Comments on: Krugman: The economics of abundance

By: mathewi

mathewi — Mon, 09 Jun 2008 13:13:03 +0000

Thanks, Michael — yes, you are quite right. The advertiser has a
relationship with the reader, but it's a secondary relationship
created by the bond between the newspaper and the reader, or the
author and the reader.

By: Michael Cayley

Michael Cayley — Mon, 09 Jun 2008 04:31:14 +0000

The only point that I would insert is that the relationship is not primarily between the reader and the advertiser. The relationship (or social capital) is between the newspaper and the reader or the author and the reader and advertiser, rents a spot.

Good post Matt.

By: davidc

davidc — Sun, 08 Jun 2008 09:16:53 +0000

What happens when freeconomics moves from information to physical goods? We already have freeconomics on things like razors and blades but what happens when physical good creation becomes as easy as sharing a file?
The reprap project http://reprap.org/bin/view/Main/WebHome has created a rapid prototyper that can replicate its own plastic parts. So such a “download your living room” world may not be that far away. What are the economics of everyone having a rapid prototyper?

By: mathewi

mathewi — Sat, 07 Jun 2008 20:48:04 +0000

Thanks for the comment, Daedalus. I agree that the two models are by
no means mutually exclusive, and that which one is appropriate has a
lot to do with the specific situation and market.

By: Daedalus

Daedalus — Sat, 07 Jun 2008 20:29:02 +0000

As usual the argument about free or not free is more about the obsession with finding/supporting a simplistic model for things rather than paying attention to reality or getting the assumptions right. This tends to lead to masturbatory argumentation rather than any clarity.

Guess what: free and not free product models are *both right*, depending on the situation. Even scarier - one seller could choose the free model, the other a non-free model *in the same market* and all four possible outcomes for long term survival are possible (A and B fail, A fails - B succeeds, A succeeds - B fails, A and B succeed).

Is it possible to know which one applies? Yes, I think so. Up to a point.

Why do people argue about it ad nauseum? 1) their math and systems thinking skills stink, 2) they pontificate in a vacuum rather than from actual experience (how many have started or run a businesses themselves? 99% not - yes I'm in the 1%, serially), and 3) they often follow an overly simplistic view of Occam's Razor primarily due to #1 IMO.

The low down is this: some products, some markets and some periods of time allow either (free or non-free) to be the optimal price-value model. Neither model is universal over the entire 3-space.