A Parable about the Dangers of Artificial Scarcity in the Service of Urban Planning
Imagine a world in which everyone is eternally 25-years old. Think of how many young sexy actors you could put in this world. Think of the creepy incestual undertones of not knowing by sight whether you live with your mother or with your girlfriend, because either way she looks like Olivia Wilde. Think of the . . . monetary economics?
Above is the extended trailer for the upcoming movie "In Time" written/directed by Andrew Niccol ("Lord of War", "The Truman Show") and starring Justin Timberlake ("The Mickey Mouse Club", "Dick in a Box"), a movie that could very well do for amateur economists what "The Matrix" did for undergraduate philosophy students. The premise of the movie is simple but powerful intuition pump for many ideas. As the trailer begins by telling us:
Time has replaced money as the unit of currency. At 25 years old, aging stops and each person is given one more year to live. Unless you replenish your clock, you die.
Through the eyes of our hero, Will Salas (played by Mr. Timberlake), we are introduced to a society with massive inequality. An impoverished underclass lives in a decaying and crime-ridden ghetto, working menial jobs and literally struggling to survive, living day to day, and earning little than it takes to keep themselves from running out of time. Mr. Salas is one of the have-nots, who at 28 is already slipping toward the end of his time, squeezed by rising prices, decreasing wages and an inability to escape his immediate situation and invest in his future.
But through the intervention of a mysterious stranger, Mr. Salas is is vaulted across the class divide from the world of the have-nots to the world of the haves. He takes us to the pristine world of New Greenwich, a beautiful place where the inhabitants have centuries or more of time. They live lives of leisure in palatial splendor, taking advantage of virtual immortality to gaining greater and greater wealth and power and while outside their gates the poor suffer, toil and die.
The poor get poorer while the rich get richer! Amid these revelations, Mr. Salas is accused of the murder of the mysterious stranger and to prove his innocence he must uncover the secret of the man's death. It is a secret that will go to the heart of this society, exposing the very origins of its social divide, and possibly our own society's with it!
But will it really? One thing I like about the premise of "In Time" is that it gives us enough material to ponder some interesting false leads. Enter the amateur economisting:
The Trap of Poverty?
Mr. Salas's situation at first appears to be some variety of the trap of poverty. He wakes up with less than a day on his clock every morning, so to survive until the next he must devote his energies to his immediate interests. He is not quite as bad off as the homeless man who is never going to be able to get normal job without an address, a set of clean cloths and the means to get himself to work every day. But Mr. Salas is not much better off. How is he going to think about going to college? How is he get new job skills? For that matter, how is he ever going to ever have the time to figure out what is in his best interests for the future?
But if this is the case, why can't Mr. Salas simply get a loan? In the real world, young people have access to private credit in order to pay for their educations. The debt can often follow students for a large fraction of their working lives, but it still makes sense financially for both creditor and debtor, because the student's earning potential is sufficiently increased that she can afford to pay a high rate of interest. If Mr. Salas could escape the trap of poverty by investing in his education, then it is in someone's interest to provide him with the means to do so.
Now, normally we think of interest rates as the "price of time" but since time literally has a price in this world, and it is a very high price for Mr. Salas, we can probably conclude that whatever loans he could get would also bear a pretty high interest rate. And this isn't terribly illogical: in a world where everyone is potentially immortal, then long term investments in human capital can bear extraordinary returns, and lenders are going to demand some of those returns.
Increased Returns to the Lottery of Birth?
Another potential is that Mr. Salas simply can't be helped by personal investment. He is never going to have the intelligence or other capacities to make lots of money in the long term, so he is never going to get that loan. The ability to live forever has dramatically upped the ante on the natural lottery of life, which hands out talents, abilities and dispositions, creating natural and enduring class divisions based on merit. In other words, immortality has produced the distopia of Charles Murray's fears that reality never could.
But this story doesn't make sense either. As long as consumers are demanding lots of labor that is relatively rivalrous, then there is a real limit to what your in-born qualities can get you, even given a very long time. And in the trailer we see lots of people who seem to be well off who aren't leveraging immortality into huge gains relative to others: a cab-driver, venders, low-level municipal employees. One day the guy who invents robots to manicure the streets of New Greenwich may earn huge personal wealth, but it looks like there are human groundskeepers, who probably don't have more skills than Mr. Salas, yet who must live fairly well. At the very least, the criminal skills displayed by some in the underclass, and the inherited status of those in New Greenwich must indicate that this is not a world segregated by the lottery of birth.
So it seems that something must be going on here that is more than simply the introduction of immortality. Some real-world process must either be failing, or it be prevented from working.
A parallel here, for example, is with rural women in India who receive microcredit. In fact these women would be better off if they could just save their money in a bank and use it to make large purchases or engage in investments. Micro-lending doesn't really allow them to make capital investments, but it does function as a forced saving mechanism. They can make purchases first, then have an obligation to repay them that takes precedence over other claims that they, their families or their community might have on money that they would save to make the same purchases. They could more effectively save if their were good banking institutions that would, for instance, keep their account balances secret.
Whatever else is the case, this has to be at least partially true of the world of "In Time" because at least some aspects of its financial system are manifestly terrible. First of all, you don't just have to have a positive balance, you have to carry some money with you. At all times. It appears that there are banks in this world, but you damn well don't want to get caught waiting in a line at the bank with a year in your account and 20 seconds on you. For safety's sake you are going to want to have a few days on you at least. But since a few days is quite a lot of money in the ghetto, that means that people are pretty routinely carrying around their entire net worth with them on their arms, exposed for all to see.
As we learn in the trailer, there are plenty of people willing to steal from someone with too much time on his hands, and it's hard to imagine that you wouldn't be called upon to donate some time to friends and loved ones in times of need or emergency. There has probably developed some form of informal social insurance among the underclass that keeps people who live day-to-day alive when something bad happens, but the flip side of this is that anyone who manages to start saving any significant amount of time is probably going to be called on to make those donations. There is a real disincentive to saving up much more than a few days.
The effect on credit could be similarly suppressive. If interest rates are so high that a boy from the ghetto is going to work off any reasonably loan for many decades while living on a thin margin, can you even trust that he'll stay alive long enough pay it off. If he decides to spend his time on leisure, you can't get that borrowed time back, and if he manages his finances poorly, then he could be dead decades earlier than expected, with no prospect of recovery. It could be effectively impossible to insure against that risk.
But this explanation isn't explosive. It doesn't really explain why the rich are so disproportionately rich, and no one wants to make action-packed thrillers about the challenges of developmental economics. No, there needs to be a master macro-explanation.
This is the danger of having a fiat currency. The central authorities — or a rogue player with access to the press — can inflate away the value of current holdings, and this most hurts people who have fragile cash holdings. Those fat-cats in New Greenwich probably have their assets in things whose value will rise with inflation, while the slum-dwellers like Mr. Salas carry all their assets on their arms. If inflation hits, they might experience dramatic price increases before they can renegotiate for higher wages.
But while it is fascinating to try to work through all the ramifications of using time as a currency, on second examination, the monetary explanation falls through. Mr. Salas's troubles aren't consistent with inflation, because far from his wages being static in the face of dynamic prices, they are effectively declining at the same time as prices are rising (the production quota has gone up). With inflation, we would expect to see both prices and wages rise. And this would probably be good for Mr. Salas if he could survive the transition, because it would mean that one of his fixed costs — the one minute cost per minute of living — would be relatively less of his income. In fact, we would think that, monetary effects aside, the society would be more wealthy that had more time.
That's because time isn't really a fiat currency. Time is a commodity in this society, and a particularly intrinsically valuable commodity at that. The complicating factor is that time does appear to be an artificial commodity. It must cost something to make everyone immortalizable at 25, but if it costs anything to maintain people every day thereafter, it doesn't seem like many resources are going toward this cost. The scarcity of time doesn't seem to flow from the scarcity of any of its inputs. You aren't going to be able to get more of it by making it more cheap to produce, and rises in its price won't induce people to make more of it. In other words, time in this world is an artificial commodity. It is a mechanism of rationing (hello, Ms. Palin, death panels!).
Urban Planning Gone Awry
The closest analogue in our world to time in the world of "In Time" is something like tradable pollution credits or taxicab medallions. The relevant authority decides that we only want so many of some thing to be done — be it harmful emissions or keeping of taxis in the city — and they sell the right to do that thing to that many people. The owners of those rights can sell and exchange those rights to others. In this case, the right is the very right to exist for another minute, hour, or day, and it is so important that not only is it exchanged, it is the very medium of exchange.
The system also bears some resemblance to congestion pricing, but there is a key difference between time in "In Time" and pollution credits or express-lane prices. The key is that space in the express lane is limited, as is the capacity of the air, water or ground to absorb pollution. And there are alternatives to driving in the fast lane or dumping pollutants — alternatives that are more expensive, but which will be incentivized as the price of the rationed activity goes up. The idea behind congestion pricing is to move people to behaviors that create less congestion. In contrast, there isn't really a viable alternative to continuing to live that will be incentivized. Raising the price of time won't move people from a more congestive form of existing to a less congestive form of existing, it will just put a cap on the number of people that will exist over a given time.
And is there really only a limited capacity of the world of "In Time" to accommodate the existence of people? There are characters that want you to think so — "Everyone can't live forever, where would we put them?" "For a few to be immortal, many must die." "You put enough time in the wrong hands [and] you upset the whole system." — but I don't buy it. The streets of New Greenwich don't look very crowded; the buildings don't look very tall; even in the ghetto, there seems to be room to build more capacity for people to live if you are willing to devote productive resources to it.
No, the world of "In Time" can only handle so many people in the same way as a suburban neighborhood where every house has a three-car garage can only handle so many houses. In other words, we are looking at something a lot like zoning laws: a preference for how to handle a crowding problem that has been artificially imposed, not the actual limits of capacity. We could build those cities taller, and more dense. We could let the cost of housing, food, and other necessities rise as congestion increases (and then let those costs fall as solutions to congestion are found). But the people in charge, the elite, would rather live in the type of nice, uncrowded cities that they are used to, at the expense of the lives of a few members of the underclass, than let people's actual preferences drive a different outcome, which would probably be for more people to get to still be alive, while devoting more of their resources to the problems of congestion.
Capitalism in "In Time" is Like Feudalism in the Middle Ages
In a capitalist economy, what should normally happen when the owners of some form of capital are taking a disproportionately large portion of the surplus from production is that more of that capital will be formed. As more of the proletariate accumulate capital, or as more capitalists shift their holdings from one type of capital to another, the high-return capital will become less scarce, and will be able to demand a lower, more proportionate share of the surplus. But that isn't true when the necessary form of capital has a fixed supply that can't be increased in response to changes in its value.
The classic example of this is land. No matter how high the return on landownership, no matter how vital it is to production, the aren't making any more of it. That means that if you have an economy that is mostly based on subsistence agriculture, in which unimproved land is the primary input to production, then the owners of that land can claim nearly all the fruits of production beyond those needed by the workers to survive and plant again. If land ownership is concentrated in the hands a few powerful people who rent that land out, then the rich will keep getting richer and the poor will keep getting poorer. That, my friends, is feudalism. The serfs scrape by while the landlords hold nearly all the wealth.
In the world of "In Time" the wealthy capitalists of New Greenwich are timelords, so to speak. They may not literally rent out time (although it seems likely that they will do that too) they can issue pay their workers amounts of time barely above what it costs them to work. The vast sums of wealth that the rich of New Greenwich hold are actually a form of economic rent bestowed by government authorities. And of course, now that the rent-collectors are so powerful, they will inevitably become the governing authorities. In Medieval England, the King is just the highest landlord (and land-rent collector); in New Greenwich the King will be the highest timelord (and economic rent collector).