Arnold Kling

Asymptotically Free Goods

Arnold Kling, Great Questions of Economics
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I've written an essay on asymptotically free goods.

Asymptotically free goods are a new economic force. Problems are being solved not by throwing capital and labor at them, but by undertaking research and development which, when completed, leads to solutions that cost relatively little in terms of traditional factors of production.

I would not want to own stock in a company that generates its revenue from music distribution on CD's and tapes, from phone service, from selling information retrieval services, or from traditional health care services. For these companies, the present value of future earnings has to be calculated under the assumption that at some point they will be crushed by the steamroller of asymptotically free goods.

Asymptotically free goods also raise issues of public policy that may exacerbate the polarization between liberals and conservatives. For those who tend to view government as an instrument of the public good whenever the free-market outcome may be flawed, asymptotically free goods provide an excuse for more government intervention. For those who tend to see government as providing an instrument by which status quo interests can impede change, asymptotically free goods are a reason for keeping government hands off.

Discussion Question. Think of music as an asymptotically free good. What is the "research and development" that produced music?

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