You! Go take an econ class, right now.

Friday, January 19, 2007

Techdirt: Infinity Is Your Friend In Economics

So the trick to embracing infinite goods isn’t in limiting the infinite nature of them, but in rethinking how you view them.

I’ve said many times to anyone who will listen that no one should graduate college without an economics class. I took Principles of Econ as a freshman (And got one of only two or three A’s for the semester, despite being one of only a few underclassmen), and it changed the way I thought about things. Just understanding a supply and demand curve, even a basic understanding, can allow you to look at things differently.

I wonder what would have happened if I had graduated as an economics major. I started off that way, then, through some sort of entrance test mixup that placed me in Calc I after two years of Calc in high school (I think maybe I was asleep for the test? I don’t know) and the subsequent working it out with a math professor, I became convinced that Math-Econ was the way to go. I managed two Econ classes before I dropped the major. It wasn’t the material, it was just that the class was so boring. There was no discussion. We just sat and took notes and then took tests. I wanted to shoot myself.

Anyway, this is sort of relevant to the link at the top. Business flips out when there is no scarcity - when supply really is infinite. This makes sense, because an infinite supply means you should be selling it for nothing. Obviously you aren’t going to make any money that way. But this article points out that markets do not exist in a vacuum. A free good can be used in other goods or used in relation to other goods, and money can be made.

It’s all about, as Techdirt says, continuous innovation. You can’t ride one great idea forever. Sooner or later, someone will do it better and cheaper. And when your old business model is obsolete, because the good you were selling is now infinite, or whatever else might happen, you can’t run to the government and ask them to make competing with you illegal. You have to think about the next step. There’s almost always value to be added.

Edited to add:

BoingBoing has a post about inflation in virtual worlds that seems appropriate here, too. I actually didn’t read the linked article, but it’s probably interesting and relevant.

Posted in: Interesting