Paul Krugman Joins The Infinite Goods Brigade

from the the-concept-is-getting-through dept

It looks like Paul Krugman is the latest economist to join the growing group of folks who recognize the impact of infinite goods on business models -- and how it's not a bad thing, just an inevitable shift in the market. Unfortunately, his writeup on the issue is a little weak. He references Esther Dyson's predictions about this from fourteen years ago and the recent Rolling Stone article we discussed last month. What's disappointing is that, as an economist, he should have been able to look at the fundamental economics and understand why this makes sense, but he chooses not to do so. That leaves him open to criticism. The next stage of this debate is going to be showing, fundamentally, why this inevitable change isn't a bad thing. Some people already recognize this, but it clearly is going to require a lot more convincing evidence.
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Filed Under: business models, economics, infinite goods, paul krugman

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  1. identicon
    dorpus, 6 Jun 2008 @ 11:23pm

    Re: Re: Re: Re: Re: yes, dorpus

    It's exactly the same in the infinite goods case. In a competitive market the price of a digital song is pushed to its marginal cost. Exactly like every other competitive market. The only different in this case is that the marginal cost of the digital song happens to be very very close to $0.

    Is it truly $0? What is the cost of buying instruments, the years of training, the expensive audio equipment for making a good recording, the rent for an audio studio? One might as well argue that the cost of pushing the "start" button on an oil rig is $0. Just as oil is consumed and more must be produced, so people do not want to listen to the exact same song for eternity. More music is demanded, with its nonzero costs of production. The argument that music must be inherently free holds no more water than Nigerian bandits who "liberate" oil. Until this year, people in the economics world argued long and hard that grains are an example of "infinite competition", therefore its cost is inherently $0. Now we are seeing skyrocketing costs of grains, mass hunger, and food riots.

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