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March 01, 2008


Chris Anderson


You can do better than this. The discussion on externalities is all in the article, which is just a few pages long. C'mon, you can do it! Read the actual words and stop this sillyness about what is or is not in a three minute video. Unless you actually don't care about what I have to say and you just want to make your own point (again).


Matthew Hurst

Chris - ok, I'll come clean. I have read the whole article, including the part on externalities. I'm just not ready to write up my thoughts on the whole piece. As for repeating the same point, I alluded to that in the post, recognizing that this was not particularly positive.

What you say in the article about externalities - as far as I understand what you have written - doesn't address the common economic concept of the term. You write about other types of currency (though you transfer this to non fungible - or at least not well understood - concepts) such as attention and reputation. Externalities are about impact on resources not covered in the model of the direct transaction.

Wikipedia says:

In economics, an externality is an impact (positive or negative) on any party not involved in a given economic transaction.

I might extend this to say that they are costs not accounted for.

I've been doing some intropsection about why I really care about this topic and I think it is really a moral issue. I believe that free stuff gets wasted - which is why we have disposable razors and way too many plastic bags filling up our landfills. And I don't mean wasted in the Alan Kay sense (which was really about the opportunity to explore), but in the negative sense.

Chris Anderson


Thanks for your explanation and candor. I certainly wouldn't argue that attention and reputation are the ONLY externalities to a monetary market, but they certainly are externalities. I'd suggest you review your understanding of economics if you don't see them as such.

Now it may be that the other externalities, such as the environment, matter more to you, in which case fair enough--you're entitled to your priorities. But I'm glad you've now clarified your point, and I hope you won't continue to suggest that I'm not addressing externalities at all.


Matthew Hurst


Perhaps you have hit the nail on the head: there are some externalities that I care about and other less so. Overall, there are two pieces of your work that I want to read more about the first is externalities (yes, you have mentioned them, but I think there is a lot more to be said) and the second is what might be called the cost structure of goods and services. For example, I was just reading in MIT Technology Review a piece which stated that the cost of acquiring a new customer for a bank was $400 to $1,000, and that this cost has a direct impact on the interest rates that a bank can offer. Similarly, 2007's internet advertising is estimated to be around $20 Billion. That amounts to more than $50 per capita for the US (in other words, over the course of the year, $50 of what you pay for stuff is used to attempt to persuade others to buy it as well).

This is, IMHO, part of the tax that goes to making things 'free' online. You describe the advertising model in your taxonomy of free, but you don't capture this point. I'm sure the ecology that encompasses the cost of advertising, and the value of promoting the product to the impact it has on the quality and availability of the product, etc. would be fascinating to capture in this context.

BTW, I'm not sure if my motives in writing on this are clear. I'm not simply attempting to have a go at you. I'm far more interested in seeing a resposible picture of consumerism and new economics emerge. As for my understanding of economics - yes, I'm a complete amateur, but what I've read of externalities often brings up the issue of environmental impact as a prototypical example.

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