Information luxuries

Arnold Kling(link to EconLog)”: asks, a lit­tle skep­ti­cal­ly, whether infor­ma­tion goods—which are fre­quent­ly “non-rival­rous and non-excludable(link to the Wikipedia arti­cle on pub­lic goods)”:—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)”:–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.

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