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. icon
    Mike (profile), 9 Jun 2008 @ 3:31am

    Re:

    What feels to you like a great discovery is a fairly elementary concept in economics.

    Yes and no. While it's based on elementary concepts in economics, most economists ignored how it would play out on infinite goods in a market.

    Just, well, a read through any one of a number of textbooks. Google "public good" or "media commodity" or something. It's really not that hard.

    No, it goes well beyond classical theory on public goods and media commodities. Read Paul Romer's research, and the research that has come since then.

    Yes, much of it is built on that theory, but it goes beyond that. If you focused just on the classical theories of a "public good" you wouldn't recognize what Krugman points out in his piece: which is that this isn't necessarily a bad business model for a private entity. That's NOT the case with classical public goods economic theory.

    So, while the core of this is based on classical theory, it's coming to new conclusions, mainly by not being scared away by the "zero" in the equation -- which classical economics was scared of.

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