Eli Dourado

The political economy of 3D printing

Last week’s Economist has two articles, a leader and a longer piece, on 3D printing technology. As the leader explains:

Three-dimensional printing makes it as cheap to create single items as it is to produce thousands and thus undermines economies of scale. It may have as profound an impact on the world as the coming of the factory did.

The articles do a good job of describing the technology, which appears to be quite revolutionary, and running through some of the straightforward implications.

But like any good political economist, what intrigues me most about 3D printing is its political effects. One of the most robust constraints on government is the ability of subjects to exit. Some especially evil governments have sought to take direct action to prevent exit, but these restrictions tend not to last.

The logic of exit is simple: when a government gives a subject a worse deal than he could get somewhere else, he can leave. When people can exit easily, governments compete with each other for subjects, and this tends to make all people (except for some of the rulers and rent-seekers) better off.

One of the major barriers to exit is the high cost of abandoning fixed capital. If you own a factory and you want to get out from under the thumb of your government, you either have to sell your fixed assets or leave them behind. Selling may be problematic. After all, if you want to get out from under the thumb of your government, so likely does everyone else. People are probably not eager to invest. Furthermore, many factories are specific forms of capital. They are good for making a particular thing, but much less valuable at making other things. There will be some loss of value from liquidation, even if everyone else isn’t yet trying to leave.

3D printers are more mobile and less specific forms of capital than factories are. This means that if 3D printing becomes a more common, cost-effective form of manufacturing, the cost of exercising the exit option will go down. In terms of one paper I am working on, the demand for quasi-governmental services becomes more elastic.

I think the political effects of 3D printing have the potential to dramatically improve the lives of billions of people, over and above any straightforward economic effects. Even if in equilibrium people don’t in fact exercise the exit option, the mere option tightens the constraint on government. In a world where parchment barriers have failed, real factors such as technology may yet succeed.