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Information Goods and Income Distribution

Comment of the Week, 2003-08-0...

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James Miller has an interesting thesis concerning information goods. Since most of the cost is up-front research and development, he argues that these goods will be priced attractively for mass consumption.

As easily copied informational goods become more important to the U.S. economy, the differences in consumption between the rich and middle class will continue to diminish.

For Discussion. Can you think of information goods that are luxuries? Is it really harder to sustain a market for luxury information goods than for luxury physical goods and services?

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CATEGORIES: Income Distribution , Information Goods, Intellectual Property

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The author at Peter Gallagher in a related article titled Information Luxuries writes:

Arnold Kling asks, a little skeptically, whether information goods -- which are frequently non-rivalrous and non-excludable -- are ever likely to be luxury goods [Tracked on August 8, 2003 1:36 AM]

COMMENTS (4 to date)

Latest Comment

Flix writes:

The correct time is an "information good", isn't it? It surely must be "intellectual property."

I give you the watch ads in any upscale magazine.

Posted August 7, 2003 7:11 PM

Brad Hutchings writes:

This is a great question. It begs the whimsical answer, which Hillary Clinton provided on Jay Leno this week:

http://www.drudgereportarchives.com/data/2003/08/05/20030805_143643_flash.htm

Tell Jeff Bezos or Oprah Winfrey that books are a luxury :-). Books have two special characteristics as an information product which continue to makes them easy to market. They have a physical form and they are not as easily digitized and shared as music and video. And reading a printed book is still more comfortable for most than reading it on the screen. But I don't see them as a "luxury" information good.

A luxury item needs to project status, perhaps discretely, though more often flamboyantly. Did Kobe buy Vanessa a $4M diamond ring so she could appreciate it in their safe deposit box or did he buy it for her to wear to Laker games, Fox awards shows, court... And I think that is the tough part with information goods as luxuries. What can you buy that has no physical form, is exclusive to you, yet can be appreciated by others? A vanity website? Sponsorship of a cool feature in an open source program? Do we have to take a page from "experience economy" stuff to answer the question? Someone is making enough money on the International Star Registry to continue to advertise on radio. But I don't think what we label as luxury information goods should be frivilous.

Maybe a luxury information good is an important person's time and attention. Could I get the world-renowned Arnold Kling to review and comment on my business ideas in his forum and share with his readers? Or maybe get Virginia Postrel to review the aestetics of my condo. Got me...

-Brad

Posted August 8, 2003 1:35 AM

Peter Gallagher writes:

Hi Arnold,

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).

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).