to do something we should make it free. Perhaps in the case of the European health systems it would be a good idea to place a small charge for visits to the doctor just so that patients appreciate that it’s a valuable service they are receiving.
Anyway I am going to finish with a quote by Oscar Wilde:
“I love talking about nothing. It is the only thing I know anything about.”