stories filed under: "inflation"
by Mike Masnick
Wed, Feb 6th 2008 3:08pm
We've already discussed the inherent dangers of basing a business model on the economics of virtual worlds. While there definitely is quite a bit of trade in virtual goods (often for lots of money), it's mostly based on ideas of artificial scarcity on goods that are effectively infinite. To drive that point home, Josh sent in an interesting story about a lawsuit between two founders of one such virtual world, where part of the complaint was that one of the guys effectively handed over the company to a third guy -- who planned to make money by selling the game world's currency, noting that once he controlled the company, he could just create an "infinite" amount of money in "a few minutes" and sell it at "below market" prices. While this suggests the folks in question had little sense of how basic economics works, it also highlights a pretty serious risk in these virtual worlds. At the same time that we're seeing Ben Bernanke struggling with managing the monetary policy of the US economy, for virtual worlds where there really is no scarcity at all, the temptation to simply flood the market without recognizing the consequences is just too great.
Mon, Sep 10th 2007 6:35am
from the inflation,-deflation,-whatever dept
The obvious response to folks complaining about the iPhone price cut is that of course the price was going to be cut, because it's a tech item, and the cost of technology invariably marches lower. Yes, technology is a constant deflationary force, not just because prices of it keep dropping, but because the quality of any given item tends to rise over time. We've made this point in the past, that inflation statistics have a hard time dealing with tech items, because the measures only look at price and have a difficult time adjusting for quality improvements. As economist Russ Roberts notes, the new iPod Classic is not just $50 cheaper than the original, it holds 40 times as much data. In other words, doing a like-for-like comparison between the original iPod and the new one vastly understates the amount of progress that was made in such a short time. What's more, while it's easy to note the data storage comparisons, how do you quantify the addition of video playback or pictures? It's pretty difficult. So while inflation statistics serve a purpose, it's important to recognize that there's often a lot more at work than just price changes.
from the alternative-to-what dept
Although ethanol has been touted as a legitimate alternative to traditional energy sources, we've been intrigued by the frequent reports of "agflation", the soaring price of agricultural commodities, as a result of ethanol subsidies. It's hard to see what good it is to switch away from expensive oil and gas if the result is simply another expensive fuel that makes other goods more expensive. As the New York Times notes today, interest in ethanol has helped push the price of Midwestern farmland to new heights. This is good news if you happen to be sitting on large tracts of land that you're looking to unload. But if you're a farmer in any other business than corn, it's trouble. Small farmers are particularly hard hit. Defenders of agriculture subsidies often argue that they help preserve the farm industry and the way of life that comes with it. But as anecdotes like this show, they mainly help large agricultural conglomerates, while independent farms continue to suffer.