Market Socialism and the iPad
By Arnold Kling
Recently, I wrote about market socialism.
Why don’t individual firms use market socialism? That is, instead of managing through command and control, senior management could set shadow prices for various inputs and outputs, and then allow the managers of individual departments to maximize profits based on those prices. Think of a large, vertically-integrated automobile company. It could operate with a series of internal transfer prices for various inputs and outputs. The most recent Nobel Prize in economics was shared by Oliver Williamson, who focused on the issue of markets vs. hierarchies.
I think that there is a tendency for people with power to over-value control. That leads me to the iPad. Many pundits note that Apple centrally controls the applications that are allowed on its products, as opposed to the wide-open Internet, where there is no central control over the creation of web sites and their associated applications. My guess is that Yochai Benkler and Russ Roberts discuss this in their econtalk conversation, but I have not yet listened.
This is a longstanding controversy. In the 1980’s, when Apple and Microsoft fought for market share, the view of some Apple supporters was that Microsoft won because Bill Gates was particularly mean and ruthless. However, another view, which I share, is that Microsoft won because it was more open. Then, as now, Apple wanted to control the applications that could run on its hardware. Microsoft instead just published its programming interfaces and encouraged anyone and everyone to develop applications that would run on its operating system. The result was a more varied and dynamic ecology of applications, making Microsoft the winner of the entire personal computing era. That era is mostly behind us. Today, with applications now heavily web-based, fewer people worry about which applications any particular operating system can support, and this change in the playing field is allowing Apple to get back into the game in the computer market.
The controversy also shows up in “walled gardens” vs. the wide-open Internet. Around 1995, some people thought that the public would prefer the safety and simplicity of closed online systems, such as Prodigy, Compuserve, and America Online. Instead, the public flocked to the Internet, and only AOL survived–basically by becoming an Internet service provider distinguished by ease of use and brand recognition.
Today, Facebook represents another incarnation of a “walled garden,” allowing you to put your real name and picture on a network without being subjected to spam (at least for now). Whether Facebook survives, or instead gets superceded by a more open approach to social networking, will be an interesting issue to watch.
My thoughts on the iPad, without having used one.
1. For someone my age, it represents a much better form factor than the other i-things. It is hard for me to look at a small screen. I call the iPad the iTouch for old people.
2. I write a lot, so having a keyboard matters. Once you add a keyboard, I don’t see the iPad is being much different from a Netbook (again, without having used an iPad).
3. I think that the coolest form factor of all would be a headset and a virtual keyboard. I don’t get excited by the tablet concept, although I may be in the minority there. My view on this go back more than eight years.
4. I do not like the way that iPad envisions paying for content. I think the itunes model is wrong. It preserves what I call content “silos,” when instead I wish to see what I call “clubs.” Again, my views on this go way back.
Having said all that, I am not ruling out someday owning an iPad. If it turns out to be useful and/or enjoyable, I will not stand on principle.