Here's the first in a series of essays on the social impacts of nanotechnology that I promsed on Sunday.
Economic Impact of the Personal Nanofactory by Robert A. Freitas Jr.
Deflationary forces resulting from mass availability of desktop personal nanofactories can be opposed by inflationary forces competently initiated by governmental monetary authorities.
Is the advent of, and mass availability of, desktop personal nanofactories (PNs)  likely to cause deflation (a persistent decline in the general prices of goods and services), inflation (a persistent general price increase), or neither?
A definitive analysis would have to address:
(1) the technical assumptions that are made, including as yet imprecisely defined future technological advances and the pace and order of their introduction;
(2) the feedback-mediated dynamic responses of the macroeconomy in situations where we don't have a lot of historical data to guide us;
(3) the counter-leaning responses of existing power centers (corporate entities, wealthy owners/investors, influential political actors, antitechnology-driven activists, etc.) to the potential dilution of their power, influence, or interests, including their likely efforts to actively oppose or at least delay this potential dilution;
(4) legal restrictions that may be placed on the widespread use of certain technological options, for reasons ranging from legitimate public safety and environmental concerns to crass political or commercial opportunism;
(5) the possibility (having an as yet ill-defined probability) that nanotechnology might actually "break the system" and render conventional capitalism obsolete (much as solid state electronics obsoleted vacuum tubes), in which case it is not clear what new economic system might replace capitalism; and
(6) the changes in human economic behavior that may result when human nature itself may have changed.
A definitive answer is beyond the scope of this essay.
Here, we take only a first look at the question.
Our preliminary analysis begins with an assumption that at the end of a 20-year period of introduction, almost every household in a given developed country has purchased a PN. The PN will be capable of building any manner of consumer goods using simple molecular feedstock such as acetylene or propane gas that will be piped into the home via a utility connection, similar to present-day hookups that deliver natural gas, water, and electricity. There are other delivery scenarios such as bottled gas feedstock, and more self-sufficient feedstock provisioning scenarios such as nanoblock premanufacturing, solar-powered recycling, biomass/biowaste extraction, or even atmospheric extraction, but these will be set aside here both in the interest of simplicity and because they may be heavily regulated  or in some cases even declared illegal . If we further assume that (1) the price to acquire the PN is approximately US$4400 (see below), (2) the PN has a mass of 10 kg and produces consumer products at the rate of 1 kg/hr , and (3) the PN is operated 50% of the time throughout a useful lifetime of 10 years, then the PN during its useful life produces 44,000 kg of consumer products which then have an amortized capital cost of $0.10/kg, a cost that is built into every product manufactured by the PN. The $4400 price point for the PN was taken as a plausible figure that might reasonably be chosen by a U.S. manufacturer. This price point cannot be too cheap or there is no profit, nor too expensive or there are no buyers. For comparison, $4400 will purchase a good quality large-screen TV, a high-end refrigerator/freezer, or a topnotch laptop computer in the U.S. today. The PN will be a versatile appliance, able to manufacture whatever is deemed legal in the 21st century such as: (1) consumer goods including nondurables such as food and durables heavily laden with nanosensors, nanomotors, nanopumps and nanocomputers, (2) all the patterned sheets or chunks of diamond that anyone might want, and (3) some kinds of medical nanorobots for personal use, though these may be heavily regulated. We assume that the PN will not be allowed to manufacture contraband, nor various types of weapons systems including ecophages , or more Pns (which would nullify the R&D funding and manufacturing business model). If the public is not allowed to manufacture Pns using Pns , then the production cost of a PN using a PN becomes almost irrelevant to the retail price of a PN. The manufacturer may charge $4400 for a PN even if it only costs them $10 to make one (see below), using the difference to pay for showrooms and sales staff, marketing and advertising, legal costs for defending the brand and a monopolistic pricing regime, product liability insurance costs (which could be substantial), warranty and servicing costs, online and print publications including consumer how-to books and magazines, websites and online help desks, executive overhead and corporate perks, and perhaps modest dividends from profits for the shareholders. Assuming the average person in the developed world consumes 2000 kcal/day of food, and taking the average energy density of food (arbitrarily weighting protein:carbohydrate:fat in a 4:3:3 ratio) as 24 million J/kg , then the person is consuming about 130 kg/yr of food. Further assuming this average person consumes four grocery bagfuls per week of nondurables with each bag containing 2 kg of useful product, then the average person requires 400 kg/yr of consumer nondurables (of which 130 kg/yr is food).
The PN is assumed to produce 4400 kg/yr of consumer products. Given that the average person in an industrialized economy needs 400 kg/yr of nondurables, or 1600 kg/yr for a household of four people, this leaves 2800 kg/yr either for increased nondurables consumption or for the manufacture of desired consumer durables. Durables might include clothing, appliances, furniture, and cars.
Large automobiles that weigh 2000 kg today might weigh as little as 200 kg if made of much stronger diamondoid materials , so the production budget would allow up to 14 diamondoid cars per year to be built. Thus, a single PN per household with the above parameters is probably sufficient to satisfy all reasonable household needs for residents of industrialized countries. Cost of PN-Manufactured Goods The base operating cost of a working PN, and hence the price of anything that can be manufactured by the nanofactory, should approximate the cost of the material and energy inputs. Of course, "cost" is not price-in a capitalist economy, prices of goods are set by competitive markets. In a stable equilibrium economy, the price of manufactured goods that are in demand cannot long persist below the base cost of the material inputs.
But added to those base input costs, and hence indirectly added to the price of a good, will also be various intangible costs, which for the PN might include some or all of the following:
(1) acquisition financing or opportunity costs;
(2) PN licensing costs;
(3) the cost of product-description information not in the public domain (e.g., IP fees, per-use fees, per-bit fees);
(4) communications toll charges for PN data links, with flat baseline fee varying by transmission speed, fidelity, security, and availability for product data downloads;
(5) fee for dangerous-product construction blocking (e.g., governmental, parental);
(6) fee for contraband or socially-taboo construction blocking (e.g., governmental, parental, religious, etc.);
(7) regulatory costs (e.g., environmental impact/mitigation, thermal pollution credits, content policing, federal mandates enforcement);
(8) federal/state taxes (e.g., sales/use, value-added, property, excise, luxury, inheritance, estate, gift, etc.), State Nanofactory Commission tax, and surcharges for unrelated social purposes;
(9) local taxes (e.g., feedstock fire services, toxic gas mitigation, metering services, low-income subsidies, universal access subsidies, 9-1-1 emergency phone number fees);
(10) federal protective trade and domestic subsidy-support tariffs;
(11) federal economic stabilization surcharges;
(12) fee for regular government-mandated safety inspections, analogous to annual smog inspections commonly required for automobiles;
(13) international surcharge for disadvantaged nations, administrated through United Nations auspices (perhaps imposed as single fee collected at time of sale, or paid as annual international tax);
(14) registration fee for all Pns, analogous to automobile registration fees;
(15) the cost of government mandated insurance for accidents or injuries to others as a result of products manufactured by the PN, similar to the automobile personal injury insurance required in many states; and
(16) miscellaneous other fees and expenses.
Originally published in Nanotechnology Perceptions: A Review of Ultraprecision Engineering and Nanotechnology, Volume 2, No. 2, May 8, 2006.
Also see Tetrad on Desktop Nano-manufacturing
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