Economics in Science Fiction: The Specter of Overproduction (from Pohl and Huxley to Heinlein)

One science fiction story about economics that made a big impression was Frederik Pohl’s “The Midas Plague,” originally published in Galaxy Science Fiction in 1954. (The story was reprinted in The Seven Deadly Sins of Science Fiction, a 1980 anthology edited by Isaac Asimov, Charles G. Waugh and Martin H. Greenberg).

“The Midas Plague” starts off with a wedding: A man who owns a mansion marries a young woman who was raised in a modest cottage, despite the different in their social backgrounds.

But this is a world where the reader’s expectations are reversed: it’s the man who’s poor, condemned to a duty of frantic consumption, while his wife was raised with freedom to live more modestly and finds the flood of material goods that now faces her a painful burden. An ingenious plotline growing out of this leads to an unexpected resolution of the couple’s problem.

Pohl’s story, of course, is a satire — a somewhat mixed form, in that it combines the projection of a fantastic imagined society (characteristic of Menippean satire) with harsh criticism of what Pohl considered the obsessive consumerism of American society (characteristic of Juvenalian satire), here changed from an aspirational goal to a harshly enforced duty. His writing aims to hold the mirror of scorn up to human beings.

But in developing his premise, Pohl relies on an economic concept: overproduction.

In Pohl’s future world, a combination of cheap energy and robot labor makes possible a massive outpouring of material goods: so great an outpouring, he suggests, that they exceed people’s demand for them, creating a danger that stockpiles of goods will go unsold. If this happens, the businesses that produce them will lose money, workers will be let go, reduced incomes will lead to even less consumption, and the society will spiral down into depression.

This fear of overproduction (or its mirror image, underconsumption) had been considered a fallacy by economists since Jean-Baptiste Say; but in the Great Depression, John Maynard Keynes rehabilitated it, along with the idea Say had rejected, that poor sales were due to a shortage of money and credit, and that what the economy needed was a stimulus to demand.

Pohl’s world uses cruder methods, officially ranking status, and assigning everyone a quota of goods to consume and punishing under-consumption—but the underlying fear is still that overproduced goods will be left unsold.

Pohl wasn’t the first writer to rely on this premise.

In 1932, Aldous Huxley’s Brave New World  portrayed a future similarly given to frantic consumption. Most readers have focused on the sexual promiscuity, the use of recreational drugs, and the ectogenetic production of new human beings, typically in large groups of identical clones.

It’s also recognized that Huxley was writing a satire, and indeed a parody of utopian works as H.G. Wells’s Men like Gods.

But the same serious economic premise underlies Huxley’s imagined future.

The world Huxley portrays makes a religion of mass production; its people invoke the name of “Our Ford” (or “Our Freud,” the two having been confused). Even human beings are mass-produced in industrial facilities.

But this produces a flood of consumer goods, and again, a desperate need to consume them. New sports are constantly being developed, for example, and evaluated by how elaborate their equipment and facilities have to be. Mustapha Mond defends the policies of the World State as leading to social stability and avoidance of economic collapse.

It should be noted that Huxley was writing in the early years of the Great Depression, when economic collapse was an urgent concern!

Written not many years later was a novel that, if not a utopia, was at least a more optimistic treatment of the concern for overproduction: Robert Heinlein’s Beyond This Horizon.

Heinlein envisions a future where money is issued by the government in amounts that are steadily increased to ensure that all the products of a prosperous economy can be sold. Rather than the general population being enticed or compelled to consume frantically, the funds are spent in such ways as providing everyone with a guaranteed basic subsistence (as well as in various government projects such as scientific research).

But why is this ongoing increase in the money supply needed? Heinlein merely states it as a conclusion in Beyond This Horizon.

However, in his earlier attempt at fiction, the novel For Us the Living (unpublished during his lifetime), Heinlein lays the reasoning out, in the form of a card game that models the economy.

It appears that in his view, when a business earns a return from its products or services, the part of the return that goes to pay workers returns into the economy and is spent on purchasing other products or services (and workers for other businesses presumably buy its own products or services).

Perhaps the part spent on buying raw materials from other businesses has a similar effect. But the part that returns to the owners as profit seems simply to vanish from the economy, buying nothing! So not enough money returns to the economy to purchase everything the business produces — which is exactly the fear of general overproduction.

Of course, it can be objected that some of the profit is spent on living expenses and luxuries for the owners, and this will take up some of what is produced. But it’s well known that substantial parts of the earnings of businesses don’t get spent in this way; rather, they’re retained as capital.

That points us at the real fallacy here: The idea that capital is simply hoarded, and not spent on buying things. That may have been true in the days when people kept private hoards of gold coins or bank notes (though even then, under the static conditions of preindustrial economies, the money going into hoards would have been balanced by the money coming out).

But in an industrial economy, capital is invested in projects that earn a return. And those projects spend it on productive assets—on buildings, equipment, raw materials, everything needed to provide a new product or service—and on labor.

(As Murray Rothbard pointed out, labor in fact is paid in advance of sales: No one can hire workers by asking them to wait until the new product goes on the market for their pay!)

Heinlein makes explicit a set of assumptions that come from economic folklore, and that lead to inflationary policies. 

It’s easy to see where this theme came from: All three authors write against a background of economic crisis, when such theories were widely circulated. In fact, they were au courant in economics, spread by Keynes’s General Theory of Employment, Interest and Money (whose title cleverly evokes Einstein’s General Theory of Relativity, suggesting both that Say’s economics was based on restrictive assumptions and that it takes brilliant people to understand and apply Keynes’s ideas).

This is a clear case of science fiction based on social rather than physical science—and, naturally enough, turning it into social science fiction, even if the economic model is partially concealed behind a hedonistic dystopia or behind a story of love and adventure.

All three works are ultimately propelled by the shadowy threat of general overproduction and economic collapse.

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