“Arnold Kling(link to EconLog)”:http://econlog.econlib.org/archives/000205.html#000205 asks, a little skeptically, whether information goods—which are frequently “non-rivalrous and non-excludable(link to the Wikipedia article on public goods)”:http://www.wikipedia.org/wiki/Public_good—are ever likely to be luxury goods. The answer to the question is unlikely to be independent of context: your discretionary expenditure may be my “luxury”—which may explain different consumption patterns even of mass market goods (see below). “James Miller(link to TechStation article)”:http://www.techcentralstation.com/1051/techwrapper.jsp?PID=1051-250&CID=1051-080703A has a point that information goods are by nature suitable for the mass-market and likely to be sold that way, if they can be sold at all. But I can’t see any reason to accept Miller’s conclusion that mass-marketed information goods will contribute to a convergence of consumption patterns between the rich and poor.
Even if the prices of common information goods (e.g. CDs) are ‘mass-market’ prices, the demand for information goods such as CDs could be quite different at different income levels revealing different preferences for the use of leisure time (for example). The income elasticity of demand for information may be less than one at many different points on the spectrum of incomes. It might not be true, but it is at least a plausible hypothesis that lower income people own more CDs than high income people, attend more movies, own more game-console games and read more racing form-guides (the most information-intensive but, of course, least news-intensive section of newspapers in Australia). Besides, if an information good can be sold at all it is because its non-excludable nature has somehow been defeated in the marketplace. Copy protection for DVDs and game console software is the preeminent example. Not only is the information priced at a level that makes it a ‘luxury’ in some markets—one reason that the theft of the IP seems to be more common in poor countries—but the producers of the good have used encoding of content to allow them to discriminate between mass-markets in different regions of the world in terms of price. The sole purpose of DVD and game-console market regionalization is, after all, to allow some degree of marginal pricing. Not a strategy designed to favor convergence, at least on a global level.
Peter Gallagher is a leading Australian consultant on trade and public policy.[bio].
"I can help you with strategies for, and analysis of, international markets, law and regulations, trade agreements, export policies, import restrictions… I also offer reports, conferences and master-classes for government officials and industry associations on international trade research."
Email: Peter Gallagher