Secular stagnation for free
charge for them.
Broadcast radio and television were the first to confront this problem, because they could not prevent those with a receiver from getting the signal. They had to develop an advertising-based model, making it possible for others to pay for the benefits received by the consumer. This is supposedly what makes Google so profitable, though I have trouble believing that the enormous benefits I receive as an assiduous and happy user are paid for by my rather infrequent Internet purchases.
So we live in a world where much of the progress that new technology permits is embodied in products that must be given away for free. A somewhat haphazard sub-set of potential products can, with the right business model, be profitable – say, through advertising or by selling the information that they passively collect from users.
But many others, like Wikipedia and public radio, have trouble making ends meet. Free products also depress the value of close substitutes. While it may require charging $100 per ticket to recover the costs of a $1 mln theater play, some filmmakers can make money on a $200 mln film by selling $10 tickets to consumers who are unwilling to wait a few weeks until their cable TV provider offers it.
The e-book mentioned above, which prompted this column, is available to you, the reader, for free (as is this column). No wonder so many people have trouble making ends meet. But the Center for Economic Policy Research, which published the e-book, and Project Syndicate, which distributes this column, are both (at least to some extent) donor-funded.
This may not be a coincidence. To harness the possibilities of new technology, we may need non-market forms of payment for valuable contributions. The traditional capitalist model may have made Bill Gates rich, but his foundation now finances valuable technological breakthroughs in unprofitable ways. As with negative real interest rates, but in a more targeted and efficient manner, we may have to pay to make valuable investments happen.