Tag Archives: economics

Tax ’em back into town?

The UK iteration of Wired is doing a themed issue entitled “Rebooting Britain”, kicking around ideas for changing the face of an already-changing nation for the better. Many of them could be more broadly applied to any Western/developed nation, but a few of them address issues that are somewhat more unique to the UK. For example, Britain is apparently one of the very few nations where the percentage of people living in cities is not increasing; this doubtless has a lot to do with deep-rooted notions of the romance and allure of country living that inform the English psyche, though the increasing proliferation of surveillance and petty bureaucracy in urban areas may well be a contributing factor too.

But the rural lifestyle is disproportionately expensive from an environmental perspective; people who live in the country need to drive further and more often, they need to use more energy for heating their homes, and so on. So, P D Smith suggests, why don’t we tax the rural lifestyle heavily to encourage people back into more efficient city living?

To create a low-carbon economy we need to become a nation of city dwellers. We tax cigarettes to reflect the harm they do to our health: we need to tax lifestyles that are damaging the health of the planet – and that means targeting people who choose to live in the countryside. We need a Rural Living Tax. Agricultural workers and others whose jobs require them to live outside cities would be exempt. The revenue raised could be used to build new, well-planned cities and to radically upgrade the infrastructure of existing cities.

We have an opportunity to create an urban renaissance, to make cities attractive places to live again – not just for young adults, but for families and retired people, the groups most likely to leave the city.  Turning our old cities into “smart cities” won’t be easy or cheap, but in a recession this investment in infrastructure will boost the economy. We need to learn to love our cities again, because they will help us to save the planet.

It’s a nice idea and well-meant, but there are some pretty obvious flaws to the suggestion. First and foremost, Smith seems to have overlooked the fact that the affluent middle classes who are at the centre of the migration into the countryside are the most politically active slice of the UK population, and no government in its right mind (if such a thing exists) is going to risk alienating them by crushing their dreams of “getting away from it all” with their hard-earned money.

Another problem is the assumption that country living is necessarily less energy efficient. As the months pass, more and more middle-class jobs will fall into the sphere of knowledge work, making them ideally suited for telecommuting… which is something that businesses looking to save on their payroll overheads are starting to wake up to. Offer the chance to work from home in exchange for a smaller pay-packet, and there’ll be a significant take-up.

Plus country houses – while usually bigger and less efficient than city dwellings – are more easily retrofitted for energy efficiency, and more likely to have that money spent on them by their owners rather than by government grants – if there’s a clear economic benefit to investing in a “greener” household, you can bet your life the middle class will be all over it like a rash, especially once a few trendsetters start doing it and trumpeting the benefits.

And let’s not forget that homes in the countryside are theoretically closer to domestic sources of food; with a little logistical planning and some smart entrepreneurship, even small villages could become efficient nexuses for local produce distribution. Hell, they could even start aiming for self-sufficiency and community agriculture, like the Pennines town of Todmorden, which is showing signs of successfully shifting toward community farming and a “locavore” lifestyle [via Global Guerrillas, of all places].

In short, there are definite downsides to the British rural exodus, but using the blunt instrument of tax to reverse it is bound to fail. Better still, surely, to embrace the rural shift and let economics do the hard work for you?

The retail show-down: will online trump big-box?

Deep discounts at Wal-Mart...Economic slump + increasing ubiquity of internet = ruthless tit-for-tat price war between Amazon and Wal-Mart:

The tussle began last month as a relatively trivial but highly public back-and-forth over which company had the lowest prices on the most anticipated new books and DVDs this fall. By last week, it had spread to select video game consoles, mobile phones, even to the humble Easy-Bake Oven […]

“It’s not about the prices of books and movies anymore. There is a bigger battle being fought,” said Fiona Dias, executive vice president at GSI Commerce, which manages the Web sites of large retailers. “The price-sniping by Wal-Mart is part of a greater strategic plan. They are just not going to cede their business to Amazon.”

And you can’t blame them for that. But will it work? Pundits have been predicting the demise of big-box retail on and off for most of the past decade, but Amazon’s recent massive gains might be the first solid sign of the tipping point:

This fight, then, is all about the future. Rapid expansion by each company, as well as profound shifts in the high-tech landscape, now make direct confrontation inevitable. Though online shopping accounts for only around 4 percent of retail sales, that percentage is growing quickly. E-commerce did not suffer as deeply as regular retailing during the economic malaise, and it is recovering faster than in-store shopping.

[…]

For rivals both real and putative, Amazon is expanding its slice of the retail pie at what must be an alarming rate. In the third quarter of this year, regular retail sales dipped by about 4 percent and e-commerce over all was flat. But Amazon sales shot up 24 percent, sending its shares soaring.

Amazon’s overheads per sale are, I presume, that much lower: no shop-floor staff to pay for, for a start. Or shop floors, for that matter…

The question is, of course, whether a victory by either side will actually work out better for us, the consumer. Lower prices are all well and good, but if they’re accompanied by increasing unemployment in the retail sector, will there be any real net gain?

I really like this quote from a former Circuit City executive, though:

“We have to put our foot down and refuse to let them grow more powerful,” she said. “I applaud Wal-Mart. It’s about time multichannel retailers stood up and refused to let their business go away.”

I now have this vision of the serried ranks of Wal-Mart’s executives stood outside Amazon HQ and sternly shaking their fingers at it. King Canute costume optional? [via SlashDot; image by lordcolus]

Rushkoff on radical abundance and the economics of Web Cubed

I’ve mentioned Douglas Rushkoff here a few times before (both as a thinker and a writer of comics and fiction), and I’m also deeply interested in alternative economic structures, so the following video of Rushkoff’s swift fifteen-minute keynote speech to the O’Reilly Web 2.0 conference was like internet crack for me.

I strongly recommend you watch it; even if you don’t agree with all of his points, Rushkoff’s got a very coherent vision, and seems to be one of the few alternative currency advocates who’s thought beyond the basics. In a nutshell, he’s saying we need to shift paradigms, and move from extracting value to exchanging value. Take a look:

Publishing economics round-up

OK, here’s another link-collection post, but there’s more of a theme to this one: I noticed I had a whole bunch of pieces about the economics of publishing, so why not shove ’em together and see what juxtapositions we get?

We’ll start with this article discovered at TechDirt, an impassioned rant from a librarian that responds initially to the American Booksellers Association and their anger at big-box stores for deep-discounting books:

In order to draw customer into their stores, Target and Wal-Mart are making ten bestselling author’s books available for under ten bucks. (Wisconsin is missing all the excitement—they have a law against dumping goods below wholesale prices —but Amazon has joined in the fray, so Wisconsinites can still go online and pre-order bestsellers at low-low prices.)

The American Booksellers Association has even asked the Department of Justice to intervene. […] But I’m also taken aback by the horrified response of the book industry. I thought the big crisis was that nobody reads. Now it turns out the problem is that books are so popular with the masses they’re being used as bait to draw in shoppers.

Come on, guys, get your story straight! Which is it?

Reminiscent of ebook pricing and the strange circular logics that emerge when it is discussed, no? There’s lots more good stuff in there, too, about the internet and libraries, peer-reviewed journals and the true value of information (as defined by its accessibility)… as a former library employee who was permanently frustrated by upper-management attitudes to changing technologies, it’s nice to see some common sense being spoken aloud in that sphere.

Ever wondered how much a “best-selling” author makes from a book? It’s less than you might think, especially if you’re not Stephen King or J K Rowling; via BoingBoing, here’s Lynn Viehl running the numbers on her latest novel:

So how much money have I made from my Times bestseller? Depending on the type of sale, I gross 6-8 percent of the cover price of $7.99. After paying taxes, commission to my agent and covering my expenses, my net profit on the book currently stands at $24,517.36, which is actually pretty good since on average I generally net about 30-40 percent of my advance. Unless something triggers an unexpected spike in my sales, I don’t expect to see any additional profit from this book coming in for at least another year or two.

My income per book always reminds me of how tough it is to make at living at this gig, especially for writers who only produce one book per year. If I did the same, and my one book performed as well as TF, and my family of four were solely dependent on my income, my net would be only around $2500.00 over the income level considered to be the US poverty threshold (based on 2008 figures.) Yep, we’d almost qualify for foodstamps.

Now, what happens to the remainders after a debut book has passed its initial “window of opportunity”? Sometimes they’re pulped, of course, but sometimes they’re sold off super-cheap. Via Ian Hocking comes a bit of soul searching from new author MFW Curran, who wonders which is the best outcome for writers:

Judging by the people walking out of the shop with armfuls of novels, if someone did buy The Secret War for £3, would it be such a hardship? True enough, I won’t get anything from that sale, but if it leads that reader to pick up another of my books, that must be good, mustn’t it? I myself have bought books from remainder shops and have then gone on to pay full price for another of that author’s books […]

So this leads me to another question about “what price is a book to an author?” Especially a debut book? Can a writer bear to have a debut book sold for bugger-all if it will lead to a following? Is it worth it for no gain in the short term only for a longer term outlook?

With the rights to my books reverting to me around summer of next year, there is a question about where do I go from here in terms of publishing and many people have suggested self-publishing. But what of the first book? Should this go out gratis to entice people to buy the next two or three? Maybe as an e-book? It’s definitely something worth thinking about.

And while authors nervously joke about it, and friends and family may tease that they’ve seen your book in The Works or a similar remainder bookshop, you know, I don’t think it’s a bad thing at all. Remainder bookshops may seem like a graveyard for novelists, but perhaps its just a new beginning or an opportunity.

Whatever gets it out there, right?

Looking at the music business, I’d suggest that giving as much as you can bear away for free is the way forward… but as has been pointed out to me many times, music and written fiction are very different businesses in some respects. That said, I think the freemium business model is going to be hard to escape, at least in the near- to middle-term; it’s unappealing to many publishers and writers alike, but there aren’t many other options on the table.

Finally, another link from MetaFilter, though one of more general application. The last couple of years have made me realise that I need to undestand a lot more about economics, not only as a writer but as someone who wants to understand how the world operates as a system; hence, I’ve added the History of Economic Thought website to my list of resources that I really need to get round to reading. The web design is very late-nineties retro, but the actual content looks pretty useful.

If you’ve any further recommendations of good introductory sources on economics (or comments on the articles above, natch), please drop a note in the comments!

More thoughts on the LoveMachine

Thanks to New World Notes, we get a little more detail about Philip Rosedale’s LoveMachine system, the reputation-based closed economy we mentioned yesterday.

Cory Ondrejka was Linden Lab’s CTO until 2007, and he was instrumental in developing the LoveMachine system as it operated within the company; here he is explaining a little more about how it came together:

One of my tasks was to invent a new system for employees to give each other feedback, one that would be fun, so easy everyone would use it, and that would generate interesting aggregate information about how individuals and the company were doing.

The design that emerged was tipping.

Tipping — via an internal web tool — would be a positive-sum, transparent game, a way to publicly thank a fellow Linden for going above and beyond. Finding a crucial bug, crunching some extra numbers, helping you figure out the right person to take a question to. Think “Twitter plus $1.” The key was to make it a small amount of money, as a payment makes it real but you don’t want to distort behavior with meaningful payouts.

Tipping was designed to solve three problems: help Lindens know what their fellow employees were doing, generate aggregate data on connections within the company, and identify extreme outliers. It wasn’t clear to me if your tipping rank would be important, but it might be meaningful data if you were generally at the top or the bottom of the list.

He also has suggestions on the problems that LoveMachine – or similar systems – may need to overcome if they’re to be of genuine utility:

The challenges that emerge, of course, fall into three broad categories. First, we optimize for what we measure, so unless you know what you are measuring exactly aligns with business goals, there are going to be misalignments. At Linden, people wrote tools to make it easier to use The Love Machine by irc, chat, email, and the web. This created “pile-on voting”, where an employee would thank someone and other employees would also deliver love to the recipient. This made the amount of love received a function of the time of initial delivery and the communication channel used, which may or may not have been desired. Second, people don’t like just being numbers, they want to understand what they can do to improve, so while The Love Machine should provide additional context for peer and manager feedback, it clearly can’t replace those conversations. Finally, with a transparent system like the Love Machine, are those ranked at the top retained? Are employees who leave or who are fired near the bottom? If not, you may introduce more communication and management overhead rather than reduce it.

If there’s one thing that can be said for certain about reputation engines, it’s that they’re not going to be an easy fix. I guess we’ll only really find out if they work once someone builds one successfully…