Eventually, p = 0 catches up to you

by on January 15, 2012 at 1:49 pm in Books, Economics | Permalink

Especially if it is a product consumers wish to bring home:

In Fairfax, officials more than doubled the inventory of e-book copies from 2010 to 2011, to more than 10,000, but demand for the books tripled in that time. Now the average wait time is three weeks. Of course, there can also be lengthy waits for hardcover and paperback books, although those waits are usually for current bestsellers while older titles are generally available.

By contrast, on a typical day, about 80 to 85 percent of the system’s e-books are checked out, said Elizabeth Rhodes, the collection services coordinator for the Fairfax library system. But after the holidays, when many people received e-readers, 98 percent of the collection was spoken for.

Here is more.

1 Alex Godofsky January 15, 2012 at 2:05 pm

E-book ‘scarcity’ is such a bizarre concept.

2 Andreas Moser January 15, 2012 at 3:19 pm

Only if you think that copyright law is a bizarre concept.

3 MattieShoes January 15, 2012 at 10:40 pm

Does anybody think copyright law isn’t bizarre?

4 prior_approval January 16, 2012 at 3:47 am

Eternal copyright for eternal control and a diminishing of the public domain, reversing the original justification for copyright as the only constitutionally granted monopoly, granted to increase the public domain and advance science ? That is what I find bizarre about America’s current copyright regime – see http://volokh.com/2012/01/11/how-to-fix-copyright-part-deux/

‘In Eldred, this is the difference between a term of protection of life of the author plus 50 years and life of the author plus 70 years; the final, later 20 year difference being the alleged source of the expected increased financial benefits. The economists figured out that in the whole period of the extension, assuming very generously that the copyrighted work has a constant stream of revenue, the revenues for the extra 20 years at the end would be 0.33 percent of the present value of the revenue from under the then existing term. Making the term perpetual would increase compensation by at most 0.12 percent. Our current regime is a perpetual regime in all but name, giving rights holders 99.88 percent of the value of a perpetual regime. In a legal system where copyright cannot be perpetual, that’s a problem.

But beyond it being a Constitutional problem, it’s a policy problem. If copyright does provide an incentive to create, we need to ensure that copyright last long enough for the incentive to work, but not beyond that. Our current term goes well beyond what is necessary. Beyond this we have a one-size-fits all approach that gives an email the same rights and term of protection as a $200 million dollar movie or David Post’s Moose book. Incentives works differently for different types of works, and our laws should reflect this. Making copyright laws work effectively means giving the right incentives, not the same ones to everyone. In the next post, Friday, I will go into some specifics as well as the question of reintroducing formalities.’

5 steve January 15, 2012 at 2:36 pm

It’s not soo bizarre because the price isn’t really zero at least not to the library.

6 EbolaCola January 15, 2012 at 2:37 pm

Eventually, c = 0 catches up to you

7 Elliot Rosewater January 15, 2012 at 7:36 pm

Or rather mc=0!

But, yeah, I agree.

8 JWatts January 16, 2012 at 12:27 pm

LOL. That is subtlest merge into the 2nd Law of Thermodynamics I’ve ever seen. Kudos.

9 Foo January 15, 2012 at 2:55 pm

Really ridiculous that e-books are “lended” and have “wait times”, when of course unlimited copies can be made at zero cost.

I guess putting an extremely low time limit to lending (say, 1 hour only) would solve the issue, by forcing people to make a copy and return it immediately.

10 Careless January 15, 2012 at 2:58 pm

But the “copies” from at least some publishers have a limited number of releases, so you’d burn through them and have to spend more money anyway

11 Foo January 15, 2012 at 3:05 pm

Obviously, the copies would be made by the users by circumventing whatever protection is in place (most likely, all such systems have been cracked, and if not you can just point a camera at the e-book reader).

The library would simply claim they have no idea that the readers were doing that, and that they believe the users only give a quick look at the book in the limited lending time.

12 Andreas Moser January 15, 2012 at 3:18 pm

Wouldn’t the e-book producer stop giving books to libraries then? (If they find about it.)

13 Andromeda January 15, 2012 at 10:08 pm

Some publishers (e.g. Simon & Schuster) already don’t sell ebooks to libraries. (None of them, so far as I know, give books to libraries, except for some advance review copies as part of a marketing strategy.)

14 Careless January 15, 2012 at 3:25 pm

Why not just google the book you want and download it from a torrent site, if all you want to do is violate copyright?

15 JWatts January 16, 2012 at 12:31 pm

Or just shoplift if from the bookstore. Granted there is a physical cost involved, but generally a hard back only costs a $1 or so in printing and delivery costs. So just leave a $1 in the tip jar and your karma is good. Right?

16 Dan Weber January 16, 2012 at 12:39 pm

Because I’m a pussy and might get caught.

17 Andreas Moser January 15, 2012 at 3:20 pm

Is violating copyright law “zero cost”? I am not sure. Whoever does it runs a risk of being sued and/or prosecuted.

18 Willitts January 15, 2012 at 9:08 pm

For a while, Kodak made much of its revenue from patent infringement lawsuits.

Not anymore.

19 JWatts January 16, 2012 at 12:29 pm

“…when of course unlimited copies can be made at zero cost.”

I don’t think you understand the concept of opportunity cost.

20 Andreas Moser January 15, 2012 at 3:21 pm

To me, print is still king: http://andreasmoser.wordpress.com/2011/03/27/print-is-king/
If more people read now than before, I applaud that as well. But I’ll stick to paper.

21 Careless January 15, 2012 at 3:24 pm

My wife was getting really annoyed at all the paper around the house before I got my Kindle. I don’t know how much space I’ve saved since then, but it’s substantial.

22 Neo January 15, 2012 at 6:47 pm

Good on ya – I still prefer using whale oil for lighting myself! All these new fangled things are sooo over-rated. E-Books, ha!

23 James Hare January 15, 2012 at 11:57 pm

While the format thing has been a problem in the past, it’s possible to buy an ebook reader that supports multiple formats. My reader supports every ebook store under the sun and several open formats. I don’t need a special cable to move stuff on or off of it — it uses a standard micro-USB cable and micro-SD cards. Should USB or SD go out of style, it connects via WiFi. Failing all that, I can convert my open books into whatever format comes out.

I used to carry 3 or 4 books with me everywhere. As my tastes matured and I’ve gotten more interested in non-fiction, those books got bigger and heavier. Now I can carry a pretty much limitless supply of books in a device about the size of a moleskine notebook. I don’t think I’m going back.

24 Rahul January 16, 2012 at 10:50 am

Which is your reader?

25 Ken Rhodes January 15, 2012 at 3:22 pm

Is the title of this post belied by Yogi’s famous comment about Ruggiero’s Restaurant?

26 enrique January 15, 2012 at 4:31 pm

Yogi is a Wiggentstein-like figure, a great source of so many modern paradoxes

27 jk January 15, 2012 at 4:31 pm

Apparently, people prefer the ease of staying at home and downloading the e-book or mp3 with the login that their library provided .

The obvious conclusion for the City Council is to fund the larger, more comprehensive Overdrive, Netlibrary, etc accounts at the tradeoff of the funding for tiny branch libraries where the collection does not match the online database and their only utility is for bums to surf the internet for free all day.

28 Steve January 15, 2012 at 4:39 pm

What’s p?

29 Willitts January 15, 2012 at 9:06 pm

Price

and before you ask, 0 is zero.

30 Neo January 15, 2012 at 9:25 pm

Very eloquent. I don’t think you realise going by your comment below that zero in the title alludes zero constricts supply relative to demand.

31 Willitts January 16, 2012 at 9:28 pm

You should read my other comments and realize I understood that quite well.

32 Neo January 15, 2012 at 6:50 pm

This is more of a case of libraries trying to stay relevant in an era of cheap access. If the purpose of library is cheap access to information, the internet has already supplanted it.

33 Bill January 15, 2012 at 7:12 pm

Libraries should show their patrons how to access free ebooks (project gutenberg et al,) so that they increase the supply of ALL books. I bet many of those requesting ebboks that are scarce are unaware of what is truly free via gutenberg.

34 Sigivald January 16, 2012 at 6:21 pm

The reason they’re “checked out” and unavailable is that they’re modern, in-copytight, restricted books.

Random old stuff from Gutenberg (often, sadly, with vastly inferior formatting and markup, at least last time I checked) is not a replacement for Current Best-Sellers or the like.

At least, revealed preference suggests it isn’t.

35 Slocum January 15, 2012 at 7:18 pm

E-books and libraries are an absurd combination. Selling books to libraries is not too much of a problem for authors/publishers now because the amount of hassle involved in trekking to the library to check out, and then return books (with the possibility of overdue charges) limits library use mainly to those who are price sensitive and time insensitive (on whom publishers were never going to make that much money anyway).

But ebooks checkouts are virtual and instantaneous, so publishers are obviously going to have to ‘sell’ ebooks to library with usage limits, such as:

http://www.cbc.ca/news/technology/story/2011/03/08/f-vp-misener-ebooks.html

So, in effect, libraries will be buying ‘blocks’ of ebook rentals and supplying them to their patrons. But why on earth does that makes sense? Libraries and librarians necessarily add a lot of overhead to that brokering service, so everybody will be paying much more (via taxes) for ebook rentals than than would if they went direct to the ebook source (where there are no waiting lists).

But this is one of those ‘seen and unseen’ situations where very few people will grasp the unseen absurdity and we’ll probably be stuck with expensive, tax-subsidized ebook rentals with our selection limited by a cadre of professional librarians who (at significant salary cost) decide which ebooks the library should ‘stock’ and which ones the local public does not need access to. And most people will think this is just great because libraries are like puppies and sunshine and they’re providing ‘free’ ebooks. Sigh.

36 jk January 15, 2012 at 8:26 pm

I don’t know why any one of the major E-book/mp3 distributors (other than Audible.com) has yet to jump over to the larger public consumer side. Maybe they are afraid of possible copyright/DRM issues or the big bad publishing houses are not letting them go there?

And to those that think that there is zero cost in releasing all the audiobooks/e-books for free…you ever heard of recouping R&D costs? Do you think serious authors wants to invest 2-10 years of their lives to make a book for pocket change for the benefit of mankind?

37 Willitts January 15, 2012 at 8:55 pm

Why did people write books before there were copyrights?

I suppose no one would ever write a song much less start a band if they couldn’t make tens of millions of dollars doing it.

Why does anybody volunteer time writing free iPad Apps, developing Linux software, or completing Wikipedia entries?

For all of its vices, the RIAA figured out long ago that the value of the music industry is NOT in the music but in the DISTRIBUTION NETWORK. They “serve” music to customers wherever the customers want it instead of where the band happens to be and what they are doing at this particular moment. Artists and authors get a SMALL FRACTION of the sale price of their work, and the distributors/publishers get most of the rest. The artists make their money from LIVE performances that pack stadiums.

That’s the business model Amazon figured out too. Amazon’s value was in its distribution network, not selling books. Henry Ford didn’t invent the automobile, he perfected the assembly line for mass production.

When I buy music, I’m already paying a price FAR above marginal cost merely for the right to play it whenever I want. I might even tire of it and never listen to it again. The prices of intellectual property are MONOPOLY prices, and the so-called “black market” of music distributors are the REAL entrepreneurs engaging in pure competition.

The world is friggin’ upside down.

38 Neo January 15, 2012 at 9:22 pm

Why did people work for free before there was money?

39 The Original D January 15, 2012 at 9:43 pm

Lost of open source software is developed by people working for free. For example, the software that powers this web site.

40 Neo January 15, 2012 at 10:24 pm

@The Original D

An exception to the vast majority is not sufficient as a justification.

41 epobirs January 16, 2012 at 4:10 pm

It also misses the alternative business model involved. Many people make a living from FOSS (Free Open Source Software) to which they’ve contributed code. Not by sale of the software itself but by selling their services implementing and supporting the software. These are frequently complex items that are not for the faint of heart but provide very necessary functions.

Thus it can be a worthy investment for those expert in the use of a particular bit of software to contribute to its ongoing development. Similarly, those who cannot contribute code directly can contribute capital, providing an income for those coders working on a FOSS product that produces no direct revenue for the coders by sale.

42 bluto January 16, 2012 at 2:02 pm

http://www.amazon.com/Adventures-Sherlock-Holmes-ebook/dp/B000JQU1VS/ref=sr_1_2?ie=UTF8&qid=1326740421&sr=8-2

Somebody should explain that to amazon because they’re missing the lesson that the distributor should earn the rents. Most of the popular titles on Project Gutenberg are also available free from Amazon (and delivered via Whispernet which is a nice convenience).

43 Willitts January 16, 2012 at 9:32 pm

I think Amazon’s profits demonstrate that quite well.

Although most of the books I read on my Kindle are free books, I have paid for a few and received others as gifts.

Most readers aren’t as interested in the free classics as I am (and as you might be).

44 Eli January 15, 2012 at 8:37 pm

Echoing some other comments, P=0 is only a problem if q<infinity. Trying to make information an excludable resource will seem like a silly and backwards idea soon and not nearly soon enough.

45 Willitts January 15, 2012 at 9:05 pm

The marginal cost of provision is nearly zero, exclusion is difficult, and consumption is nonrivalrous. That pretty much makes information, music, art, and movies a public good.

Having some sort of voting system, imposing a tax, and making a one-time payment for unlimited use almost makes sense.

Note that by the time movies become digitized, the distributors have already made most of their money in the theaters where exclusion is possible. DVD sales have nontrivial profits, but I don’t think that will remain so forever. On-Demand is already making the DVD/Blu-Ray obsolete. Unlimited on-demand by subscription is on the horizon.

46 Neo January 15, 2012 at 9:28 pm

A lot of labour supply (‘jobs’ or ‘work’) is characterised by a marginal provision cost of zero. If you think that makes it imperative for people to supply their output for free – go right ahead and ask your employer – he’ll quite like it too.

47 jpa January 17, 2012 at 10:44 am

DVD revenue already eclipse theater revenue

Unlimited on-demand by subscription is not on the horizon, it is here now (Netflix, et al)

48 Willitts January 15, 2012 at 8:43 pm

You should see the fights between senior citizens and disabled people over the limited number of ADA seats required by law for a public transit vehicle. The law does not require the transit system to ask one person entitled to a seat to move in favor of someone else so entitled, but the passengers sure act like it. They argue about who is more disabled than one another.

On top of that, the cost of monthly passes for senior/disabled is minimal, and the marginal cost per trip is zero, so they overutilize the transit system to begin with. There is no means test for the elderly and disabled – the transit system assumes they are all dirt poor.

The transit system could have entire buses dedicated for seniors and disabled, and fill them to capacity. They even give disabled passes to people with emotional disabilities who are perfectly capable of standing.

Nothing is ever so expensive as when it’s free.

49 Dan Weber January 16, 2012 at 12:41 pm

By contrast, on a typical day, about 80 to 85 percent of the system’s e-books are checked out,

Why is this a problem? A library that has most of its inventory in the hands of customers is the best kind.

50 Willitts January 16, 2012 at 9:35 pm

Exactly. It would be a problem if every day it turned away people who wanted a book, empty-Kindled.

But that could be the case. I’m not sure how a library stocks and distributes e-books. I only found out a few days ago you could get e-books from public libraries.

If they have only one copy of 1000 free e-books, an 85% check-out rate might still mean a lot of disappointed readers. On the other hand, if they could lend out 1000 e-books, possibly all the same title, on any given day, an 85% check-out rate would mean they have excess capacity.

51 epobirs January 16, 2012 at 4:19 pm

Ultimately, I expect libraries as we know them to disappear. A long, long time ago, there were libraries which essentially rented books. This model could make a comeback. How much would you pay for a month’s access to a popular novel? So long as the system can pay for itself and pass some royalties on to the authors, it should be possible to do this very cheaply and make almost everyone happy. I know several author with lengthy out of print backlists who’d be thrilled to get a nickel from every reader if all of their works were widely available.

The self-publishing venues like Amazon are helping to revive the backlists and being able to sell an item for 99 cents while pocketing a hefty 30% is quite nice for those who never earned enough from writing to give up their other work, especially if that was the source of their medical insurance and other concerns.

Think a book is drastically overpriced in the e-book version? Send the publisher a message by paying the author directly what you think it was worth for a version found from an illicit source. A smart author will provide some means of doing this on their site.

52 Meg January 18, 2012 at 10:53 am

Marginal cost = 0 too, though, so there shouldn’t be a problem right? When p=mc=mv, the market is working!

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