Tyler Cowen points to a historical timeline of the cost of data storage on hard disk drives.

According to the timeline, the cost fell below $100 per megabyte in May of 1984. It fell below $1 per megabyte ten years later, meaning that it fell by a factor of 100 over that period. That means that storage capacity per dollar increased at a 58 percent annual rate.

Ten years later, the cost was $1.15 per gigabyte, meaning that the cost had fallen by nearly a factor of 1000. That means that storage capacity per dollar increased at slightly more than 100 percent per year.

In my view, this changes the way that the music industry should work. However, the changes have taken place so rapidly that the economy has not yet adapted.

Update: See also Brad DeLong’s post on this topic.

For Discussion. What other industries ought to change in response to the reduction in storage cost?