An Economic Interlude

And crack is pretty cheap (as is my understanding). Free love pushed the value of sex down to $0 and significantly shrank an industry.

- erinf

If we’re going to apply economic definitions, we should be consistent: obtaining crack is presumably cheap, but doing crack involves serious health problems and becoming useless for a job, so the main cost of crack use is in terms of health and opportunity cost.

Also, despite the label “free love,” sex is not free: you (presumably) have to get to know the other person, spend on good clothes and grooming to look attractive, learn the social skills and rules of dating, and buy drinks for the other person. (Of course, not every item may apply in every scenario, and some of those may be sunk costs, making the marginal cost of dating/hookups very low, but that’s still not free. It is only vastly cheaper than it previously was.) I’d liken it to what would happen if DeBeers suddenly opened their vaults and let all the diamonds out on the market, instead of the small fraction it lets through now. Diamond prices would plummet. This would not be the same thing as being free but would still probably destroy the industry.

Erin’s article is pretty spot-on, otherwise. Ultimately a lot of the problems discussed stem from not costs, but the arrangement of marginal costs. That is, it costs an uploader money to obtain a DVD, but none extra to upload said DVD. If, in theory, it were possible to attach a huge cost to uploading and lessen the cost of obtaining DVDs, then more DVDs would be sold and fewer would be uploaded.

The pursuit of this situation is what has driven new measures to protect intellectual property. The only problem is that granting corporations the power to implement such measures is horribly invasive of privacy, and that is also a cost that ought to be factored in.

Published in: on July 10, 2010 at 1:13 PM  Leave a Comment  
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