The Clippings File: Economics
Writing about money and the value of things.
Piggy Bank. Photograph by BabaSteve
Venture Capitalist Fred Wilson has an interesting perspective on the failure of the New York Times subscription service, Times Select, on his blog. He says that the New York Times Opinion pages, "possibly the best raw material for blogging and online discussion," lost out on being a leader in the debates swirling around the issues because the meaty content was hidden and open only to subscribers. "Would the Huffington Post be what it is today if it weren't for TimesSelect?" he wonders. "I don't know, but that's the kind of thinking I try to do instead of traditional economics/revenue maximization when I think about stuff like this."
He writes that his perspective was formed by being an early investor in TheStreet.com which was a subscription service which lost on market share to the free MarketWatch. Market share drives everything else online, Wilson believes, and if the a content provider's material isn't visible there's nothing to build a business on.
The Proprietary Model Heading Towards Extinction?
Apple built it's business and cult-like following around being a closed system. The current controversy about the lack of openness of the i-Phone and people's ability to mould it into something they want to use, rather than a cool system that Apple decides everyone should use has created cracks in Apple's philosophy. Steven Johnson, on his blog, writes about the decision to open up Apple's i-Phone to third party developers.
It struck me yesterday reading Steve Jobs' personal note about plans for third-party apps on the iPhone that the most telling thing about the announcement was the opening five-word phrase:
Let me just say it: We want native third party applications on the iPhone, and we plan to have an SDK in developers’ hands in February.
Let me just say it. What we're starting to see here (and of course in the anti-DRM letter from earlier this year) is a pretty significant shift in Jobs' public relations strategy, in that he seems to have recognized that there are limits to secrecy. Yes, some developments are best kept under wraps for as long as possible -- like the iPhone or the Intel switch -- contrary to all the principles of Web 2.0 openness and transparency. But with other decisions, you're sometimes much better off going public early, and exposing some of your thought process when you do.
Old Thinking at Work in a New World
Fred Wilson's criticisms about Times Select in his blog over the last year consistently return to the New York Times management not understanding the culture of the online world and the notion of value, what assets can be charged for or used to create revenue and what must be provided freely in order to establish and maintain credibility. The Australian media market is suffering the same uncertainties, and there's an essay in The Monthly magazine, by David Salter, who suggests that the media in Australia has become unhinged as its previous revenue sources dry up.
Why do our media organisations now seem so close to unravelling? It's always tempting to search for grand themes that offer a convenient, catch-all explanation. The truth is more complex and scattered. We've come to a point where a handful of powerful yet disconnected impulses are tugging the media in different directions. The brash, self-regarding confidence that characterised so much of Australia's print and electronic output has largely evaporated. The old swagger is gone.
New technology undermines the media's poise because few local editors and producers understand it. The newspapers' embrace of the www world was motivated more by fear of being left behind than by any genuine expectation of journalistic improvements or expansion. Their rush to re-version themselves on the internet came largely without a workable strategic plan as to how the two forms would then support each other as businesses. The more prominent writers were given blogs on which to blather, adding to their workload without adding to the number of people willing to pay cash for a daily newspaper.
The Cultural Value of Economics
This year's Nobel Prize in Economics goes to three individuals who have helped to establish "mechanism design theory." They've created analytical tools that may help to evaluate the social costs and benefits of market forces. At least that's what I think the work is about from quick read throughs of the Nobel Committee's release and a few news stories I've read.
One of the award's earlier recipients, Joseph Stiglitz, whose writing has helped to make the economics of globalization coherent for a general audience comments on the award in the International Herald Tribune.
"Historically there was a lot of justification to the critique that it was somewhat ideological in nature," said Joseph Stiglitz, who received the award in 2001 along with George Akerlof and Michael Spence for their analyses of markets where people possess different degrees of information.
He referred to a six-year period in the 1990s when economists from the University of Chicago - Milton Friedman's headquarters and the temple of laissez-faire economics - received five Nobels. Some of that work, he said, "was clearly not breakthrough in any fundamental sense."
That is no longer the case, he said; indeed, the trouble, Stiglitz said, stems from the committee going to the opposite extreme.
"The main criticism right now is, if anything, they're slanted more to mechanical modeling and technical advances," he said. "One can understand that as part of a response to criticisms that they were too ideological," he said, but the problem is that not enough thought has been given to "how substantial the work is."
Patricia Cohen. International Herald Tribune. October 19, 2007
The debate involves the definition of economics, if it's something scientifically quantifiable and mathematically rigorous, or a set of theorems based around observations of financial forces that require cultural details for their context.
Steven Levitt and Stephen Dubner's blog, Freakonomics, takes economics to pop culture. Their blog grew out of a book which grew out of a feature in the New York Times, now resides on the Times' opinion page. They write about the Nobel Prize in Economics, linking to an Economist story that explains the prize itself, while drawing out the curious, hip details that characterize their work, mentioning that a Nobel laureate in Economics, Eric Maskin, lives in Albert Einstein's old house and dresses up as Einstein on Halloween.
They write about the new economic systems that have emerged online, for instance this evaluation of Amazon.com's reader reviewing system.
What Are We Buying?
The Ethicurean writes on food from an economic as well as ethical perspective, from the farm bill and the environmental and social as well as economic costs of agriculture, to the price of food and the value structure of organic food. "Organic", "Free Range", "Bio-dynamic", the labels on food tug on our hearts and consciences as much as our wallets, and The Ethicurean's founding editor, Bonnie Powell, has this recent examination of the "grass fed" labelling system for beef.
Exciting announcement for Ethicurean readers: After almost five years of deliberation and two rounds of public comments, the USDA’s Agricultural Marketing Service (AMS) has finally issued standards for "grass (forage) fed" marketing claims — ones that actually mean what most consumers think they should mean, and aren’t chock full of industry-pandering loopholes as we feared they would be.