Thank you, Messrs. Marburger, for encouraging Mr. Masnick to post your analysis. It was a refreshingly clear read. So let's jump in.
In your analysis, you write, "The competition among the dyers to sell their shirts will force them to undercut one another in price" (p. 28). True enough, if the only dye in the world were beige, as you suppose. But what if there were many dyes, and what if dyers could mix them or otherwise combine them in ways that could produce highly desired patterns and designs? Let's suppose dyers could differentiate their products so as to compete on quality rather than merely price. That seems plausible, at least.
Let's further suppose that buyers of shirts are quite enamored of their multi-colored, branded shirts. Of course, the dyers' "prices will not reflect the cost of making the shirts." But I'm not sure it's therefore necessarily the case that "the price of a dyed shirt will be below the price of the foundational white shirt...." Instead, buyers of colored shirts might pay a premium for them and the self-expression they afford. Not necessarily, of course, but it's plausible.
Does the mere fact that beautiful multi-colored shirts fetch a price greater than what the plain white ones fetched while they were alone in the market mean that the price of the white shirts won't dip once they face competition from the multi-colored shirts? I'm not an economist, and I don't have a strong intuition either way. I might be wrong, but let's presume that the balance of white shirts maintain their original price.
Here, the analogy breaks down some because news is a "public good," while shirts are not. So let's try to forget the hypothetical fact that the makers of the white shirts were forced in the first place to give away their wares to be dyed (you chose to analogize between digital and analog goods and services, not me!). Mustn't we conclude that the makers of white shirts are no longer harmed--that they do not face unfair competition? They're no longer losing profit per shirt, after all.
There are two relevant conclusions, one theoretical and one empirical. The first is that the value an aggregator adds to an article matters theoretically. The more value an aggregator adds--whether it arises from additional analysis, context, entertainment, or Mr. Masnick's beloved "community" or from reduced risk to the reader that the news, an experience good, will be an inefficient allocation of attention (i.e., super boring)--the more an aggregator can charge for its advertising, and the less the original publication's advertising rates will be depressed. The second is that the pressure that advertising coupled with highly value-added rewrites puts on the advertising coupled with original articles seems like a wildly complicated empirical puzzle--a puzzle rather more tangled than traditional microeconomic theory can handle. This seems like a problem for practically minded courts.
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Beige t-shirts hyppthetical
Thank you, Messrs. Marburger, for encouraging Mr. Masnick to post your analysis. It was a refreshingly clear read. So let's jump in.
In your analysis, you write, "The competition among the dyers to sell their shirts will force them to undercut one another in price" (p. 28). True enough, if the only dye in the world were beige, as you suppose. But what if there were many dyes, and what if dyers could mix them or otherwise combine them in ways that could produce highly desired patterns and designs? Let's suppose dyers could differentiate their products so as to compete on quality rather than merely price. That seems plausible, at least.
Let's further suppose that buyers of shirts are quite enamored of their multi-colored, branded shirts. Of course, the dyers' "prices will not reflect the cost of making the shirts." But I'm not sure it's therefore necessarily the case that "the price of a dyed shirt will be below the price of the foundational white shirt...." Instead, buyers of colored shirts might pay a premium for them and the self-expression they afford. Not necessarily, of course, but it's plausible.
Does the mere fact that beautiful multi-colored shirts fetch a price greater than what the plain white ones fetched while they were alone in the market mean that the price of the white shirts won't dip once they face competition from the multi-colored shirts? I'm not an economist, and I don't have a strong intuition either way. I might be wrong, but let's presume that the balance of white shirts maintain their original price.
Here, the analogy breaks down some because news is a "public good," while shirts are not. So let's try to forget the hypothetical fact that the makers of the white shirts were forced in the first place to give away their wares to be dyed (you chose to analogize between digital and analog goods and services, not me!). Mustn't we conclude that the makers of white shirts are no longer harmed--that they do not face unfair competition? They're no longer losing profit per shirt, after all.
There are two relevant conclusions, one theoretical and one empirical. The first is that the value an aggregator adds to an article matters theoretically. The more value an aggregator adds--whether it arises from additional analysis, context, entertainment, or Mr. Masnick's beloved "community" or from reduced risk to the reader that the news, an experience good, will be an inefficient allocation of attention (i.e., super boring)--the more an aggregator can charge for its advertising, and the less the original publication's advertising rates will be depressed. The second is that the pressure that advertising coupled with highly value-added rewrites puts on the advertising coupled with original articles seems like a wildly complicated empirical puzzle--a puzzle rather more tangled than traditional microeconomic theory can handle. This seems like a problem for practically minded courts.