By Andrew Keen
One of the few benefits of the global financial meltdown and its consequent government activism is the return of the economics of sanity. Paul Krugman's Nobel prize is excellent news. So is the rehabilitation of Keynes and the resurrection of Gordon Brown.
If Keynesian economics is back in vogue, then it's Friedrich Hayek, Milton Friedman and the laissez-faire Vienna School who are suddenly out of fashion. In media and technology, this irrationally exuberant supply-side thinking has its home at the libertarian Wired magazine and is exemplified by the cornucopian economics of its editor-in-chief and Hayek disciple Chris Anderson. Anderson, the author of a best-selling book called The Long Tail which predicted the death of the best-selling book, is now peddling an even quackier economic theory called "free":
FREE: Why $0.00 is the Future of Business ("enabled by the miracle of abundance, digital economics has turned traditional economics upside down").
Such sophistry might be believable when the Dow Jones Industrial Average is at 36,000. But, today, when this economics of insanity has been entirely discredited, what becomes of Anderson's utopian theory that the digital revolution has done away with scarcity?
Last week, Anderson - who early this year announced the end of science - asked what recession means
for free.
His answer was made up of pre-recessionary Silicon Valley buzz terms
like "freemium", "cognitive surplus" and "real free". But, of course,
we all know what a recession really means for free. It means the demise
of the quack economics of digital abundance. It means the end of Chris
Anderson's FREE.
Orginally published on Andrew Keen's blog The Great Seduction. Read Andrew Keen every Monday in the media section of the paper - independent.co.uk/media
Oh dear, did he once snub you or something?
Posted by: TimHolmes | Wednesday, 15 October 2008 at 04:31 PM
Chris Anderson's views on the economy might be exuberant, but it's a simplification/misconstrual to claim this makes him, per se, a cornucopian follower of Hayek (he may be but I wouldn't know). The starting point for understanding Anderson's 'freeconomics' is that new technology makes the cost of copying certain items negligible. Where these items once had a significant price, this is now called into question, and this constitutes a problem for existing business models. Anderson contests the obvious strategy of lowering the price. He says there's a fundamental difference between a cost of one cent and a cost of zero. In other words, the $1 download is conceptially equivalent to the $30 download: they're both too dear, and will always be undercut by free. This problem is clearly operating in the mass media. Music, books, newspapers and movies are all now easily reproducible at almost no marginal cost and, crucially, we know it. The reality of competition is that all this stuff will be free. Matt Mason calls this 'The Pirate's Dilemma'. in other words, if you can't beat those giving it away, you have to join them. But Anderson isn't changing the laws of physics. The 'miracle of abundance' is strictly limited and there's still no such thing as a free lunch. Businesses will make money not from mass copying but from the associated services. And this has nothing to do with Hayek, the Dow Jones or even the NASDAC.
Posted by: Roguish | Monday, 20 October 2008 at 05:43 AM