Archive: Economics

Charged debate

A series of posts

  1. Are newspapers ready to charge for online content?
  2. How charging for online content might work

Rupert Murdoch’s decision to experiment with charging for content has ruffled a few feathers. Fair play to Murdoch for being brave enough to put his head above the parapet. If anyone can take the risk, it’s Murdoch — and the rest of the media will have him to thank if the gamble pays off and it reveals the business model that other outlets can follow. Malcolm Coles certainly makes a fairly good case to suggest that Murdoch can get away with it.

Without doubt, monetising content online has been a very tough nut to crack, so much so that many appear almost to have given up. Indeed, the controversy surrounding Murdoch’s decision shows just how much some people now believe that it is impossible to charge for content.

No doubt the advent of the web has changed the game. It is much more difficult to charge for something that doesn’t physically exist, and something which can very easily be distributed for almost zero cost. This more or less means that, if you want to, you can probably get it for free.

I know of one major national newspaper that found that having a paywall was detrimental to their business because they made more money by removing the paywall and instead displaying Google ads to the extra readers. Anyone who has used Google ads will know that we are talking about pretty low amounts here. It is a real demonstration that a simple subscription model will not work for everyone.

But we know that there are plenty of people who are willing to pay for content. As Malcolm Coles points out, there are countless examples of people paying for music, audiobooks and whatever else, when they could have got it for free. That is because, contrary to what many people assume, most humans have a conscience.

For instance, the pay-what-you-like or “honesty box” model actually seems to work. There is the example popularised by Freakonomics about the bagel man. Radiohead seemed to make it work when they released In Rainbows.

Just last week I heard an interview with a taxi driver from Vermont, USA who invites all of his customers to pay what they like. “Nobody has shortchanged me yet,” he says. Even in cases where cash payment was not forthcoming, payment in the form of CDs was.

The problem is, you won’t be able to charge anyone anything if you only serve up a pile of samey crap. Your product needs to be distinctive. The bagel man wouldn’t have done so well if he was trying to sell pens. Radiohead made it work because they are the best band in the world with a loyal fanbase.

But how many media outlets can offer something so attractive? The problem as I see it is not that you cannot monetise any content. The problem is that the content newspapers are producing just now is not the sort of content they can get away with charging for.

Jeff has suggested that there needs to be a sense of duty to buy newspapers, just like there is a sense of duty to vote. But people should only really pay for something that they value, otherwise inefficiencies will result.

If people still value newspapers, they should be willing to pay — and many still are. Most people would feel guilty otherwise, as the honesty box examples suggest. But the problem is that many people just don’t like newspapers any more, as is evident in the comments on Jeff’s post.

It is not as if there is anything wrong with the physical product, despite the jibe about newspapers being “dead trees”. I can imagine a parallel universe where the newspaper was invented after the internet, where the physical paper would be seen as a luxury item. You don’t have to be connected to the internet. You can fold it up and carry it about with you. You can scribble on it if you want to. You can frame it if you love it enough.

But the problem is with the content. With the advent of new technologies, newspapers have become much less useful to consumers. Once, newspapers were almost the only way to find out about the news. Today they are the slowest of many ways to find out the news.

How many times does a major story break late in the day? That story will be all over the breakfast radio and all over the 24 hour news channels. There will be countless reports about it on the internet, and to add insult to injury the bloggers will have had their say too. But if you want to read it in the newspaper, you will have to wait until tomorrow.

Maybe a major story doesn’t break so late very often. But even in these cases, the chances are that you have had ample chance to hear analysis about the front page stories on the radio or the television the night before. In essence, newspapers now do little more than peddle what is literally yesterday’s news.

Like the music industry, the newspaper industry’s mistake was to fail to adapt. They arrogantly assumed that they could carry on with the same template and tinker round the edges, fumbling around for a business model that would work.

Of course, most newspapers have websites these days. But if anything, that has exacerbated the problem. It has led to phenomena like churnalism, with journalists producing more and more content with fewer and fewer resources. As such, much of newspaper websites’ content is watered-down crap. Worse still, much of it is Digg-bait which has been SEOed to death.

That is the crux of the matter. The media is sullied, and journalism as a profession is held in contempt by much of the general public. No wonder people won’t pay for content — it’s not any good, and there is nothing to distinguish it from free alternatives. Why pay to read Telegraph Digg-bait when you can read BBC churnalism for free?

So is there a solution? Keep an eye out for my next article where I will put forward a few suggestions.

It was revealed yesterday that Gordon Brown will spend part of his summer doing voluntary work in Kirkcaldy, the town where he grew up which forms the major part of his constituency of Kirkcaldy and Cowdenbeath. It is also my home town.

Some uncharitable people have suggested that his job may involve digging holes, something he has done quite enough of as Prime Minister. More cutting might be the observation that voluntary work is the only sort of work you’ll be able to find in Kirkcaldy.

A couple of weeks ago, The Times ran a piece about the economic woes which have hit Kirkcaldy which was a talking point among some of my friends. Aside from apparently inventing the demonym “Kirkcaldians” (I personally prefer “Langtonian”, named after the town’s old nickname, the Lang Toun), I think the article is largely a fair and accurate reflection of the town.

I have written before about the sorry state of the Mercat, the town’s main shopping centre which used to house my former workplace, Woolworths. Over the difficult Christmas period the Mercat went from bad to worse. But it gets just a passing mention in the Times piece, with its mere eight or more empty units.

Apparently there are thirty empty units in the High Street. There is a particularly dire section in the middle of the pedestrianised zone, where three shops in a row — which used to be the Link, Adams and Icon Clothing — now lie empty. What remains has been criticised for exhibiting the characteristics of a clone town (PDF link). Beyond that, particularly in the west end, what isn’t a chain store is most likely a pawn shop or a charity shop.

Perhaps this is not particularly unusual. The death of the High Street has been widely advertised, so this is not a problem unique to Kirkcaldy. The Times article briefly touches on the retail park. It sits on the north-western edge of the town, well away from the centre. But it is currently being expanded, a development which feels like a desperately-needed shot in the arm for Kirkcaldy.

The problem is that it just is not enough. Indeed, the clamour over the few new jobs that are available serve to bring into focus just how dire the situation is. I have lost count of the number of people that I know of applying for the same few jobs.

A new B&Q has opened, although the old one closed. A number of my former colleagues at Woolworths have ended up working there. PC World is another new store at the retail park. But so many people I know applied for jobs there. A friend who got an interview there was told that they had been bombarded with over 700 applications.

If you got rejected by PC World, you could always try applying for a job at the new Toys R Us. The only problem is that they apparently had 3,000 applications. Only a lucky 350 got an interview, with just 40 places going.

An Argos Extra has also opened up. They held an assessment day at the Jobcentre a couple of months ago. I saw it with my own eyes as I walked past it. There were two queues coming out of the Jobcentre, one in each direction. I have been told that the larger of the two queues stretched all the way to the police station, which sits at the opposite end of a street which is the best part of 200 yards long.

The store has been open for just over a week now. The good news on that front is that my friend, who transferred to work there from the existing High Street store, reports that sales have been very encouraging. Whether that is simply down to the excitement of something new opening in Kirkcaldy remains to be seen.

As for the Jobcentre itself, that continues to hire new people, including one of my friends. What they’ll do with the new staff when demand for the Jobecentre’s services is not so strong is unclear. But at the moment that feels like a distant possibility anyway. Whenever I went there I was often told they were short staffed.

In the Times article, there is a quote about the Jobcentre by a man called Tam Collins: “they expect you to stack shelves at Asda.” I got exactly that when I visited the Jobcentre. Going there is a fruitless task which I have now given up.

The Asda is a new store which has opened up in neighbouring Glenrothes. It is probably the most exciting thing in terms of employment to happen in Glenrothes for years. That is another place where a few of my former Woolworths colleagues have ended up. In a way they were lucky — Asda received over 7,000 applications for that one store.

Meanwhile, the town’s largest employer, a call centre called MGt, has recently shed 65 jobs as a result of the closure of Setanta. 65 looks like a small number compared to the amount that are already looking for work. But MGt has provided a lifeline to Kirkcaldy in terms of employment since it set up around a decade ago. Today it has around 1,000 people on its books. I dread to think what Kirkcaldy would be like if it wasn’t for MGt. That even MGt is downsizing is ominous.

But that sums up Kirkcaldy. It lost its way after the industrial decline of the previous fifty years. Now if you want a job in Kirkcaldy you need to either work in a call centre or in the precarious retail sector. And even then, good luck to you. After my previous experience of working in retail, I am avoiding it if at all possible.

Seven months since losing my job at Woolworths, and over a year since I graduated, I still haven’t found a full time job (although I’m lucky to have found bits and pieces of freelance work). I have well and truly hit the buffers, and I am now starting with a blank sheet of paper to decide on my next move.

One of my biggest mistakes was to focus my search too narrowly on a small geographical area. I certainly didn’t bet on finding a job in Kirkcaldy — it was bad enough before and clearly getting worse. But I planned on finding something in the eastern part of the central belt — somewhere within an area encompassing Fife, Dundee, Perth, Stirling or of course Edinburgh. No luck yet. I will have to broaden my search further and hope that something comes up, or hope that I will be able to rely on freelance work in the long term. I wouldn’t like to bet on relying on getting a job at a call centre in Kirkcaldy.

It is sad that Kirkcaldy is like this. This is the town of Adam Smith, the father of modern economics who looked out onto the bustling Firth of Forth, full of trade ships, and was thereby inspired to investigate sources of wealth. Today he would only be inspired to investigate the weed growth in the derelict former workplaces.

Sadder is the role of Gordon Brown. Surely, some people say, if there was one man who could save Kirkcaldy, it would be the Prime Minister and former Chancellor, who grew up here and depends on the residents’ votes. Some are truly furious about it.

Others, as the Times article notes, inexplicably give him and the government the benefit of the doubt. Talking to people, it is genuinely true that there are people in Kirkcaldy who believe that Gordon Brown is a competent leader who has somehow been stitched up. Even for failed leaders, the halo effect is still in evidence.

That is the irony. The people of Kirkcaldy are probably the one set of voters in the country that Gordon Brown can afford to take for granted. Could it be that having the local man as Prime Minister has exacerbated Kirkcaldy’s problems?

It would indeed be harsh to lay the blame wholly at Gordon Brown’s door. Kirkcaldy had problems before, and most of what has happened in the past year can be put down to the global recession.

But the Labour Party is supposed to look after the interests of people who live and work in towns just like Kirkcaldy — a former industrial town that slips ever-further into the mire, with one of the highest unemployment rates in the country. On the evidence I see with my own eyes, the Labour Party have failed us.

A couple of tools have emerged in the run-up to the European elections. They aim to help people decide who they should vote for.

This is nothing new — nowadays every election comes with its own similar tools. They are the cousins of Political Compass and the like. While they may not be totally scientific, they are quite enlightening in their own way — and a bit of fun whatever. So I have taken both tests to see what they say.

EU Profiler

This test doesn’t give you results for all the parties, but the big hitters are there. This has the advantage of also comparing your views with parties right across Europe, not just in Scotland or the UK. The Europe-wide results are interesting in themselves.

But first, here are my results for parties that I can actually vote for. The top party is the Liberal Democrats, which perhaps shouldn’t be too much of a surprise. Ideologically, they are the only party I am closely aligned to, and I have always voted for them in the past. I am a 60.3% match. Not terribly high, but higher than the other parties.

Second is the Conservatives with a 58.3% match. The SNP are a 55.2% match, while Ukip edge ahead of the Greens to be my fourth-closest match. Labour slug it out with the BNP to be my least favourites.

If you exclude the importance I attach to issues, Labour actually rise up to 4th place. Perhaps this suggests that I agree with many Labour policies — just not ones that I think are important.

I have a much closer affinity with other political parties outside the UK. My strongest match, by quite a long way, is Sweden’s Pirate Party. This is a recently-formed party which rose up in protest at over-zealous copyright laws. Makes sense I guess.

One striking thing about the Europe-wide results is the fact that three Croatian parties appear in my top five matches! Is there something about Croatia’s politics that would make me swing that way ideologically? Are there just lots of similar parties in Croatia? The three are the Social Democratic Party of Croatia, the Croatian Social Liberal Party and the Croatian People’s Party — Liberal Democrats.

The other parties in the top ten are: Liberal Democracy of Slovenia, People’s Movement Against the EU (Denmark), Estonian Reform Party, Freedom Union — Democratic Union (Czech Republic), Humanist Party (Portugal), Liberal and Centre Union (Lithuania). To be fair, having had a glance at each of these parties, they seem to vary quite a lot, so I wouldn’t put too much faith in them.

Incidentally, the Liberal Democrats are only my 65th strongest match. So in theory, there are 64 other parties across Europe that I would rather vote for. Not very good, is it?

Vote Match

Vote Match gives me very different results. My strongest match is Libertas with a score of 51/54, which seems quite high. (I’ve taken the test three separate times now, and Libertas were the top result each time.) This is despite the fact that I chose Scotland as my region and Libertas aren’t standing in Scotland.

Joint second are the Greens and the SNP with 41. The Lib Dems, the Conservatives and Labour are all joint fourth with 39. Jury Team’s Alan Wallace has 33 and Ukip have 28.

The results page on Vote Match is very comprehensive, with a table of each party’s position on each of the 30 questions. Looking down the table, it does appear as though I agree with Libertas on a lot of issues, and all of the issues that I marked as important. On all the issues I marked as unimportant, I disagreed with Libertas. This has perhaps accentuated their score.

These results just don’t sit right with me though. The list seems wrong. It is especially odd to see the Greens so high up there. Perhaps this is where differences in policies for Holyrood or Westminster and Europe come into play. But I’m taking this result with a pinch of salt.

Political Compass

This isn’t related to the European Parliamentary election, but it is the granddaddy of online political tests, and I think it is a couple of years since I have taken it. So I thought I’d take another look. My result now is:

Political Compass 2009
Economic Left/Right: 1.25

Social Libertarian/Authoritarian: -6.82

So I’m — just — on the libertarian right. But I am still more of an economic centrist, though firmly a social libertarian. This is more or less what I expected. A clear trend that I have noticed is a slow drift towards the libertarian right. The last time I took this quiz, two years ago, my economic score was 0.38 — closer to the centre, but still on the right. The social score was a slightly less libertarian -6.10.

The time before my score was 1.00 and -6.21. The time before that, in 2006, it was -0.13 and -5.08.


I still haven’t decided whether or not I will vote. However, I think if I do vote, I know which party I will vote for. I’ll report this evening on my action / inaction.

Here it is: that post I’ve been sitting on for upwards of a year. Before I start, I am going to make a few introductory notes about what I do and don’t mean when I call democracy disturbing. I find that all too often debates about this subject are clouded by dogma, which leads to poor thinking and boilerplate arguments.

Before some cheesy person wheels out that Churchill quote about democracy being the worst system apart from all the other systems, yes of course I have heard it. And it is true. I am a democrat because I believe it brings about favourable conditions. For instance, there is the correlation between democratisation and higher GDP per capita. (Whether democracy is cause or effect does not matter. If the value of the higher GDP per capita is greater than the cost of democracy per head — as it almost certainly is — then democracy is a price worth paying.)

Furthermore, I should define more closely what I mean by democracy. Most of the flaws I will point out are actually problems with elections rather than democracy as a whole. Aspects of democracy such as civil liberties, human rights, freedom of speech, the rule of law, due process, and so on and so forth, are of course things that I am deeply supportive of. This will become clear in my first point.

I tackle the issue not from an anti-democratic perspective. Far from it. My problem is with the approach which sees democracy almost like a religion which ought not be questioned — what Bryan Caplan in his book The Myth of the Rational Voter called “democratic fundamentalists”:

Its purest expression is the cliché, attributed to failed 1928 presidential candidate Al Smith, that “All the ills of democracy can be cured by more democracy.” In other words, no matter what happens, the case for democracy remains untouched.

No case should remain untouched. That is why, for me, there is not enough scrutiny placed on democracy. There is a fear of investigating it, because the benefits of democracy are perceived to be so self-evident that anyone who stops to ask what the disadvantages are is instantly regarded as a fool. That must be dangerous. If we agree that the system is imperfect, the only way to improve the situation is to investigate it and have an awareness of what the problems are.

Just as a final point, much of my thinking in this area came about as a result of the research I did for my dissertation, which was about the “paradox of voting“. In case you want to read more about voting behaviour, I have uploaded my dissertation here.

Having got all of the caveats and explanations out of the way, it is time to move on to my five points.

1. Democracy is not guaranteed to uphold freedoms

This is more or less a rehash of The Devil’s Kitchen’s post which I referred to yesterday. Above I said that “aspects such as civil liberties, human rights, freedom of speech, the rule of law, due process” are important. Arguably, these have all taken a battering by recent democratically elected governments.

Wave goodbye to your right to peacefully protest, have a fair trial and take photographs in public. Say hello to ID cards, the database state, endless reams of CCTV footage, mass DNA collection, control orders, detention without charge and extraordinary rendition. Thanks, democracy!

2. Tyranny of the minority

Most people are familiar with the concept of the tyranny of the majority. Thanks to the system of democracy adopted in this country, it doesn’t even take a majority to construct a tyranny. In the 2005 General Election, 9,562,122 people voted for Labour candidates. Assuming a population of 60 million, this translates to around 16% of the population.

The votes of this small percentage of the UK’s citizens has given the Labour Party 55% of the seats in the House of Commons, a majority of 67 seats. What gives the government the right to rule the country with such dominance? Not the people, that’s for sure. Only 16% of the people expressed a preference for the current government. In fact it is the way the system is constructed, and nothing else, which gives Labour its “legitimacy”.

That brings me neatly on to…

3. The system can’t be fixed

Arrow’s Impossibility Theorem states that there can be no voting system which will be able to fulfil a number of desirable criteria:

  • The Pareto principle — if everyone prefers x to y then y should not be elected
  • Anonymity — every voter should be treated equally
  • Neutrality — every candidate should be treated equally
  • Independence of irrelevant alternatives — the ability of x and y to win an election should not be affected by the entrance of a candidate z
  • Transitivity — if x is preferred to y and y is preferred to z then x should be preferred to z

Independence of irrelevant alternatives is the one that riles up proponents of electoral reform the most. Just think of Ralph Nader, or the farcical events of the 2002 French Presidential election. In this case, the voting system is far more important than the voters themselves. The fifth item on the list refers to Condorcet’s paradox, whereby attempts to find a winner of the election leads you on an endless circle.

We can argue among ourselves about which voting system should be adopted. But (and I’m not saying this will necessarily come as a surprise to anyone), you will never find a system that will please everyone. It will be a matter of choosing the least worst option, as every system has a fatal flaw of some kind. For what it’s worth, my preference is Single Transferable Vote — but that’s a matter for a different post in the future.

For more along these lines, read this post about a talk I attended a couple of years ago. It was given by economist Eric Maskin en route to collecting his Nobel Memorial Prize in Economics. He had some very interesting views on electoral reform.

4. An individual vote is almost worthless

If you are concerned with affecting the course of history by having your say on major political issues, going to cast your vote in an election is more or less a complete waste of your time and energy. It is said that you are more likely to be killed on your way to the polling station than to actually cast the deciding vote.

The probability the the outcome of an election will hinge on your vote is minuscule. Even under the fanciful assumption that in a two candidate US Presidential election each other person is likely vote for either candidate with a probability of 0.5, the probability that your vote will be the deciding vote is 0.00006.

Yet the costs of voting are actually rather large. You have to spend time and possibly money learning about each of the candidates and their policies. The time and money spent travelling to the polling booth is not exactly negligible in the context of the minuscule probability of your vote actually meaning a damn thing.

Of course, this doesn’t mean that voting is wrong. People don’t vote because they believe it will affect the outcome. They vote because it makes them feel good. But the fact that you need to resort to non-instrumental incentives in order to justify the act of voting leaves wide open the possibility that people with bad motives (or motives with bad effects) are more likely to vote…

5. Many who do vote base their decision on prejudices

In his very interesting book The Myth of the Rational Voter, Bryan Caplan said that the fact that people vote can be explained by the fact that they like to hold certain political beliefs. Let’s call our voter a sheep. He may hold suboptimal opinions and support policies that would actually make him worse off. This might be due to social pressures, a sense of self-image or whatever. It is, after all, all too common to meet someone who votes Labour just because their dad did.

It is precisely because a person’s vote is so worthless that sheep are encouraged to vote. They like to go and vote because it makes them feel good, reaffirms to themselves their ideological loyalty and so on. But sheep never stop to think if the policies they support would make them worse off. They don’t have to because their vote doesn’t matter anyway. The cost of ideological loyalty is low. Indeed, the benefits of it are enough to outweigh the costs of voting.

Those who hold no strong ideological loyalties, and who may therefore be expected to enter the polling booth ready to judge fairly based on all of the information they have gathered, are actually far less likely to vote. This is because they feel no warm glow from the act of voting for their favoured party.

As such, the traits of voters are the sort of traits you would normally expect to find on a football terrace. They will trudge along to express their tribal feelings, and will keep on doing so even in the driving rain, even if their football team is rubbish and the game is low-quality.

One might say that the political party you support is rubbish and the state of politics just now is low-quality. Who wants to buy a season ticket? Is it not better to leave that sort of behaviour on the football terraces?

It’s a funny time in politics. I have written a couple of times in the past about why I would consider abstaining, or sympathise with those that do. That provoked some interesting discussion.

My degree was in Economics and Politics, and I found that the more I learned about politics, the more jaded with the system I became. Conversations with other people have suggested that I am far from alone in experiencing this. Indeed, it has been one of the central points of the previous discussions here, with James O’Malley offering a contribution that backs the theory up:

I think your experiences of becoming more apathetic with age – essentially more apathetic as you became better informed – are pretty similar for a lot of people. I’ve just finished a degree in International Relations, and as a consequence of learning what a horrible bleak mess the world is, I think we all became cynical about almost anything political.

Events since then have only made me more likely to become apathetic. The credit crunch underlined that what goes on in politics does not matter an iota as much as what happens in the real world of business. Politicians don’t have as much power over the economy as they like to make out, and any influence they do have is probably a negative one.

Now we have the expenses scandal, which in fairness is only surprising in terms of the scale of the problem, not the fact that it existed at all — most people took that as a given. It adds to the impression that the system is inherently rigged against individual voters.

Increasingly, when people ask me how I would vote if there were an election tomorrow, I say that I wouldn’t vote. Making a conscious decision not to vote is not the same as apathy. I still have opinions on issues just as much as I have ever done. But my stance does reflect a more jaded view of party politics.

Next week we will be asked to vote in the elections which people are almost certainly the most apathetic about — European Parliament elections. This will put to the test the idea that I wouldn’t vote. If I were to abstain on Thursday, it would be the first time I have ever turned down the opportunity to vote in a major election. Mind you, I have only had the vote for five years so I haven’t had that many opportunities to turn my nose up (although voters my age are the most likely to).

In the background of recent events, the political elites are now becoming aware of how intense the distrust of political types is among the wider public. As such, there are a number of ideas for how to reform the system floating around just now. As someone who takes an interest in constitutional issues, electoral reform and the like, I think it will be worth investigating them.

I find this an interesting situation. In the wake of a barrage of apathy-inducing news, and in the face of the most stupefyingly boring elections on the face of the planet, can I bring myself to vote? Or, more to the point, can I bring myself not to vote? Will feelings of civic duty trump the temptation to rationally abstain?

Increasingly, as Question Time is broadcast, I find that the conversation on Twitter is dominated by discussions about “#bbcqt“. I have not been able to bring myself to watch that programme for a couple of years. That was another thing that has got me thinking. I wrote:

Can’t work out if I want to totally give up on politics, or if now is a good time to get stuck in again. Everyone on Twitter talking [about] #bbcqt

I got one reply, from Chris Hawes: “Get stuck back in!”

So, is it time to get stuck back in? For the next week or so I am going to go on a voyage of discovery. Okay, that’s just a grand way of saying I’m going to write some posts about politics over the next few days. I will start over the weekend by writing some thoughts on the state of democracy, and looking into some of the ideas for reform.

Later on into next week I will write about the upcoming European elections, taking a look at each of the parties standing in Scotland. There will be an election literature review, and I will be asking questions such as, “Who on earth is this Duncan Robertson fellow and why is he suspiciously invisible on Google?”

Most importantly of all, I hope to find an answer to the big question: Will I vote, and if so who for?

The plans are vague because I haven’t written the posts yet, and I genuinely don’t know what the conclusions will be. My post about the democratic system is something I’ve been meaning to get off my chest for over a year now, but I’ve never managed to bring myself to actually write it. Now seems like a good time to do it.

By way of a taster, here is another of the catalysts to this series of posts. It’s a post by The Devil’s Kitchen: Democracy is not a given good. It comes pretty close to summing up my feelings, but you will learn more about that when I publish the next post.