Man Bites Blog

Steve Atwood laments that downloaded software costs the same as shrink-wrap physical media software.

He seems to hang his case on how profitable it is for software vendors to allow downloads. If that’s the case, exactly what is the incentive for them to change?

Unfortunately, the state of digital software distribution is so bad right now that it’s almost a parody of itself. It should be a wondrous, democratizing tool that pushes software pricing down by naturally leveraging the inherent efficiency of bits over atoms. Instead, as it exists today, the digital distribution of commercial software is intentionally crippled. It’s only useful for the rich and impatient, a fact vendors exploit to line their pockets with obscene profit margins (even by software industry standards, which is saying a lot). The average consumer avoids digital software distribution entirely in favor of retail discounters. Can you blame them? With every download at retail prices, you’re effectively paying vendors five times as much for the same software, and that’s a huge ripoff.

It’s called price discrimination, which despite the usual nefarious connotations of the word discrimination, isn’t that awful a practice (think student discounts on movie tickets). If it’s that important to you to get the latest version of the game at 12:01 on the release date, the vendor is going to try to extract a premium from you for that privilege.

Software vendors, particularly big boys like Microsoft, are not in an open market where the primary driver of the price is the marginal cost. They will charge what people are willing to pay. And if people are willing to pay full price for the convenience of downloading software, that’s what they’re going to charge. That their cost is lower is completely irrelevant.

The solution isn’t to keep downloading software and whining about the mark-up. The solution is to stop downloading software, and force the vendors to lower the prices for downloads in order to recoup the investment they made in their download software. Or for competition to enter the market to drive prices down. But software vendors have no moral obligation to base their prices on the cost of distribution.

Megan McArdle laments that Paul Krugman seems to have given up the opportunity to be an excellent economics writer to be an average news columnist.

Yes, but he has two weekly column in the New York Times!

The discussion reminds of what happened when Alex Rodrigues was traded to the Yankees.  A-Rod had been a shortstop with the Mariners and Rangers, and that position was occupied with the Yankees, so he moved over to third.  Some commentators (I seem to remember Rob Neyer writing a column about this, but I can’t find it) lamented that A-Rod was giving up a chance to challenge Honus Wagner to be the greatest shortstop in baseball history.

Yes, but A-Rod gets to play for the New York Yankees!

In essence, (if you stipulate that Krugman is a great economist and an average columnist, which I’m not really qualified to judge) both Krugman and A-Rod gave up the opportunity for historical greatness in a specialty in relative obsurity for the chance to display other skills on a greater stage and be better compensated for us.  A-Rod could have continued being a shortstop, but that wasn’t the way to maximize his income and exposure.  Krugman could have stayed in economics, but he wouldn’t have reached nearly the same prominence, had as much influence, or I suspect, be paid as much.

A-Rod’s case is slightly different, since he is now the best third basemen in the league.  The “tragedy” of A-Rod’s move is that it breaks up his career, so he will not play shortstop or third base long enough to be considered the greatest at those position.  McArdle’s stance is that Krugman is a middle of the pack columnist.

But wouldn’t almost any of us make that choice?  And don’t we all make that choice every day anyway?  How many of us are doing what we are absolutely best at, or what we would be best at if we did it all the time?  The market rewards certain skills, and the reality is we shape our careers to balance between what we are good at, what we enjoy doing, and what pays the bills

I love C++ and object-oriented programming.  I would estimate I am in the top 1% in terms of ability to use it.  But if I could double my salary and work on an important project in some other technology, say regular C and shell scripting, I would do it, and I don’t think I would hesitate for very long before doing so.

The problem isn’t that Krugman made his choice.  The problem is that the market rewards Krugman more for producing red meat “Bush sucks” columns than it does for economic writing.

Interesting ongoing discussion on whether the US should adopt European-style vacation policies.

Tim Lee and Matt Yglesias have come out against it, while Ezra Klein has argued for it.

Lee writes:

It seems to me that basic economic suggests that in the long run, at least, if people work 5 percent fewer hours they’ll produce 5 percent less stuff. And if a worker is producing 5 percent less stuff, he’s going to receive (again, on average and in the long) 5 percent lower wages. Which means that regardless of what the law says, if you mandate that an employer provide 12 extra vacation days, that’s going to mean that in the long run, employees’ wages will be 5 percent lower than they otherwise would have been.

Lee goes on to list “several plausible answers to this argument,” but one that he doesn’t is that it is doubtful that the marginal value of the last 5% of a knowledge worker’s time spent working is equal to 5% of her total value. In other words, that workers would not respond to increased vacation by compressing more productivity into their working days, and that the current vacation schedule is optimal.

Companies offer vacation as a benefit to lure workers, yes, but also in recognition that people need breaks in order to be maximally productive. Is the current two or three week norm the magic number? Europe seems to have arrived at a different conclusion. My suspicion is it varies. For some professions and individuals, the European model yields the maximum productivity. For other, the optimal amount of vacation may be zero.

Lee cites the example of the lawyer working 80 hour weeks. But the associate working 80 hour weeks isn’t doing so just to be more productive; she is doing so to demonstrate dedication to the company.

The real problem is the cultural association of productivity with hours worked. And it’s going to take more than mandated vacation to change that.