Economics of the Future

Flux CapacitorPaul Krugman has an interesting paper regarding interstellar trade, and the consequences of general relativity for arbitrage. He concludes that interest rates will equalise between planets, and that the opportunity cost of goods in interstellar trade should be measured using the inertial time-frame of the planets in question.

It became a question of perspective. If an individual perceives time passing at a different rate, or has the ability to do so, does this alter the concept of opportunity cost and how?

In science fiction, the future is often depicted as giving man the opportunity to put himself into cryopreservation or suspended animation. Indeed, such processes have been experimented with in the recent past.

Suppose that a medical breakthrough in the morning allowed cryopreservation of human beings and reanimation at any later date. It’s quite likely that such technology would be exceedingly expensive, at least initially.

Suddenly, the utility-maximising individual is faced with the opportunity of freezing himself at considerable cost. Let us assume that medical progress elsewhere has not leapt, but only improved life expectancy.

The person with low net worth has no such choice, and will continue to labour as usual. The person with enormous net worth should obviously freeze himself, and allowing his assets to accumulate profits and interest over time. All that matters to the individual is that he maximises his utility over the course of his lifetime as he perceives it.

There may be an effectively two-tier society. If you can accumulate sufficient funds to cover cyropreservation and have enough assets to profitably afford upkeep, freeze yourself. Allow scientific, medical and technological breakthroughs to occur and wake in a future world. Meanwhile, Labourers will toil in the real world employing the capital of the rich – immortals existing in a different time line.

The necessary upkeep in such a state of cryopreservation may be relatively small according to current indicators (although, the hitherto undiscovered technology of suspended animation is unknown in cost). However, the initial step and reanimation would be the major element of expense.

If the technology was cheap and plentiful though, presumably cryopreservation would be commonplace. Capital also instantly becomes cheap and plentiful. Automated production of goods and services ushers in an age of affluence.

Arbitrage would surely dictate that you can live today more comfortably or live tomorrow in a more advanced world. Otherwise, there would be overwhelming desire for everyone to cryogenically freeze themselves. This decreases the productivity of capital through decreased economic activity, pushing up the costs involved in the upkeep of the cryogenic pods.

The logical outcome is a world with extremely low population awake at any given moment, enjoying the fixed resources of the planet at extremely low interest rates, mostly extremely poor. So.. “I am Legend” basically.

© The Free Marketeer 2009

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