The Internet is like Los Angeles...

Los Angeles — where the cars are magnificent but the roads atrocious. Interesting article in the Spectator by Rory Sutherland about how we pay for gadgets but not data, in fact as the utility of the information incresaes we are willing to pay less and less for it:

Given the entrepreneurial feats achieved online, this free-market enthusiasm isn’t altogether surprising. The only problem is that certain aspects of the digital economy actually show the invisible hand as being slightly arthritic.

The problem arises, I think, with Darwin. We have evolved with an inner bias which gives us a high readiness to pay for tangible, scarce things which we can hold and own outright — while we tend to undervalue those things which are ethereal, abundant and enjoyed communally. For the first few million years of our existence, this instinct made sense. But in a digital, networked world, it may cause us to misdirect our spending.

Digital music is perhaps the starkest example of this bias. In terms of what economists would call ‘utility’, digital music is a great improvement on the tangible kind. It takes up no space in your luggage or your home, you can buy songs one track at a time and you can find music in seconds, rather than grovelling around for hours squinting at the illegible spines of CDs. Yet our willingness to pay for intangible music is much smaller; in fact, where we can, we try to get it for free.

And if its bad for audio streaming, its going to get a lot worse for video

[Re niche BBC programming] Ten years ago I would have missed almost all of it. Has anyone suggested this extra utility might justify a slightly higher licence fee? I don’t think so. Even your Spectator subscription shows this same distortion of value. Now, once you subscribe, you can sit in a café in Shanghai on a Wednesday afternoon and read the latest issue on your iPad or laptop two days before it lands on your doormat back home. There is a searchable archive going back years. Yet all this is given away free. It’s the tangible, paper copy people pay for.

Why is this a problem? Because it means all the money gets spent on ‘things’. We all end up with shiny new iPhones, but won’t pay for mobile data, meaning that the mobile data networks on which our phones depend are usually appalling. It’s the technological equivalent of Los Angeles — where the cars are magnificent but the roads atrocious.

That is in the "Anglo Saxon" economies of course - elsewhere Governments have become far more instrumental in ensuring the buildout of the road network, and it shows. The US and UK rank pretty low (compared to their GDP etc) in average internet speed surveys.