Response: Week 7

“In the digital realm you can try to keep Free at bay with laws and locks, but eventually the force of economic gravity will win.”

I quoted this statement in my framing questions earlier this week, and I would like to focus my response on a single part of the quote, “…but eventually the force of economic gravity will win.”

In many ways, this statement can be compared to a dog chasing its tail.  The mentality of free is different from the business and quality aspects of free.  For example, take Anderson’s “power of the penny” example.  People were willing to pay 14 cents more for fancy chocolate than generic chocolate when the generic chocolate cost only a penny, but when the generic chocolate was free and the fancy chocolate was still only 14 cents more, people went for what was free.  The fancy chocolate was never more than 14 cents more expensive than the generic, but as soon as something is labeled as “free” societies mentality toward the product changes.

Then take companies like Hulu and Pandora.  Their products (the streaming of video and music) are free, but to make more money they are adding more commercials and the option to stream without the annoying commercials for an annual price.  Now, in contrast to the “power of the penny” example, what is free isn’t necessarily what society wants.  Now people lean toward the “fancy” option instead of what is free.

Then the whole idea of demonetization, on the surface, seems to contradict the idea that  “the force of economic gravity will win.”   The most obvious example involves Microsoft and Britannica.  When Microsoft created Encarta, people only had to pay for the CD once, and the price was much less than that of the hard copy encyclopedias.  Thus the encyclopedia industry went from being a 600 million dollar industry to a 100 million dollar industry.  With the current recession, this change seems like it hurts the economy instead of helping it.  While the “force of economic gravity” won in relation to individual purposes, it lost in relation to the overall economy.

All in all, I can compare the economic changes occurring in the Digital Revolution to those that occurred during the Industrial Revolution.  Machines took away the jobs formally done by skilled craftsmen and society had to learn to function with this new way of life, and eventually the economy and society learned how to function in a more technological age.  History always repeats itself.

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