Matt Yglesias

The New Economics of Valuelessness

Reader J.S. writes “I thought you may not have seen this but I know you are a big twitterer so you may see this differently.” This is an article making the case that Twitter should be eager to accept a purchase offer since ultimately there’s no revenue stream behind it:

The blogosphere was all atwitter over the weekend with news that Google (NSDQ: GOOG) is close to offering a lot of money for Twitter. I know I’m going to get dinged for saying it, but I think the company’s founders should take the offer, whatever the price. [...] And, when matched against the potentially cosmic implications of ubiquitous social/search, Twitter might be only one mechanism in search of an issue (or issues) to resolve. Sure, it’s immediate and quick, but what exactly does Twitter really own?

That seems entirely reasonable to me. I think that the true essence of the “new economy” of the digital era is that there will be lots of activity going on that people enjoy and find useful, but that has very little in the way of economic value that’s captured by profit-making firms. The quintessential enterprises of this era are things like Wikipedia, which may no money, or CraigsList which makes a very modest sum of money, even while they both revolutionize certain spheres of endeavor. Certainly the revenues associated with CraigsList are tiny compared with the revenues that used to exist in the rapidly-dying newspaper classified ad market.

Twitter seems like something that could become extremely widespread, and that lots of people could receive a small-but-real amount of daily enjoyment from, all without ever generating much money. And I think that will be pretty typical of the digital realm. The fact that Google itself is a very successful company sometimes serves to obscure the fact that the total amount of money being made off the internet is pretty small considering how ubiquitous internet use has become. Ultimately, I think understanding this growing de-linkage between value and monetizability, or perhaps between “use value” and “exchange value” as Marx would say, is important to understanding the world we’re increasingly living in.

Social Production and Demographic Changes

One noteworthy trend we’re experiencing of late is the rising prominence of social production—the creation of valuable information goods on a non-commercial basis. Probably the clearest example is Wikipedia, a hugely useful service that doesn’t produce any economic “value” in GDP terms. Of course valuable activity that doesn’t register in GDP is nothing new—just ask moms spending time taking care of their kids. But the transition to the digital economy is changing things in important ways. In particular, it’s simultaneously making it cheaper than ever to produce and distribute information goods, but harder than ever to capture revenues from information goods.

In other words, if you and a friend have a band and want to work with another friend to produce an album that sounds decent and make it available to music fans all around the world, that’s become dramatically easier than it was 20 years ago. But if you want to make people pay money for your album, that’s much harder than it used to be. The marginal cost of distributing digital records is nothing, so the price trends toward zero. And much the same is true of making a movie, moving a news story, or anything else that can be sent around over the internet. This implies that production of these kind of goods ought to decreasingly be conducted on a commercial basis and increasingly done on a non-profit basis. For profit firms are finding it harder-than-ever to make revenues match costs in the news business, for example, but non-profits and hobbyists are finding it easier than ever to gain an audience for their products.

I think this trend has important linkages with the various demographic trends facing the world. At the moment, the costliest element of producing information goods is no longer the capital required to produce them (primarily a computer and an internet connection) but the time it would take out of your busy day to do it.

But many Americans—retired Americans—actually have plenty of time on their hands and famously spend a great deal of time pursuing their various hobbies. At the moment, relatively few retirees have the skills necessary to engage in digital social production. So you’ll find them playing golf or bridge or what have you, but generally not blogging. This skills issue is, however, a pretty transient phenomenon. In the future, it might be common for grandpa to spend a couple of hours a day tinkering with open source software. Or maybe he’ll make it his business to attend city council meetings and write on the web about them. People will write whole books and distribute them for free to people’s kindles. A lot of this material may have a “crank” quality to it. But much of it will be genuinely well-informed, and reflect a lifetime of knowledge. Already, I can see in DC’s local blogosphere that there’s a fine line between an annoying busybody and a vital source of information. As the cohort of people with the most time on their hands to just pursue their interests becomes more digitally literate, I think we’ll probably see an explosion of non-commercial activity in a variety of fields. And one important source of success for commercial enterprises will be finding ways to hybridize commercial and non-commercial elements of the production/distribution process. Someone might make a living organizing and marketing goods that are overwhelmingly made by hobbyist producers, doing a certain amount of “last mile” stuff that’s too dull to be fun for anyone but that no longer produces enough revenue to support an entire paid workforce.

One important implication of this is that we’re almost certainly shifting from a world in which a large and important set of activities aren’t captured in the national economic statistics to a world in which a large, important, and growing set of such activities isn’t captured in the conventional statistics.

Yochai Benkler on the Future of the News

Yochai Benkler has a nice piece gently pushing back on some of the alarmism about the decline of newspapers. There are a couple of different parts to this, but one is simply the observation that the old media isn’t necessarily as consistently awesome as newspaper nostalgics make it out to be. The rest is observing that the opportunities for promising new forms of media are better than the nostalgics often seem willing to admit. Largely, though, whether one likes this trend or not is sort of irrelevant because everyone agrees that the world is changing. But the reason I think it’s important to be clear about this is that there clearly are some real downsides to what’s happening. And insofar as people are urging philanthropic action to help plug those gaps, it’s important to be precisely and clear-sighted about what the gaps really are and how they can be plugged effectively. As Benkler says:

Perhaps, as Starr proposes, there is room to enlist philanthropic support for local reporting. I would suspect, however, that doing so would achieve more if it created state-level online muckraking organizations with a generation of young journalists who have grown on the Net than by propping up older establishments that still depend on much higher ratios of organizational, financial, and physical capital to talent than the new, lighter, networked models permit. We are still very much at the beginning of the new era. It is indeed possible that news reporting, national or local, will prove more resistant to a shift to mixed networked models with a large role for social production in its creation than was true of operating systems, web server software, or an encyclopedia. But I doubt it.

Indeed. Part of what’s going on is that recent innovation seems to have had primarily non-commercial benefits—catastrophic for owners of media properties, bad for professional producers of media content, good for consumers of said content.

The George Will Scandal and the Decline of Great American Newspapers

I’ve heard a number of MSMers suggest to me in recent days that maybe bloggers should stop complaining about how The Washington Post publishes non-true statements about climate change as fact in its pages, and then has its editors and ombudsman claim that these false statements are true, because said complaining is contributing to the deplorable crisis in American newspapering. This strikes me as badly wrong. Clearly, the main cause of the crisis is structural/technological shifts in the media and economic landscape. But a small number of news organizations are actually well-positioned, in principle, to benefit over the long run from these changes. Papers like The New York Times and The Wall Street Journal and The Washington Post have strong brands and the possibility of becoming national news organizations that partially fill the space left empty by the receding metro dailies in Detroit, Seattle, San Francisco and elsewhere. But The Washington Post, by standing behind the claim that up is down if George Will says that is is, is pissing that brand away. Rather than complaining to me, people who work at, or care about, The Washington Post need to complain to Fred Hiatt and ensure that something gets done.

Meanwhile, one of the Post’s main competitors in the world of papers with potential to attract a national audience is The New York Times. So faced with a humiliating abrogation of basic responsibilities by its competitor, does the Times take the opportunity to pour some salt in the wounds? No! Instead, out comes Andrew Revkin with a false equivalence article painting Will with the same brush as Al Gore. Will’s sin is to say that the world is not getting warmer when, in fact, it is. Gore’s sin was to say that warming is happening (it is) and to illustrate the problems with this trend by referring to a chart that Revkin deems unduly alarmist but that Gore found in The New York Times. Hm.

Most of the newspapers in the United States don’t seem to me to have any real future. And this is going to pose some real problems. In particular, I’m not sure where intensive coverage of state and local government is going to come from in the brave new world and as Paul Starr points out that probably means more corruption. But interested consumers of national and international news will, I think, be extremely well-served. There will be a proliferation of niche media, and there will also be a handful of global English-language news media brands offering video, test, and audio coverage. I think it’s clear that one of them will be the BBC and that one of them will be based on Rupert Murdoch’s News Corporation. It strikes me as very plausible that another could be based on the Times and plausible, though somewhat less likely, that one could be based on the Post. But to reach that promised land you need to take care of these brands not flush them down the toilet to avoid angering conservatives or in pursuit of a cute conceit.

Relative Prices Blogging

Brad DeLong observes “In Agatha Christie’s autobiography, she mentioned how she never thought she would ever be wealthy enough to own a car – nor so poor that she wouldn’t have servants.”

This kind of thing gets a bit hard to get one’s head around when thinking about the future. What do you think will be the equivalent 100 years from now of Agatha Christie’s car and servants?

Trauma Pod

Alert reader G.K. is on guard about the robot threat and offers this link about DARPA’s Trauma Pod project:

The Trauma Pod Program will enhance battlefield casualty care by developing autonomous and semi-autonomous mobile platforms through the integration of tele-robotic and robotic medical systems. The initial phase has successfully automated functions typically performed by the scrub nurse and circulating nurse; these functions are now performed by semi-autonomous robots working in coordination with the tele-robotic surgeon. The next phase of the program will develop methods for autonomous airway control and intravenous access so that initial therapy can be autonomously administered. Finally, these systems will be miniaturized and incorporated into a tactical platform capable of operating in a battlefield or mass casualty environment.

As I get almost to the end of Peter W. Singer’s Wired for War: The Robotics Revolution and Conflict in the 21st Century I worry less and less about the Terminator scenario and more and more about two other considerations. One is the way in which for some in the American national security establishment, thinking about better military technology seems to serve as a substitute for thinking about better strategy. It’s more lucrative, it ruffles fewer political feathers, and it’s easier. But it doesn’t work as well. War is politics by other means, and improving your means doesn’t get you very far if you’re not thinking sensibly about your policy aims.

The other is that if robots and AI are really the technology of the future, then the United States seems to be aiming a perilously large proportion of our financial and intellectual resources into military applications of these technologies rather than potentially more productive ones. In Asia they have lots of robots making stuff and taking care of people, not patrolling the skies over Afghanistan dropping bombs.

What Would Recovery Look Like?

A friend asks via Twitter “assuming (for sake of arg) the stimulus stops the bleeding, what replaces the actual day to day GDP lost in finance and housing.” The answer, of course, is progressive blogs. Or, actually, I think the answer is that we’ll be making stuff for Chinese people:

In the short run, of course, we’re doing some fiscal stimulus. But if you want to be optimistic and assume that global coordination of fiscal policy plus “unorthodox” monetary policy plus banking reform puts the world back on course for growth, what needs to happen then is a rebalancing of global flows of trade and money. The United States will have about all the houses it needs, so employment in the building-trades sector will be lower. But the people and resources employed in that sector are still capable of doing useful work. But American households won’t have that much capacity to consume additional stuff. Americans will need to start making more products and services that people in East Asia and Germany and the oil-exporting countries want to buy. My understanding is that the main export goods we specialize in are airplanes, defense systems, and pop culture. Presumably if the dollar crashes far enough then other kinds exports become more competitive. But while I doubt progressive political blogs will ever become a really huge industry, it is the case that the software/media/creative fields appear to be one of our comparative advantages so presumably people will need to work in those sectors. Beyond that, hope for arms races.

A return to something like full employment would make everyone feel a lot better since unemployment and anxiety about unemployments have costs beyond the purely financial. But it might take some time after that for Americans as consumers of goods to return to the levels of consumption enjoyed in 2000 or 2007. We’ll need to be consuming less as a share of income, so incomes will need to get higher than they were back then.

The Case for Ever-Bigger Government

By Matthew Yglesias

Nobody on the left ever really talks about the issue of exactly how big we can envision big government getting down the road. So I’m glad Kevin Drum took this important subject on even though I don’t really agree with his answer:

I am, oddly enough, not really in favor of vastly increased funding for other social programs. Some increased funding is OK, but it should be kept under pretty strict scrutiny — and not just on the generic grounds that all spending ought to be monitored carefully to make sure it’s effective and pruned away when it’s not.

Here’s why. I’m obviously more open to high government spending than most conservatives, but even liberals think there’s a limit to how much of the economy ought to be under government control. Speaking for myself, I’d put that limit at 40-45% of GDP. Somewhere in the low 40s, anyway. Currently, total government spending (state/local/federal) is in the low 30s, which means we can afford to increase spending by about 10% of GDP. I figure that changes to Social Security will eat up about 2% of GDP and funding a true national healthcare plan will eat up around 7-8%. That doesn’t leave room for very much more, and even reductions in defense spending only give us another point or so to work with. So we should be pretty careful with other long-term spending commitments.

The way I think about this goes back to a root dispute I would have with the right about the nature of public sector work. A lot of people on the right point to things being done not-so-efficiently in the public sector and say—aha! government is inefficient, we need to let the market in. I look at it the other way around. Where markets work well—primarily in the field of producing consumer goods—they create incredibly efficiencies. But there are lots of fields of endeavor in which markets don’t work well. Since well-functioning markets are the best method we know of creating efficiency, this is a problem. It tends to leave those fields of endeavor plagued by certain kinds of inefficiencies. But since some of these things are very important, they wind up getting taken over by the public sector. Which is, yes, less efficient than the private sector. But not because the public sector “doesn’t work” and its responsibilities need to be turned over to the market but because the things that belong in the public sector are precisely those things for which turning it over to the market isn’t a realistic option.

Meanwhile, one needs to understand that, somewhat counterinuitively, when you have a very efficient economic sector what happens is that it tends to go away. Consider agriculture. Our modern-day agricultural technology is way better than what was available 200 years ago. But agricultural progress hasn’t meant that everyone goes to work in the super-charged high-tech agriculture of the future. It’s meant that more food than ever is grown with fewer person-hours of labor than ever. We should expect this to continue apace. For all the talk of trade’s impact on American manufacturing, the bigger issue has been automation and robots. But either way, even though people will continue to consume manufactured goods—just as we still eat—manufacturing will be a less-and-less important part of the economy. Not because manufacturing “isn’t important” but because it’ll get more efficient. And that’s how the whole private sector part of the economy will go. Markets, doing their work, will make those sectors more and more efficient leading them to shrink as a share of the overall economic pie.

What will be left is big government. Or, rather, bigger and bigger government. Teaching kids. Taking care of the elderly. Patrolling the streets. Making the SUPERTRAINS run on time. And it’s going to be fine.

Which isn’t to say we should crank spending up to 93 percent of GDP next year. But it does mean I don’t think we should set an arbitrary limit. And it also does mean that it’s always important to find ways to make the public sector more efficient and more effective. It can be done. Public agencies are better-and-worse managed and offer better-and-worse performance. But it’s difficult to do and it doesn’t happen automatically the way it does in a well-functioning market. And it also means, as I’ve been taking to saying lately, that we need to think about garnering more revenue in ways that have non-revenue benefits. For example, market-rate prices for street parking not only raise revenue, but allow for more efficient allocation of parking spaces. Similarly with congestion pricing on crowded roads. Auctioning carbon permits will keep the planet habitable and raise some money. Taxes on alcohol and sweeteners would have public health benefits. And on and on down the road.

Reassemblable Modular Robot

And we get one step closer to the T-1000:

We’re going to need some more liquid steel.

Newspapers Without Profits

The future is going to contain lots of for-profit media enterprises. But the very rapid pace at which information can be disseminated these days makes it difficult for a media enterprise to internalize all the gains of reporting new information. Consequently, in the future news gathering is going to be a lot less profitable. And that means that more of it is going to have to be done by not-for-profit institutions. So I think it’s very good to see Steve Coll, a longtime veteran of the newspaper business now working for a non-profit, thinking along these lines:

Not to pick on any one institution, but, from a constitutional perspective, how did we end up in a society where Williams College has (or had, before September) an endowment well in excess of one billion dollars, while the Washington Post, a fountainhead of Watergate and so much other skeptical and investigative reporting critical to the republic’s health, is in jeopardy? I’m sure that Williams-generated nostalgia in the emotional lives of wealthy people is hard to overestimate, but still … [...] The typical spend rate for endowed nonprofits is in the five-percent range. If the Washington Post had a two billion dollar endowment, it would be able to fund a very healthy newsroom. And this is before revenue from continuing operations—advertising, circulation, etc., which could surely cover at least the cost of distribution and overhead, particularly if the form of delivery is increasingly digital. Two billion dollars, by the way, represents something in the neighborhood of five per cent of Warren Buffett’s net worth, the last I knew that figure.

One problem here is just that The Washington Post is no Williams. Elite American colleges, whether or not they actually do a good job of educating young people, do a VERY good job of producing nostalgic alumni and prestige for themselves. American newspapers have done a very good job of convincing professional journalists that they’re vital civic institutions, but journalists don’t seem to me to have a very good grasp of the fact that the public at large doesn’t like them very much (see here and here). And I have to say that when I worked at primarily journalistic institutions, one of the most aggravating aspects of my job was the need to deal with the self-righteousness of journalists about their work.

And beyond the fact that the Post does not, in practice, attract the kind of warm and fuzzy sentiments that newspaper nostalgics think it deserves to, it just wouldn’t make any sense to offer a $2 billion gift to an outfit like the Post for the simple reason that the vast majority of the Post’s activities aren’t the sort of hard news reporting for which there’s a need for a stepped-up non-profit sector. The world is not currently lacking for sports coverage. Nor is there some kind of critical shortfall in people offering opinions about politics. Business reporting actually seems to have a viable economic model behind it. Similarly, lifestyle journalism continues to be viable in a number of formats. And Warren Buffett doesn’t need to spend $2 billion so that people can find movie recommendations somewhere.

Part of what’s happening to newspapers is the specific issue with the digital era making it hard to make money doing reporting. But part of what’s happening to newspapers is that a newspaper is a gigantic bundle of paper covering miscellaneous topics. The rationale for lumping all those topics into a single geographically-bound institution has a lot to do with the economic logic of printing and distributing bundles of paper, and very little to do with the economic logic of producing and disseminating a digital media product. In other words, two different things are happening simultaneously. One is that as things migrate online, it’s making less and less sense to have a “newspaper” in the traditional sense.

Another is that as things migrate online, the economic foundation of news reporting is looking shaky. But these two things aren’t the same problem, and they’re not equally problematic. If a billionaire was asking me whether investing charitable giving in the media sector was a good idea, I would tell him “yes.” But I wouldn’t tell him to invest in a non-profit newspaper. The smart thing to do would be either to spend money so that existing non-profit media operations—ThinkProgress, the Center for Independent Media, ProPublica, The American Prospect, The Washington Monthly, The Nation, etc.—can add capacity, or else to spend money to create a new non-profit media operation (my suggestion would be a focus on state and local reporting somewhere).

People should also recall that a catastrophic collapse of the newspaper industry would hardly be without precedent. The real heyday of American newspapering came in the late 19th and early 20th centuries when the United States features a literate population and no broadcast media. The rise of radio and television had a devastating impact on the industry and caused massive shrinkage in the volume of papers. This shrinkage then led to what journalists consider the heyday of American journalism when the industry had fallen so far that most papers faced little-to-no competition and could serve as authoritative “objective” sources of information. We’re now once again amidst and era in which technological change is going to kill off a lot of existing business models. But all this has happened before, and all this will happen again.

How Not to Save The New York Times

Felix Salmon’s post on how not to save The New York Times is excellent. From where I sit, The New York Times Company really seems, unlike General Motors or Citigroup, to be an example of a company whose underlying situation is reasonably sound but where short-term credit issues are preventing them from riding out a temporary economic downturn that’s bad for everyone’s business.

The way I think about it is that the Internet is forcing a structural transformation in the news business. There will almost certainly be less overall profit in that field than there has been in the past. And rather than hundreds and hundreds of for-profit medium-sized English-language news sources we’ll probably consolidate to a handful of really big ones plus millions of really small ones, most of which will be hobbyist or non-profit ventures. And the New York Times seems well-positioned to take advantage of that situation. It has an unparalleled capacity to do actual news-gathering and it also has one of the strongest brands—if not the strongest brand—in the business. The same forces that are bad for “newspapers” are quite possibly good for the best newspaper since it’s now trivially easy for people to read the Times in Bakersfield or Belfast or Bombay or Brisbane at the same time that more and more people in Bruges and Bergen and even Beijing are getting used to reading things in English.

But for that to work, the company has to stay in business long enough for competitors to fold so it can take advantage of the vacuum. And it needs to not lose its core assets—its brand and its reporting capabilities—while riding the problems out.

Retail Bankruptcies

We’re certainly going to see a lot fewer stores in the future, but I don’t think Steve Benen’s quite right to say “Think about your local mall, and then think about a quarter of the stores disappearing, as compared to a year prior.” The motive for his post was a Wall Street Journal report that “Analysts estimate that from about 10% to 26% of all retailers are in financial distress and in danger of filing for Chapter 11.”

But even if a quarter of all retail firms go bankrupt, that doesn’t mean we’ll see a 25 percent decrease in the number of retail outlets. For one thing, a firm going bankrupt isn’t the same as the firm becoming non-existent. The point of Chapter 11 is to give firms a chance to reorganize and return to viability and certainly some Chapter 11 firms will do that. And even if a firm does wind up being liquidated under Chapter 7 that doesn’t mean all of their outlets will vanish. One thing that can happen during a liquidation process is that competing firms will take over some of the choicer locations currently occupied by the liquidated firm. And last, some non-bankrupt firms may expand — a downturn is good for a minority of firms.

Then on the flipside, many of the 75-90 percent of retailers that don’t go bankrupt will be closing locations nonetheless. When consumer demand goes down, the first response is to discount the merchandise to make sure you can move it. But the second response is to start stocking less inventory and operating fewer stores. And that’ll be the case for many firms whose underlying finances may be sound. Long story short, we can’t straightforwardly project the volume of retail closures from the volume of retailer bankruptcies.

What Might Have Been

Ezra Klein makes the case that the decline of newspapers was and is so inevitable that there’s nothing smarter or better management could have done to prevent it:

Jarvis had no answer for this, and nor, so far as I know, does Shirky. More prescient managers might have made for better news products but not sufficient revenue models. Most of the commentary on dying newspapers has been about making their news product better. But the salable product of newspapers was not news. It was local advertising and classifieds. Classifieds are now free and online advertising is a weak revenue stream. Meanwhile, the internet gives individuals have access to more news, not less. Much is lost amidst this, particularly in terms of local coverage. Which is why, aside from journalists losing their jobs, few are actually upset over the changes roiling the industry. Which is why, as Shirky presciently said in 1993, “there is nothing anyone can do about it.”

A few points on this:

One — there’s obviously a very strong sense in which newspapers, physical bundles of newsprint with ink on them, are doomed. That issue should be separated from the question of whether or not the firms and brands traditionally associated with newspaper publishing are doomed.

Two — one shouldn’t underestimate the extent to which a lot of people in publishing took a remarkably long time to appreciate point one. A lot of people really took the view that because older readers habituated to the practice of reading physical papers continued to prefer print that somehow that meant online-only would “never” catch on.

Three — I don’t actually think that the firms and brands traditionally associated with newspaper publishing are doomed. One such firm, the News Corporation, will clearly survive the transition to digital. Probably none of the papers the News Corporation currently publishes will continue to exist as papers forever, but their brands and human capital were persist as part of the continued entity. I suspect that 1-3 other newspaper companies and/or wire services will continue to exist. And even if The New York Times were to go bankrupt and be sold-off to someone else, I’m fairly certain the brand will continue to exist.

Four — the clearest thing management could have done better was to recognize earlier what business they were in. In particular, letting the online classified market slip away was a preventable error. Everyone might be posting their free classified on NYTList.com had someone really smart come up with that idea. The pageviews involved would have been a huge additional asset to the nytimes.com website and it would have been one newspaper undercutting the competition rather than all newspapers being undercut by a guy named Craig.

Five — I have more thoughts on this but I’m supposed to go get a burrito with my colleagues.

The Jobs of the Future

One great trick that 200+ years of Anglo-American hegemony has pulled has been to entrench the English language as the global lingua franca. It’s not just that people need to learn English in order to communicate with Anglophones, everyone relies on English to communicate with each other. A Korean jet talking to an air traffic controller in Bangkok will do it in English. A Finnish businessman talking about a deal with a firm in Lisbon will speak English. And at any major international gateway you’ll see signs up in one or two local languages and, of course, English. But as James Fallows observes, the English is often not quite right:

Literally, the Chinese could be rendered as: “Traveler, halt!” Or, to sound less Teutonic, “Travelers, stop!” But if you’d asked a native speaker you’d probably just end up with the simple “No entry.”

My reaction to this and innumerable similar signs in China has become sympathy rather than anything else (frustration, mirth, etc). All the fiddling with computerized translation programs, all the paging through English textbooks, all of whatever other effort came up with “The traveler halts,” for a result whose oddities could so easily have been avoided. Oh well. The airport itself is nice. Other topics shortly.

The interesting thing is that you don’t need to speak Chinese at all to fix this sign. You only need to be a native English-speaker who’s familiar with airports. I would rewrite this as “Do Not Enter.” And there are tons of examples of this sort of thing all over the world in both official signage and corporate advertising. And it seems to me that after the total collapse American journalism’s economic foundations, this will be a lucrative line of work for US-based writers — we can travel the world and fix everyone’s signs.

News Without the Paper

I think James Suroweicki’s column on the newspaper business takes a wrong turn here:

For a while now, readers have had the best of both worlds: all the benefits of the old, high-profit regime–intensive reporting, experienced editors, and so on–and the low costs of the new one. But that situation can’t last. Soon enough, we’re going to start getting what we pay for, and we may find out just how little that is.

This is wrong. As Felix Salmon says when you pay for the physical newspaper you’re not paying for the news, you’re paying for the paper. A newspaper is a big physical object. Creating it and distributing it on a daily basis is a hugely expensive undertaking. And subscriptions to newspapers are cheap — the amount of money being charged for home delivery of The New York Times or any other major paper only does a tiny amount to defray the costs of producing and delivering the object.

The problem newspapers are having with online isn’t that the readers won’t pay, it’s that the advertisers won’t pay. The reduced costs per reader make up for the reduced revenue involved in giving the product away, but a physical newspaper generates far more in terms of ad revenue per reader than does a newspaper website. Probably once physical newspapers all disappear, ad rates for news websites will go up somewhat merely because ad buyers won’t have as many options. But I think it’s plausible that even when everything shakes out online advertising revenue still won’t support the volume of staff that print advertising revenue once did. In that case we’re going to have to count on a mix of nonprofit media (ProPublica, Center for Independent Media, ThinkProgress, The American Prospect) and value-adding analysis by experts workers on an amateur basis (Brad DeLong, Greg Mankiw, Mark Kleiman) to make up the gap. That and, of course, increased productivity on the part of journalists — Google and email have made it much more efficient to research stories than it once was.

But in terms of revenue for for-profits, the action is all in the advertising — can people come up with ways to raise more money — not in charging readers.