Ending End-to-End?

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Jeff Chester of the Center for Digital Democracy has a piece called "Stealing the Internet" up on TomPaine. Sounding a distinctly Lessigian note, Chester attacks attempts by Net infrastructure providers to meter and differentially charge for different uses of bandwidth.

Now, I'm somewhat sympathetic to concerns about this, insofar as the open, end-to-end structure of the Internet has played a large role in allowing innovation to flourish. But it's precisely for that reason that I'm not all that worried: Consumers accustomed to the Net as they know it aren't going to sit still for an architecture that contravenes the end-to-end principle by requiring centralized approval for new applications. And it's more than a little amusing to see precisely the same people who carp the loudest about a supposed "digital divide" get just as hot and bothered about a form of price discrimination that could help to close the (already fast-closing) gap by offering tiered access.

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  1. Julian,

    Keep writing like this and soon you will be up to Derrida’s speed. 🙂

  2. c. 1995 “internet” access for the masses was far more tiered than it could ever get now. Internet communication — chat rooms and message boards — depended on whether you dialed-up on Compu-serve or AOL. The web was barely utilized on such software. While serious innovators are always going to opt for end-to-end structure, others just want to IM and check their email once in a while

    Somewhat digressing, Wayne Crews had an interesting idea calling for privately-controlled parallel internets: “splinternets”

    http://www.cato.org/tech/tk/010411-tk.html

  3. Just don’t tread on my goddamned internet, and no one will have to die. 😉

  4. Too many “progressives” confuse the issues of concentration of the IP market and “tiered” service, when they’re entirely separate. Leaving aside concentration, which I view as largely the result of state intervention in the marketplace, tiered service in itself is a good thing. It is a move away from a subsidized infrastructure created by the federal government, toward one operating entirely on the cost principle. The price we pay for things SHOULD reflect the cost of providing them.

  5. “The price we pay for things SHOULD reflect the cost of providing them.”

    Actually, the notion that the price should reflect the cost of production is an old, and venerable, economic fallacy. Price should reflect the value placed on the service by the user, which may or may not have any relationship to cost.

    The cost of any unit of a commodity product or service in a heavily capitalized market is actually very difficult to calculate. There’s marginal cost, replacement cost, etc.

  6. Don’t forget opportunity cost – the Big Bitch of all costs in economics, as it is so rediculously hard to really wrap up in a neet and reliable package.

    Price is set primarily and most proximately between the maximum price the buyer is willing to pay, and the minimum price the seller is willing to accept. Where the final price lies is decided by negotiations and outside and systematic factors.

    Price as has a floor set on it in that below a certain price a seller just won’t accept selling it, because it is worth more to them to just keep the damn thing. One of the side-effects of specialization in an economy is that the goods produced have little to no value to those who produce them, as their only value is purely trade value – as such there is no floor on the price, and as such they will be sold at pretty well near any price, including below cost; this is because holding onto the item has holding costs, and sense you can’t sell it for more anyway, you may as well just sell the damn thing and be done with it (it is in your interests to do so).

    This has the unpleasant effect of driving prices down below profitable levels such that the producers can, and often do, end up going bankrupt and otherwise reducing supply until the situation is correct; one of the nice effects is that producers begin to shift and sell other products to make their profit, often continuing to produce and sell things for below cost for other reasons (like holding onto customers or attracting new ones, as with Loss Leader items).

    As such, the price you pay for an item bears no real relation to the cost to produce it, and nor should it, as we would actually be worse off as a whole (and on the net) if such a thing were to happen.

  7. R.C. Dean,

    Regardless of what something “is worth” to a buyer, a seller cannot charge according to that valuation unless he’s in a special situation enabling him to extract a scarcity-rent or producer’s surplus.

    Plutarck,

    You are correct in pointing out that short-term prices deviate from cost; and from the point of view of the producer who has already-made goods on his hands, cost is a past issue. He has to dispose of the goods at the best price he can get in the future, given the market as a “snapshot” of supply and demand at any given time.

    But if market entry is free, and the good’s supply is at all elastic, price will adjust itself toward cost. The producer may dispose of his existing goods below cost, but if the price they bring is consistently below cost, he will cease to produce. And if it is consistently above cost, other producers will enter the market.

    My main line of study over the last year has been an attempt at rehabilitating the classical labor theory of value against marginalist/Austrian critiques. I’m quite aware that this position is viewed as the economic equivalent of a flat-earth theory. But believe it or not, I actually HAVE read Bohm-Bawerk and Mises. A great many of the marginalist/subjectivist insights can be integrated into a cost- or labor-theory framework.

    The most merited criticism B-B made of the Ricardo/Marx LTV was that it had no adequate mechanism or reason behind it. Although they occasionally referred to the law of value acting through the behavior of market actors, they acted more often as though the translation of embodied labor-time into exchange value was some kind of self evident metaphysical principle.

    I believe that the answer to that lies in Smith’s (and Hodgskin’s) “toil and trouble”; and Tucker’s remark that producers, in a free market, will charge for only what costs them–and “after all, what is cost besides labor?”

    Even the Austrians admit that labor is unique among the factors of production in being a disutility. The “cost” of all other factors is simply relative to available alternatives, which are shaped by the relative distribution of power and property at any given time; but labor is a real cost, in terms of subjective effort and unpleasantness, in an objective and absolute sense.

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