And What If Tangible Goods Become More Abundant?

from the a-thought-experiment dept

Over the years, I've written plenty about the economics of infinite vs. scarce goods. Too often (and I do this on occasion as well) people default into thinking of "tangible" goods as being the scarce ones, and digital goods or information goods as being the infinite ones. But the definitions can certainly expand beyond that -- and there's also the possibility that material, tangible goods could one day lose much of their scarcity. Economist Arnold Kling, riffing on a post by Will Wilkinson about why energy isn't really scarce points out that, if energy isn't scarce, matter isn't scarce either.

In theory, as you solve "the energy problem" and figure out how to create energy cheaply, then you can make any material you want as it's needed cheaply as well. Then you're in a bit of the Star Trek replicator universe where even tangible products become much more abundant. We're still a ways off from that point, but it's worth thinking about as a thought experiment (especially as 3D printer technology improves rapidly). Indeed, Chris Anderson is also thinking along these lines, noting that technology is likely to solve both of the big "shortage" problems we're facing these days: energy and food -- if only government regulations would let them.

For those who think that copyright holders should try to artificially maintain scarcity, this may be a scary situation. After all, then the same "problem" facing copyright holders, will also face makers of tangible goods. But the truth is even if you switch tangible goods from scarce to abundant, it doesn't mean that you run out of scarcities to sell. Music is more abundant thanks to digital technologies, and there are still plenty of scarcities to sell for the music industry. There are always scarcities -- it's just that they're no longer tangible goods. Instead, business models will start to revolve around those non-tangible scarcities as well, such as time, attention and reputation. But these changes could create a rather radical shift in how economies function. So, even if it's pretty far out, it's worth considering the possibilities already.

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Font Company Can't Come Up With Good Business Model; Punishes Customers

from the yeah,-that'll-work dept

Tyler Hellard writes in to alert us to the bizarre and self-destructive plan of a company called Letterhead that sells different fonts. The super paranoid company apparently includes the name, email and account ID of each purchaser with the font itself. One font buyer shared the font with a company making a sign for him (which seems reasonable enough) and that company ended up sharing the font on a file sharing network. That's the point at which Letterhead went ballistic. It claimed that every single download was "stolen" (which, of course, it was not) and then sent the original purchaser a bill for $944 for all of those downloads (Update: Apparently the folks at Letterhead aren't happy about this post -- they've blocked anyone coming from this site, so if you want to see the article, you need to copy and paste the URL, rather than just clicking the link. Apparently, they don't deal with criticism well.). How many downloads were there? A whopping 32 copies. But Letterhead falsely assumes that all 32 would have purchased the font (no, they would not have) and then thinks it can change its original deal with the guy so that they can charge him for those downloads. The company also published his name and his contact info (which would appear to be a violation of a customer's privacy).

Then, to make things even more ridiculous, Letterhead decided to punish all its own customers for its own inability to put in place a business model that recognizes basic supply and demand. So, along with publishing the story and this guy's name, it's significantly raised the price of the font from $30 to $40 -- saying that it will keep the price up until the full $944 is paid off. This is doubly stupid. Not only are they making it even less likely that anyone will buy the font, they're now competing with the fact that this font is already out there available for free. That's not the time at which you raise prices. Obviously, they're trying to shame the guy into paying $944 -- but the real problem is the company doesn't understand its own market or the products its selling.

In fact, it goes out of its way to admit that it doesn't understand digital goods by claiming:

"Fonts are tangible goods around here and will forever be treated as such. Theft always affects the price of fonts and there are some costs that must be recouped. (1) The time that Duncan Wilkie spent in creating the fonts (2) The time Letterhead Fonts spent in helping Duncan to refine his fonts (3) The time and advertising dollars Letterhead Fonts spent to promote LHF Garner (4) The time Letterhead Fonts spends removing LHF Garner from the file-sharing websites."

This shows a fatal lack of understanding of basic economics. First, fonts are not tangible goods. They never have been, and to say that the company will always consider them to be suggests that it will probably go out of business well before businesses that understand what they're actually selling. Then, claiming that there are specific costs that need to be recouped, again is a misunderstanding of economics. Yes, costs need to be recouped, but that's the responsibility of those setting up the business model -- not the customers. Furthermore, the company falsely includes fixed costs with the marginal costs in figuring out how to "price" the fonts, again insuring that other companies will be able to create much more reasonable business models.

Basically, the company is advertising its ignorance of basic economics and its own products and market, while punishing customers for its own incompetence. It may think it's going to shame one of its customers into paying, but all it's really doing is convincing a lot of folks never to buy anything from Letterhead fonts in the future.

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California Lawmaker Wants To Change Law To Tax iTunes; Pretending Infinite Goods Are Tangible

from the reality-is-meaningless-if-it-gets-in-the-way-of-tax-revenue dept

Slashdot points us to the news that a Los Angeles (surprise, surprise) area politician is pushing to change a California law that requires sales tax on the sale of tangible goods. He wants the law to be adjusted such that digital goods would be considered tangible goods so they can be taxed. Effectively, this is a way of applying a sales tax on iTunes downloads as a way to make up the California budget shortfall. Considering that the entertainment industry has been trying to convince the world that intellectual property is no different than tangible property, it's not surprising that a politician coming from LA would see no problem with pretending infinite goods are tangible goods. However, it seems likely that such a plan would backfire. If anything, it will push more people to look for alternatives (potentially unauthorized) alternatives if California forces an unwanted price increase on iTunes. Also, if the law starts treating digital goods as tangible goods, will that give people other rights -- such as the right to do what they want with the content after purchase? It looks like there's plenty of opposition to this plan, so it probably won't go very far. In the meantime, though, does someone want to explain the difference between tangible goods and infinite goods to Assemblyman Charles Calderon?

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