The Economics Of Free Isn't Good Or Bad -- It's Simply What Happens

from the understanding-economics dept

Wed, Feb 27th 2008 4:38am — Mike Masnick

One of the problems that comes up whenever we discuss economics around here is this prevailing belief that there's a moral component to economics -- and that whether something is "good" or "bad" plays a role in determining the economics. Economics is just an explanation of the forces at work on a market. Asking if economics is good or bad is like asking if physics is good or bad. Sure, gravity sucks for those who want to fly, but it's simply a force that is. The same is true with the economics associated with infinite goods that force a price to free.

That's why it's rather disappointing to see someone complaining that the economics of "Free" is somehow a bad thing. This is written by Alex Iskold, who recently was confused about how free economics actually works. He compounds that problem now by suggesting that it's somehow "bad." The fact is it's neither good nor bad. It's an economic force that is impacting the market. Worrying about it being "bad" is missing the point. Again, it's like worrying that gravity is bad or that Thursday is bad. These are things that are going to happen no matter what, and are generally neutral.

Even worse, Iskold fails to show how it's actually bad on a larger scale. What he does is show how it's bad on a micro scale for certain companies. But, you could make that argument for anything. Automobiles were "bad" for buggy whips. The printing press was bad for scribes. The telephone was bad for telegraph operators. Yet, on a larger economic scale, all of these things opened up more opportunities to the economy. The same is true with the economics that are being discussed these days. Recognizing the inevitability of infinite goods to be offered for free increases the resource pool and opens up many new opportunities to provide goods and services -- and to profit from them.

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Filed Under: business models, economics, free

72 Comments

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Iron Chef, 27 Feb 2008 @ 5:27am

It works very well. look at wireless industry
One issue is how to give something and then or upsell/cross-sell, convert to, or otherwise use the "free" item to segway into a revenue-generating activity.

Many efforts that led towards the Dot-Com Bust failed to have the overall strategy to increase customer conversion rates, or otherwise look at the the customer lifecycle to use this as "customer acquisition costs."

An example is to consider that the wireless industry has been "giving away" handsets for years. These handsets are heavily subsidized. In return, carriers make up the investment in the handset over the one or two year contract period by selling service.
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MadJo (profile), 27 Feb 2008 @ 5:31am

Actually Thursday isn't that bad...
it's Monday that's bad. Mondays should be declared illegal!
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Crosbie Fitch (profile), 27 Feb 2008 @ 5:33am

The ethics of free
What we do know though, is that monopolies are bad and a free and fair market is good.

Hence copyright, the anachronistic monopoly and unethical privilege of publisher over public, is bad.
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Anonymous Coward, 27 Feb 2008 @ 5:43am

Re: The ethics of free
Wow, that was almost an argument. Unfortunately, your conclusion contained nothing from the premise. Nice try, though.
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Charming Charlie, 27 Feb 2008 @ 5:47am

The science of economics may be a study of human forces akin to the science of physics, true. There is a difference though in that WE dictate the laws concerning economics, which brings in the moral component. I understand where you're coming from that many economic discussions make statate and unstated moral claims which misses the point, however, it's another thing to completely absolve human responsibility when talking about copyright, royalties, privacy, and the other assorted issues we talk about on Techdirt that are tied to economics.
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Anonymous Coward, 27 Feb 2008 @ 5:52am

From the Blowback report
Copyright This:
Intellectual property’s social value may trump copyright law.

http://www.latimes.com/news/opinion/la-oew-weaver20feb20,0,1675278.story
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JE Bailey, 27 Feb 2008 @ 6:05am

Re: The ethics of free
Actually a monopoly isn't bad, nor is it illegal, what's bad is the abuse of power by a monopoly.

A monopoly is merely a state of being that comes about when market forces dictate that a certain product has no successful competition.
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Richard Deadman, 27 Feb 2008 @ 6:08am

Economics and Productivity
From a macroeconomics view, the wealth of an economy is related to its productivity. Certain actions consume money without producing usable goods (i.e. war) and so are economics sinks. Free goods are the actually the opposite. By satisfying needs without costing money they free up money to be spent producing other goods. Overall more goods are produced by the society which increases its classical wealth.

A bit simplistic in that it doesn't touch how fast money turns over in the society, or green concepts, but economic advances have always been build on productivity gains and getting more for less. Certainly its hard to argue that free goods aren't the ultimate extension of that concept.
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Stan Schroeder, 27 Feb 2008 @ 6:11am

what is free/scarce?
Alex doesn't make one important distinction.

Gmail isn't an idea that can be copied freely. It's a service, with actual costs behind it - hosting, etc. It is a mistake to mix a service such as Gmail or Google Docs with an MP3 song; it's just not "free" in the same sense.

A company with a lot of resources can kill off smaller companies by unfair business practices: that's what Microsoft is paying 2+ billion dollars to the EU these days for. But, it doesn't necessarily have to do anything with the economics of free or scarce/infinite goods. If Ford were to have 10000 billion dollars in cash, they could give away cars (an obviously scarce resource) until every other car company goes bankrupt, and then charge double after it happens. I'd say that this is what Alex is talking about.

The core of Alex's mistake is in this sentence:

"Chris and other advocates of freeconomics argue that with costs of digital products rapidly dropping, it is best to give them away for free."

Right there, he bundles all digital products into one category, which they aren't: web hosting, for example, can be considered a digital product (service), but it has scarce components tied to it in a way that an MP3 file doesn't.

In other words, some things (information) are meant to be "free", while some aren't; a big company with a lot of cash can push the limits between these categories, and Alex is IMO right about warning of the dangers of such behavior. The question is, who determines when this happens? Don't just say "the market," because there are ways to manipulate the market in an unfair way and thousands of rules, laws and regulations to prevent it.

Just for the record, I think that your usual arguments on the economics of free stand when we talk about MP3s. I'm just not sure about some other products.
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Anonymous Coward, 27 Feb 2008 @ 6:19am

Re: Re: The ethics of free
All monopolies are bad.
Copyright is a monopoly.
Therefore, copyright is bad.

All the logic's there, it's just muddled by the natural language used.
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Anonymous Coward, 27 Feb 2008 @ 6:22am

Re: Economics and Productivity
"Certain actions consume money without producing usable goods (i.e. war)"

I may be wrong, and correct me if I am, but wasn't is a war that brought the US out of the Great Depression?
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Anonymous Coward, 27 Feb 2008 @ 6:23am

Bringing up the buggy whip is tired and wrong. Sure, the auto replaced the horse, thus putting buggy whip makers out of business. With content, you are not replacing it with anything, you just copy it. A perfect copy.

I view the two things differently, you don't, so we disagree. I view a car manufacturer competing with the cart head on, offering a better product. You view the copy of the MP3 as something different, but to be different, it would require you to write your own song, sing your own song and try to compete that way. Instead, you just copy it.

I would say it is wrong to even mention the buggy whip. Michael Douglas is an A-Hole and you are no Michael Douglas (although I would take his wife.)
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Anonymous Coward, 27 Feb 2008 @ 6:26am

Re:
In the case of regulations which we enforce upon the market, yes. But who's forcing the cost of infinite goods to be zero?

Momentum and inertia are physical laws; highway speed limits are legislated regulations. They don't carry the same weight. No pun intended.
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Anonymous Coward, 27 Feb 2008 @ 6:31am

War produces nothing, but preparing for war produces pretty much everything.

Even today, look at the products that would have never seen the light of day without war. GPS and Nuclear Reactors come to mind. How much research finally reaches its way to the market because of work being done for the sake of the military.

Hell, the military pumps out a heck of a lot more things than NASA has. All that money and we got what? Balloons that last for years?
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dorpus, 27 Feb 2008 @ 6:50am

Greed is not physics.
So Techdirt wants to argue that the human-based impulse to steal toys from other kids is the same as the "laws of gravity", implying that it is impossible to make kids stop stealing toys. Perhaps this says more about Mike's upbringing, in which stealing toys from other kids is "market forces at work", the "victim's fault", and any intervention is "big brother at work" and therefore "creating inefficiencies through regulation". Oh, and a bicycle lets the thief run away more quickly, so if it was stolen from the victim and the victim has to run on foot, then it is "bad" for the victim who "fails to keep up".
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Crosbie Fitch (profile), 27 Feb 2008 @ 6:51am

Good point JE Bailey
I could qualify 'Monopolies are bad' as 'Enforced monopolies are bad, especially when enforced by the state, e.g. copyright and patent'. However, there are other situations in which monopolies can be unfairly retained by their holders against would be competitors.

There's a very small word budget when trying to get a point across to readers with a limited attention span. :-)
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Anonymous Coward, 27 Feb 2008 @ 6:53am

Re:
Buggy whip : automobile :: CDs : digitally distributed music

Or, more to the point:

Buggy whip : automobile :: old business modle : new business modle

You seem to think the argument is that copies of MP3s are competing with MP3s, and that's not the case. MP3s are competing with CDs, and they bring with them new properties which break the old modles of business. It's not a perfect analogy, but if you look at it as CD merchants versus MP3 merchants, it's a fairly close fit. It doesn't work mostly because whips and cars are both finite, but the whole point of digital content is that it's infinitely copyiable.
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Sound like, 27 Feb 2008 @ 7:07am

Re: Actually Thursday isn't that bad...
Someone has a case of the moon-days.
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Anonymous Coward, 27 Feb 2008 @ 7:25am

"You seem to think the argument is that copies of MP3s are competing with MP3s,"

You seem to thing that content and CD's or MP3's are the product. They are not, they are the packaging. The product is the music.

Does a buggy whip look and do the same thing as an automobile? A copy of the MP3 is exactly the same product, just delivered in a different way. I recognize that difference, obviously others don't.
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Anonymous Coward, 27 Feb 2008 @ 7:27am

Re: Re:
The important distinction that you may be overlooking is that it's not a matter of MP3s competing with CDs as a unique and different product.

The CDs compete with MP3s as a free clone of themselves. The CD (as overpriced as it is) is a produced, finite object. The MP3 (assuming you're not buying digital music) is a free and easy-to-copy version of a finite good.

MP3s and file sharing (copied free files from legally purchased CDs, just to clarify) is not a new business model, it's a new way to steal.

Now you might be talking about purchases of limited use digital content then I think you're on to a new business model. However, when it comes to MP3s people rarely are.
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Pessimist, 27 Feb 2008 @ 7:28am

Free?
NOTHING IS FREE!!!
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DanC, 27 Feb 2008 @ 7:30am

Re: Greed is not physics.
...wow...Is there anyway to more thoroughly misunderstand the point of the article?

Quite simply, Mike is saying that economics does not have a moral component. It isn't "good" or "bad", it's science. He compared economics to physics because they're both scientific fields of study.

Toy stealing and bicycle theft...utterly ridiculous. Theft in economics is essentially a line item under losses. None of your claims has any basis in the article; You invented them. You're simply arguing against yourself.
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Ryan, 27 Feb 2008 @ 7:40am

Re: Re: Economics and Productivity
"Certain actions consume money without producing usable goods (i.e. war)"

"I may be wrong, and correct me if I am, but wasn't is a war that brought the US out of the Great Depression?"

--Wasn't it that same war that brought us into the age of major national debt to foreign countries?
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DanC, 27 Feb 2008 @ 7:41am

Re: Re: Re:
"MP3s and file sharing...is not a new business model, it's a new way to steal."

Copyright infringement is not stealing. It's copyright infringement.

"Now you might be talking about purchases of limited use digital content then I think you're on to a new business model."

'Limited use digital content', aka DRM, has soundly failed as far as the recording industry is concerned. As the expected move to movie downloads picks up, look for it to crumble to pieces there as well.
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Anonymous Coward, 27 Feb 2008 @ 7:43am

Re:
Sigh. Once again the point of the analogy is missed. The point is that the business model is changing through new developments which produce certain economic stimuli, and hence you have to change how you do things in order to stay in business.
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comboman, 27 Feb 2008 @ 7:47am

Re: Re: Economics and Productivity
I may be wrong, and correct me if I am, but wasn't is a war that brought the US out of the Great Depression?
That is a common misconception. President Roosevelt's New Deal reforms (started in 1933) are what started to pull the US out of the Great Depression. The US involvement in WW2 actually delayed the full economic recovery until the end of the war (which is why some believe that it was the war that caused the recovery).
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mike allen, 27 Feb 2008 @ 7:59am

Re: ecconomics of copyright
Artist writes or records song
it gets played on radio and sells a few thousand for argument.
Artist sits back and sniffs at white powder gets small checks from record company who keep the major share.
Artist one day a year down line may write a song record get to sell a few thousand
. the circle starts again.
now without copyruight the artist
records song sells millions through his web site makes a few thousand dollers plays to sell out audiance cause everyone has heard his music makes millions record companies die.
The moal of ecconomics copyright is helping the drug dealers of America.
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Anonymous Coward, 27 Feb 2008 @ 8:00am

I agree, my posts were not really on the topic of the article, but the article contained the reference to the buggy whip. That is why I posted it, and I think it is an important point.
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DanC, 27 Feb 2008 @ 8:01am

Re:
"There is a difference though in that WE dictate the laws concerning economics, which brings in the moral component."

That's not really true...we make laws that attempt to influence economic systems. We do not, however, create the laws that make up economics. Take the most basic economic law - supply & demand. We didn't create it and it has no morality attached to it. We do create laws that attempt to influence it, by regulating supply, for instance.

"But who's forcing the cost of infinite goods to be zero?"

I think this might be unintentional wording. I believe you meant to ask what's forcing the price of infinite goods to be zero. The answer, of course, is basic economics. If there is an unlimited supply of something, the price will naturally tend towards zero. That's why gold is expensive, and dirt is cheap. Morality has nothing to do with it.
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dorpus, 27 Feb 2008 @ 8:01am

Re: Re: Greed is not physics.
Quite simply, Mike is saying that economics does not have a moral component.

Morals do not affect economics at all? What about Islamic societies today, or Christian societies of medieval Europe where interest on loans were outlawed? Do morals then have no effect on economics at all?

It isn't "good" or "bad", it's science. He compared economics to physics because they're both scientific fields of study.

Economics likes to draw many analogies from physics or biology, talking about the "law of gravity" or "Darwinian selection". However, the human greed that drives the "laws of economics" is not an infallible law that can be appropriately compared to gravity. The "Darwinian selection" that economics often likes to talk about also shows an antiquated understanding of biology. It is known in biology that many species in the wild do practice altruism, which makes no sense from an economic point of view. Darwin did not know anything about Mendellian genetics either. He is regarded as a historical figure whose ideas are no more relevant to modern biology than Kepler is relevant to quantum physics. Economics is not a physical science, but a social science driven by dogmatic assumptions.
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Anonymous Coward, 27 Feb 2008 @ 8:03am

Re: Re: Re: Re:
I agree, DRM always has, and probably always fail as a business model, however new or rebranded (recycled) it might be.

As far as the discussion between calling it "copyright infringement" vs "stealing" goes, I believe it's a matter of symantics. But I can agree with you that I would get behind calling it "Copyright infringement" because the only difference is "stealing" involves taking something from you, now you have less. "Copyright infringement" is copying what you have, rather than buying my own or going without, the result is the same.
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Anonymous Coward, 27 Feb 2008 @ 8:04am

Re: Re: Re:
It is difficult if not impossible to make "limited use" digital content.

MP3s do offer value above and beyond that of CDs, if for no other reason than granularity. Bad songs can no longer ride on the coat-tails of good songs, for example. Though you may argue the content is the same, one might point to VHS and Beta competeing in a similar way. Or, more recently, HD DVD and BluRay.

The triouble is that digital content is inherently copyiable. It's a fundamental property. Fighting against that is costly and, ultimately, futile. It simply makes more sense to take advantage of the new technology *by altering your business modle* than to continue to fight it in order to continue what you've been doing for decades.
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Anonymous Coward, 27 Feb 2008 @ 8:06am

Re: Re: Re: Re: Re:
DRM can't work. With DRM, the legitimate user is the same person as the potential attacker. If you give him the key to open to locks, you've lost. If you don't, it's not useful to him. And in EVERY case, it make 'legitimate' content *less valuable* to the consumer than rip-offs. Rebrand it however you want, these facts remain.
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Anonymous Coward, 27 Feb 2008 @ 8:09am

Re: Re: Re: Re: Re: Re:
Lol, yes, you're right, DRM won't work. I don't think I see anything above your post that would disagree with the point your making.

Again. :-)
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Chronno S. Trigger, 27 Feb 2008 @ 8:26am

Re: Re: Re: Greed is not physics.
The law of gravity is a bad example. A better one would be weather forecasting. It's still science but not %100.

Economics has no moral compass. It is not driven over what is good or bad. People make decisions over what they deem as good or bad and the economics change accordingly.
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Anonymous Coward, 27 Feb 2008 @ 8:38am

Re: Re:
I'm not disagreeing with you, but I think the question that needs to be posed is whether or not there really is new economic stimuli.

In the case for Google, I think it does. Posting ads on a page that offers free service allows people to use those ads to indirectly make purchases. But I don't think this is a universal truth, someone needs to eventually get paid in the end, directly or indirectly, and for that to happen someone needs to spend money eventually.
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DanC, 27 Feb 2008 @ 8:55am

Re: Re: Re: Greed is not physics.
"Do morals then have no effect on economics at all?"

Once again, you are misreading and making false assumptions. Social morals affect economics, but they don't belong to the science of economics. The law of supply and demand is universal, but different societies demand different things based on a variety of factors, including morals. They can also pass laws that affect either factor, but the law of supply and demand itself doesn't change.

"greed that drives the 'laws of economics' is not an infallible law that can be appropriately compared to gravity."

Attempting to state that greed is the equivalent of demand is misleading and incorrect. Greed, or more appropriately 'want', is simply a single factor in determining demand. Survival, or 'need', is another.

"Economics is not a physical science, but a social science driven by dogmatic assumptions."

What assumptions are you referring to?
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Chronno S. Trigger, 27 Feb 2008 @ 8:57am

Re: Re: Re: Re: Re:
The main reason we try and force the distinction between stealing and copyright infringement is the same as the distinction between stealing a "Ford" and hand building an exact copy. Both are wrong and illegal but for different reasons and have different legal outcomes.

With the theft comes Police involvement, tax money spent, and jail time.

With copyright infringement comes a law suit and fines. The only government intervention is the court.

We force the distinction so that the RIAA/MPAA can't twist the definition and get people jail time for downloading a song.
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Anonymous Coward, 27 Feb 2008 @ 9:31am

Re: Re: Re: Greed is not physics.
Morallistic decisions effect the outcome of economic equasions. However, economics itself doesn't care. If you want to plug in "no interest on loans" the same numbers drop out regardless of whether that no interest is religious-based, enforced by a dictator, or an effect of amiable communism.

And it might be noted that altruism, in fact, apparently DOES make sense in economics. See Gate's recent call for compassionate capitalism, or the article from earlier today on techdirt:
http://techdirt.com/article.php?sid=20080224/184002338&threaded=true

Though i'm not sure exactly what you're getting at by saying altruism doesn't make sense in economics. That's like saying altruism doesn't make sense in calculus, or statistics.
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Anonymous Coward, 27 Feb 2008 @ 9:33am

Re: Free?
Air?
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Anonymous Coward, 27 Feb 2008 @ 9:34am

This disagrees, no?
I agree, DRM always has, and probably always fail as a business model, however new or rebranded (recycled) it might be.
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Kevin, 27 Feb 2008 @ 10:00am

Re: Re: Re: Greed is not physics.
It is known in biology that many species in the wild do practice altruism, which makes no sense from an economic point of view

It is also known in the fields of biology and genetics that altruism, when practiced in the wild, tends to be strongest among groups of related individuals and that the more closely related those individuals are the more frequently they will exhibit what appears to be altruistic behavior. This is sufficiently explained as economically sensisble when examined at the genetic level rather than the organism's level. Had you read anything written in the past 30 years concerning biology and genetics you would know that.

But even if you discount the "Selfish Gene" theories explaining altruism, there is still the matter of reciprocal altruism, which has been observed in most intelligent species. What looks like altruism (giving assistance or resources while getting nothing in return) can often times be explained in longer-term thinking. Unrewarded altruism today can act as an insurance policy against needs that aren't being met tomorrow. An animal may share a meal that it has caught/gathered with a less successful animal in the expectation that the favor be returned at a later date. I'm sure that you're familiar with the concept since in large part it is the basis of most human societies.
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Nick (profile), 27 Feb 2008 @ 10:38am

Let's pretend that one group has gone out and planted trillions of plants, and populated the ocean with trillions of times more oxygen converting plankton, algae, etc. This organization now owns all plant life, and now, all oxygen that these plants is therefore owned by that group. A law is passed that says all air (assuming it is clean) is now owned by that group, and anyone that breathes it without paying is stealing it. The money goes to the people who planted the plants. This group also introduces a standard of morality: paying for the air you breath is good and moral. Not paying is bad, immoral, unethical "stealing."

This is the same quandary we are talking about right here. Man-made, digital technology or IP is just like the near-infinite good nature has created, like oxygen, for people to breathe. Society is better of for not allowing the scenario above to take place.

Let's make a couple of assumptions for the sake of this argument that you don't need to tell me. Digital copied are not necessary for human survival, air is necessary - this is understood. But, in this argument, you can substitute digital copies with anything else that can be copied infinitely with zero or near-zero cost such as: ideas, chemical structures used in pharmaceuticals, designs, etc. In other words, think of the things that countries like China "pirates" in order to survive.

With the "good vs. bad" argument, you could just as easily say that patents and copyright are neither good nor bad, but market externalities that monopolists have figured out how to use, and the use of the consequences may be for good or bad. Therefore, we are defining "good" as things that benefit the majority at the expense of the minority, and "bad" as things that benefit the minority at the expense of the majority.

We should define stealing as the taking of a scares good or the means to produce a scares good. Stealing is NOT borrowing ideas, using the nature of a near-infinite device (digital technology, the human mind, plants that produce oxygen, etc) to make a copy or transmit an idea. This is violation of a norm, a violation belief, not violation of economic theory.

Everything is subjected what is the popular belief. Some ideas are so radical that they defy popular belief. These beliefs are popularized by those who will benefit by those that believe. Guess what? The world is round, it is not the center of the solar system, and you can't turn lead into gold. And, it is possible to have a business model with free built-in. This is just history repeating itself, except today you don't get burned at the stake.

“The reasonable man adapts himself to the world. The unreasonable man persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man.” ~George Bernard Shaw, political activist and Noble Prize Winner
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dave blevins (profile), 27 Feb 2008 @ 10:42am

"bad technologies"
The music industry was saved by the "bad" phillips cassette.
The movie industry was saved by the sale of "bad" VHS recordings of movies.
Look at how much $$ are in the sale of DVDs of TV series, bad and otherwise.
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Mike (profile), 27 Feb 2008 @ 10:43am

Re:
Bringing up the buggy whip is tired and wrong. Sure, the auto replaced the horse, thus putting buggy whip makers out of business. With content, you are not replacing it with anything, you just copy it. A perfect copy.

You are looking at the wrong thing. It's not about the perfect copy... the buggy whip:automobile analogy is to physical distribution:digital distribution.
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Anonymous Coward, 27 Feb 2008 @ 11:06am

Re: This disagrees, no?
I think that agrees with your point, specifically the part that says:

"I agree, DRM always has, and probably always (will?) fail"
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Anonymous Coward, 27 Feb 2008 @ 11:07am

Re:
Strictly speaking, plants don't "make" oxygen, but...
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Michael Long, 27 Feb 2008 @ 11:15am

Social science
I agree with the above poster, in that economics is about as much a science as socialogy or psychology.

The study itself may be conducted in a scientific fashion, but many of the "laws" postulated are much like the "laws" of thermodynamics. Useful in some contexts, but in actually only crude approximations and descriptions of the actual events. For centuries mankind has tried to understand and control things like recessions and inflation, and still our economies swing back and forth like reeds in the wind.

Saying that "free" is a "force" falls back on the same falacies, and assumes that the force in fact exists (aether, anyone?), and can be measured and quantified.
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Anonymous Coward, 27 Feb 2008 @ 11:15am

Re: Re: Re: Re: Re: Re:
I think you make a good point, but I think (I'm assuming) the fear associated with piracy is that unlike building an identical replica of a vehicle, there are no resources consumed when you copy digital content.

What I mean is, the time, cost, and difficulty associated with building a replica vehicle has 0 negative impact on anyone. If anything it would promotes economic growth. I'm not an economist, but I think using existing replica car companies as an example you should be able to make that assumption.

However, in the case of digital content the cost associated with making your replica is insignificant and has a negative impact on the original provider of the CD (as overpriced as it is) in the form of lost potential sales.

I know that may be a stretch, you can't really be angry at someone for *not* buying your goods because whose to say they would have if they hadn't made the digital copy?

It's a pretty gray area, I'm not saying anyone is right or wrong, but as a provider of digital goods (software) I can see how a corporation can get a little irked when someone uses their product without paying you for it.
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Anonymous Coward, 27 Feb 2008 @ 11:16am

Re: Re: Re: Re:
**My two cents**

Don't forget the analog loophole found in all audio content :-)
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Anonymous Coward, 27 Feb 2008 @ 11:25am

Re: Re:
But for digital content (as shown in the example of the article) it is about a perfect copy.

The Buggy Whip analogy focuses on replacing one finite good for another. Digital distribution is about taking a finite good (original code) and devaluing it by making it infinite.

This undermines quality because it removes the motivation behind producing quality content from the start. This isn’t always the case, for FOSS projects the motivation is the project, not the money you’ll get from it. So yea, I can see how this “Free Economy” works there. The mistake that’s made is when we attempt to apply this model to everything. Not everyone codes/writes/composes for the love of it. :-)
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Anonymous Coward, 27 Feb 2008 @ 11:32am

Re: Social science
But the question remains: is there a moral component to thermodynamics or aether? I submit that there is not and, as the article makes a point of, there is similarly no moral component to economics. Even if it's just an approximation, it's not "Good" or "Bad", it just is.

(And by "good and "bad", we do not mean a measure of accuracy in the approximation.)
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Anonymous Coward, 27 Feb 2008 @ 11:37am

A simplistic example
Thunderfap has a lot of interesting freebies for those interested.

Participating companies include Proctor & Gamble (Pringles, Tide, and many other products), Arby's M&M Mars Corp (Snickers bars), and others.

Point is, the big companies are starting to take notice, and you can't just give the whole car away like in the old dot-com days.. You'll go bankrupt! But if you give the stereo away, you could possibly sell more gas. Start thinking like that, and it's pretty amazing...
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SomeGuy, 27 Feb 2008 @ 11:42am

I really want to agree with you, but you're missing a key point to the whole equation: we aren't asking anyone to work for free. The trouble, as you've noted, is that digital distribution pushes the cost of such things towards free ('devalues' them, if you insist on that terminology). The problem now becomes how do you continue to do business?

Software is one of the easier markets, I think: RedHat already does it. You give the code away for free and you sell your expertise in the form of service and support plans. Price those finite plans appropriatly and the income will help pay for your programmers, who can continue to write code that you can give away.

Music is also easy, since you can use the music itself as an promotions for concerts; get popular and draw large crowds who all want finite tickets. Some people argue that not everyone tours or that not everyone involved with a band (songwriters) actually perform. But if they're considered part of the band, then they can get a cut of any profits the performance brings in. You needn't be paid directly for what you contribute if your contribution is vital to the end product.

Books are, I'll admit, trickier, but it can still work in similar ways.

"The Economics of Free" doesn't say "give everything away," it says "give away what you can to encourage people to buy what you sell." And that's not really a new idea.
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Nick (profile), 27 Feb 2008 @ 11:45am

Business models are no different than morality in that they are both subjective, man-made social constructs. If you break the constructs, beat the system. In some languages, there is no word for "steal."
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DanC, 27 Feb 2008 @ 11:45am

Re: Social science
"Saying that "free" is a "force" falls back on the same falacies, and assumes that the force in fact exists"

'Free' isn't a force, it's a result. If you have an unlimited supply of something, the price is naturally going to tend towards zero. The only way around that is if you attempt to create an artificial scarcity of an unlimited product.

"For centuries mankind has tried to understand and control things like recessions and inflation"

That's a bit presumptuous, isn't it? Discounting economics as a "lesser" science because our understanding isn't complete? There's plenty of phenomena in the physical sciences that we can't predict or have a full understanding of. And we do use economics to make predictions; it happens on the stock market every day. They aren't always accurate, but then again neither are our weather forecasts.
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Anonymous Coward, 27 Feb 2008 @ 11:47am

Re: Re: Re: Re: Re: Re: Re:
I'm not clear on what you're trying to say. Is it "building a replica car is expensive for you, the pirate, so it's less of a concern than digital music, which costs the pirate nothing"?
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Chronno S. Trigger, 27 Feb 2008 @ 11:56am

Re: Re: Re: Re: Re: Re: Re:
I see exactly where you're coming from. What you're saying is that copying CDs is different from copying a car because of the ease of access. (and odds are that Ford isn't going to go after one person doing it just for themselvs) Legally it isn't, it's just much more common.

The main problem with working with computer analogies is that there is nothing in history that computers can be compared to. Nothing in history can create an exact copy of an item. Let alone that fast and easily. The car analogy is as close as I can get. Everyone knows that theft of a car is a bad thing. Every one knows that copying a body stile is infringing on the creator's copyright.

This will be one of the topics I discuss if I ever finish writing up my theory of computer illiteracy.
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another mike, 27 Feb 2008 @ 1:47pm

more like biochemistry than gravity
you see, gravity is well understood. mass is attracted to other mass and more mass has greater pull than less mass. attempting to violate gravity has very well known consequences, too; you push it, you fall.
economics is the science of economies just as biochemistry is the science of life processes. both biochemistry and economics are highly complex with many variables and neither is completely understood. yet that lack of understanding does not stop us from futzing with the system. we pass laws and regulations to affect the economy just as the pharmaceutical industry has us popping pills to affect our bodies.
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NRK, 27 Feb 2008 @ 3:06pm

Re: The ethics of free
Sounds so good until you define "free" and "fair" Most of the world does not define either of those words like the English speaking world does, and even we have a few discussion about their meanings... nrk
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Anonymous Coward, 27 Feb 2008 @ 7:45pm

Everyone knows that theft of a car is a bad thing. Every one knows that copying a body stile is infringing on the creator's copyright.

Would you also say that infringing on the creator's copyright is a bad thing?
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Michael Long, 27 Feb 2008 @ 11:35pm

Social science
I agree with the above poster, in that economics is about as much a science as socialogy or psychology.

The study itself may be conducted in a scientific fashion, but many of the "laws" postulated are much like the "laws" of thermodynamics. Useful in some contexts, but in actually only crude approximations and descriptions of the actual events. For centuries mankind has tried to understand and control things like recessions and inflation, and still our economies swing back and forth like reeds in the wind.

Saying that "free" is a "force" falls back on the same falacies, and assumes that the force in fact exists (aether, anyone?), and can be measured and quantified.
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PaulT (profile), 28 Feb 2008 @ 12:25am

Re: Re: Re:
"MP3s and file sharing (copied free files from legally purchased CDs, just to clarify) is not a new business model, it's a new way to steal."

OK, this hasn't been fully addressed from what I can see so here goes...

MP3 is a file format; nothing more, nothing less. It's a format that offers everything that the average music consumer has been demanding for the last decade: reasonable quality, easy to obtain, portable and transferable to any desired playback device.

It's also a format that the music industry has utterly refused to offer until very recently. DRM has been an utter disaster, as have lawsuits, attempts to ban MP3 players in the early days, etc., etc. The industry failed to listen to the demands of its consumers, who found an alternative in the form of file sharing, that happened to preclude paying for the songs.

Now, we can theorise constantly about how the music (and now movie) industry should have handled things in the past, but there's still a chance for redemption. File sharing shows the desired model (easy access to any desired song, quick and easy distribution). The successes of independent stores like eMusic and AmieStreet (and Amazon's recent entry) show that the desired format is DRM-free such as MP3 and that consumers are willing to pay for content if the price is right. Embrace this and you will make money. Restrict the consumer and die. Thankfully, the labels are starting to realise these points.

The same needs to be done for the movie and TV industries. They need to stop following their music brethren into ruin and give the consumer what we want - unrestricted content, no region protection, no unskippable ads telling us we're pirates, content that's compatible with the standard formats already in existence. Any less than that, and they're going to lose sales. Not to the boogeyman of "piracy" but to a fragmented, apathetic customer base that's fed up of being ripped off.
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Evil Mike, 28 Feb 2008 @ 6:19am

Re: Re: ecconomics of copyright
Mike Allen may have a point...
sadly, it's a tad illegible.
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Evil Mike, 28 Feb 2008 @ 6:35am

Re: Greed is not physics.
Dorpus, your conclusions are horribly illogical.

Please support you're local community college and take an economics class. And maybe a philosophy class which covers logic.
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Evil Mike, 28 Feb 2008 @ 6:44am

Re:
Actually, we can turn lead into gold. But, the chemical procedure is so energy intensive--it's cheaper to find, dig up, and refine it.
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Evil Mike, 28 Feb 2008 @ 6:54am

Re: Social science
"The study itself may be conducted in a scientific fashion, but many of the "laws" postulated are much like the "laws" of thermodynamics. Useful in some contexts, but in actually only crude approximations and descriptions of the actual events."
"Crude approximation" my ass!
Good fucking grief!
The depth of ignorance displayed in the one statement is absolutely astounding.

You obviously have no understanding of what the scientific term "law" refers to.

In any science, the term "Law" refers to a THEORY which has yet to be disproved, and which has, as yet, held up to all scrutiny and tests of it's validity! (Sometimes for hundredes of years, you twit.)

A Law of thermodynamics is called such because nobody has successfully disproved it.
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Nick (profile), 28 Feb 2008 @ 1:28pm

Re: Re: Social science
Thus, "Law" in this context is a government enforced construct, presumably works in theory to benefits society (ant it may), but has yet to be proven not to benefit society and then be struck down by a politician or judge.
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DanC, 28 Feb 2008 @ 1:53pm

Re: Re: Re: Social science
There's two different types of laws in this case:

1. Economic laws or theories, such as 'supply and demand' and 'diminishing returns'. What Mike refers to as the 'economics of free' would fall into this category as well.

2. Government laws that attempt to affect the economic laws. This is where morality enters the picture.
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Anonymous Coward, 28 Mar 2009 @ 10:47am

Re: A simplistic example
Companies have been offering incentives to interact with their brands since the Internet first began to take root. Free Mania is one such resource. The freemium model, while prohibitive to some extent for startups is an incentive to innovate, and offer more to the end customer.
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Rodney, 7 Mar 2010 @ 6:56pm

Re: Re: Economics and Productivity
Anonymous Coward writes: ... wasn't is a war that brought the US out of the Great Depression?

That is far from a settled issue. There are several viable explanations for what brought us out of the Great Depression. Even if it did, it wasn't not war per se; there is nothing special about war that stimulates the economy except for deficit spending and full employment. So, any program of deficit spending and full employment will get the same result.

The part that is most ignored is that you have to get the money back into the treasury when the economy starts recovering so there won't be run away inflation. But nobody ever wants to raise taxes so we just deficit spend and leave it at that. The result? A level of deficit that is dangerous so you can not deficit spend again. Then you have painted yourself into a corner.

Rodney
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I like free, 16 Mar 2010 @ 8:00pm

Good argument.
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