This blog post by an academic economist raises a question that I am convinced we can already see part of the answer to. Industries that have a negligible marginal cost of production (media, software, etc.) demand a different economic system.

Capitalism may excel at efficiently (or at least close pareto optimally) using scarce resources. When faced with a marginal cost of production that is near enough to zero as makes no difference, the best capitalist solution appears to be to create artificial scarcities through patents, copyright etc.

This is clearly not optimal because more units could be supplied to consumers at above the marginal cost of production, increasing their utility without decreasing anyone else’s. Is there any flaw in that reasoning?
The obvious solution would be to simply abolish or selectively weaken the laws that create these artificial scarcities. It would mean losing some incentives, but given that these incentives are inefficient and encourage the creation of monopolies and the distortion of markets, that is not much of a loss. We also have evidence that other ways of doing things provide better incentives at lower cost (consider how much more consumer interests are considered by open source software developers).

I do not have a complete solution to the wider issues of new forms of ownership. I would like to see more decentralised systems and more diffuse ownership, as much for social benefits as economic. I like the idea of employee ownership, but except in rare cases like John Lewis it is hard to see where initial capital will come from.

One idea I do have is that a new system does not, necessarily, make the old one wholly obsolete. Although modern capitalism with its separation of ownership and management dominates the economy we still have family owned businesses (an older from of capitalism), large landowners (a remnant of feudalism) and farms owned by farmers (a truly ancient arrangement). Many of the best pubs and restaurants are those managed directly by the owner, rather those that are part of a large chain. Artists, writers and craftsmen work for themselves.

Similarly, capitalism may remain the most efficient way to manufacture and distribute physical goods. Nothing short of a Star Trek style replicator (which can make a copy of anything) looks likely to abolish it altogether. What may happen is that a large chunk of the economy finds a different way in which to operate.