The New Economy lives

by John Quiggin on January 28, 2004

Having finally managed positive earnings over a full year, Amazon shares have now acquired that most basic measurement of value, a price-earnings ratio. With shares at $53 and earnings of 17 cents per share, it’s a bit over 300 to 1, which suggests that perhaps the New Economy is not dead after all. With revenues growing at 20 to 30 cent per year, and slowing, it’s hard to see how Amazon can deliver the four or five successive doublings in profit that would be needed to justify this price.

Unfortunately, I haven’t yet been able to get hold of Doug Henwood’s book After the New Economy so I can’t relate this directly to Kieran’s review> But I will make the point that, especially on first acquaintance, the Internet is like a magic mirror. More precisely, it’s like Harry Potter’s Mirror of Erised, which shows the viewer whatever they most want to see. Among the academics and other geeks who built the Internet this was a co-operative world in which sharing based on mutual esteem would displace the profit motive and render large corporations obsolete. In the United States, where stock market mania predated the dotcom boom, the mirror showed a route to instant riches. (Thomas Frank’s One Market Under God, which I reviewed here along with what I found a very disappointing book from William Baumol, The Free Market Innovation Machine, is very good on all this).

After starting this post, I thought it would be a good idea to read the comments on Kieran’s, and I notice that Brad de Long has offered an Amazon book prize to the first member of Crooked Timber to follow Kieran up. I don’t suppose I could ask for a copy of After the New Economy, could I?

Update I’ve fixed a couple of typos noted by commentators. Thanks for that. I’ve also attended to a problem arising from my inexperience with ecto, that led to duplication of part of the post

{ 17 comments }

1

Colin 01.28.04 at 12:30 pm

Hey,

If you are looking for an interesting book on Amazon, I highly recommend 21 Dog Years.

2

jamie 01.28.04 at 1:17 pm

er, shouldn’t that be Thomas Frank’s One Market Under God?

You’re right, though. It’s a great book

3

Brad Delong 01.28.04 at 3:38 pm

I have two copies of _After the New Economy_. Where should I send it?

4

Andy Duncan 01.28.04 at 4:34 pm

John Quiggin writes:

Among the academics and other geeks who built the Internet this was a co-operative world in which sharing based on mutual esteem would displace the profit motive and render large corporations obsolete.

State-funded academics and lefty geeks kept the Internet pretty much to themselves, for many years, in a fairly primitive state, and it was only when business took it over, that the rest of us got a look in, and the Internet improved exponentially in only a few years.

And the profit motive was never displaced. The only reason it seemed to be displaced is because all parasitic academics draw their sustenance from the state, which coercively taxes profit-making private business to fund all of their easy days and long holidays.

Without needing to make any profit, because someone else is forced to do it for them, these academics were able to play, in-between their long coffee breaks, fooling themselves that the ‘horrible’ money motive wasn’t being involved.

Also, those few lefty geeks who actually did something productive in the private sector, used the wages the private sector helped them generate, to fund their spare time spent developing the Internet. The profit motive was therefore only displaced, not removed.

All that coca-cola they drank, at 3am, while enhancing the Apache server, was paid for by the profit motive driven private sector.

Given the choice between a taxpayer-funded Internet kept largely inaccessible within academia, and a privately funded Internet where I can instantly buy Murray Rothbard books on the stupidity of socialism, give me option two, anytime.

5

Barry 01.28.04 at 5:01 pm

Why do libertarians so often sound like they’re bots?

6

Barry 01.28.04 at 5:16 pm

Where to start:

There have been two exponential improvements in the internet in the past few years:

1) Cable/DSL access – due to government-organized monopolies.

2) The fact that huge numbers of people, institutions and companies are now hooked up – 100% due to the openness (i.e., non-proprietary basis) of the net. Anybody care to guess how IBM or Microsoft would have set up an internet?

“Also, those few lefty geeks who actually did something productive in the private sector, used the wages the private sector helped them generate, to fund their spare time spent developing the Internet. The profit motive was therefore only displaced, not removed.”

Amazing how all of these geeks are now lefties. I’d have figured that they werre 1/3 liberals, 1/3 conservatives, and 1/3 libertarian.
Then again, the age of the geek is over – their jobs are being offshored, so maybe it’s time for all good right-wingers to dis geeks.

“All that coca-cola they drank, at 3am, while enhancing the Apache server, was paid for by the profit motive driven private sector.”

Gee, whatever happened to efficient markets?

7

Steve Carr 01.28.04 at 5:35 pm

How do you figure the improvement in cable/DSL access is due to government-organized monopolies? When local phone companies really did have monopolies on Net access, they charged obscene prices for ISDN to homes and sat on DSL lest it threaten their profit margins on T1 lines and the like. It wasn’t until the market became competitive that we saw any improvement at all. My first DSL line was provided by Covad — non-monopoly provider. My best friend’s first DSL line was provided by DirecTV — non-monopoly provider. Right now, there are at least five or six different providers, and prices and service have never been better.

Besides which, giving government credit for allowing huge companies to squelch competitors is frankly just bizarre.

8

Ophelia Benson 01.28.04 at 6:02 pm

I love that Thomas Frank book – as, in fact, I love pretty much everything Frank writes. Read Commodify Your Dissent if you haven’t already, not to mention The Baffler.

9

Andrew Plotkin 01.28.04 at 6:34 pm

Harry Potter’s Mirror of *Erised*. Like, “Desire” spelled backwards.

I know that, as a theoretically adult and employed human being, I
should be more interested in the evolution of the information economy
than in misquoted wordplay. However, “geek first business later”.

But I’ll note that the Internet explosion was originally fueled *by*
that magic mirror. Netscape figured that they could give everybody a
free web browser, and then [mumble mumble mumble], and then they’d be
rich. The mumbling evaporated, but the free web browsers transformed
the Net *anyway*. The lefty communitarians geeks (“…business
later”) turned out to have a better description of reality.

10

Andy Duncan 01.28.04 at 6:42 pm

barry writes:

Why do libertarians so often sound like they’re bots?

I’d rather be a bot than a parasite, any day of the week, barry. What do you do? Something in the public sector, perhaps, or funded in some way through taxation? Go on, enlighten me.

Cable/DSL access – due to government-organized monopolies.

Sorry the words government and organised do not compute … breaking up … breaking up … bot breakdown … bot breakdown …

The only things governments can organise are waste, chaos, and inefficiency. Even in their PARAMOUNT task, that of protecting life and limb, they can’t even organise enough kevlar body armour kits for their own soldiers, because too many billions of pounds have been wasted on fighter planes designed for the 1970s.

The fact that huge numbers of people, institutions and companies are now hooked up – 100% due to the openness (i.e., non-proprietary basis) of the net.

Cracking. What those same evil capitalist companies that socialists hate so much? What do you want, Barry? I suspect having it both ways. You must be a socialist. Hard luck. One day you’ll grow out of it.

If you are living as a tax-funded parasite, remind me next time to try to avoid paying that bit of my taxes which I may be being forced to hand over to you, via Gordon or some other Mafia boss. Most people find having to earn a real living, rather than receiving a parasitic rent, helps them throw socialism off.

100% due to the openness (i.e., non-proprietary basis) of the net

Did I say I was opposed to openness? Sorry, I thought I was dissing the idea that profit has nothing to do with the Internet. It has everything to do with it. And Thank God for openness. For with open standards, and open APIs, more of us can make more money, and compete against Microsoft and IBM. Which is excellent.

What isn’t excellent, of course, is that some of that money is then stolen from us by Mafia crooks like Gordon Brown to prop up useless failures in life, and other rent-seekers, who couldn’t get a job outside the safety blanket of the state.

Amazing how all of these geeks are now lefties.

Well, not ALL geeks. Eric S. Raymond, for instance, one of the main driving forces behind the Internet, is still, I believe, one of us libertarian bots.

Check out the first line on this page:

‘For freedom to flourish, the Internet must be kept free of government control.’

Good ol’ Eric! :-)

Though I’ll grant you, a lot of geeks, especially in Europe, swung left when the winds of change, they themselves helped create, meant they weren’t worth the high salaries any more, that they’d got used to, and started seeing the attractions of state-sponsored jobs protection.

Then again, the age of the geek is over – their jobs are being offshored, so maybe it’s time for all good right-wingers to dis geeks.

Geeks will never die, barry. They’ll just move on to other arenas, as they moved on from inventing fire, wheels, steam engines, and Internets.

Gee, whatever happened to efficient markets?

No, sorry barry. Lost me on that obviously hilarious riposte. It’s my faulty programming. My apologies.

11

dsquared 01.28.04 at 6:52 pm

Andy, I’ve got no problem with libertarian ideology or robust debate, but CT house rules are that you have to mix in some points germane to the post when you’re randomly insulting other posters. Otherwise, I’m about to confirm a couple of your prejudices about heavy-handed Stalinist censorship. Cool it.

12

Barry 01.28.04 at 7:18 pm

Thanks, Daniel. And I think that Andy confirmed my first insult. A breath of USENET groups from the 1990’s.

Andrew – good points. The fact that people were willing to throw temendous amounts of money at anything with ‘internet’ in the business plan was an incredible growth factor for the net in the late 1990’s. What’s wierd is that so much was so obviously crazy. Even the telecom investment assumed staggering rates of growth, which would have to maintained for a number of years. Pretty much assuming that the economy could and would operate at growth rates rarely seen before, for (say) 5-10 years. Ordinarily, pitching a plan based on insanely optimistic projects doesn’t get one money, unless one is truly goldern-tongued. For a few years, insanely optimistic project would be funded, unless one was truly tongue-tied.

13

Barry 01.28.04 at 7:20 pm

Steve – good points about cable/DSL.

The late 90’s growth of the Net was certainly enabled by the government ‘common carrier’ regulation of the phone companies. This kept them from strangling internet businesses in the cradle.

I’m uncertain of how to think of the cable/DSL-phone company set-up. Obviously, competition between the two is good for us. From what I know, most of the investment in local networks is made by those two groups, precisely because they have government monopolies. Resellers of their services wouldn’t exist without them, and I consider them to be sub-contractors. I was working off of the assumptions that the phone companies (in the US) were actually being absorbed into the Bell system, before govenrment regulation. This would mean that most of the monopoly aspect would have been there, even without the government monopoly grant.

14

Andy Duncan 01.28.04 at 7:37 pm

dsquared writes:

CT house rules are that you have to mix in some points germane to the post

Well, my first post was in response to the point that profit had nothing to do with the Internet. Germane, I would’ve said. And yes, I should’ve used the word ‘abstracted’ rather than ‘displaced’, at one point, making me look rather silly! :-)

I also said ‘all parasitic academics’, so this would only apply to those academics who consider themselves parasitic. If you don’t, then why would you be offended? There are plenty of academics in the world who aren’t parasites. Professors Hayek, Mises, Rothbard, and Hoppe spring to mind! :-)

In the 2nd post barry likened me to a bot, I notice without risking censure, so although such insults have very little effect on me, I felt I had due cause to respond in kind, as well as responding to his other points.

I’m confident if barry is happy to hand it out, he’s also happy to take it?

Though yes, perhaps I went a little close to the edge in one or two paragraphs, so your point is duly noted! :-)

Otherwise, I’m about to confirm a couple of your prejudices about heavy-handed Stalinist censorship. Cool it.

Hey, assuming you’re the owner, it’s your blog. It’s your property. You do what you like with it. You won’t find me claiming any spurious social democratic ‘right to reply’. CT house rules duly noted.

Now, back to work. Gotta earn those taxes to keep the public services going!!! $-)

15

a different chris 01.28.04 at 9:27 pm

>Update I’ve fixed a couple of typos noted by commentators. Thanks for that

Well the weird thing is that here in my corner of the WWW (where problems with libertarian ideology abound) I don’t see any typos but I do have two full copies of Professor Quiggin’s post bung up against each other.

And although I adore everything he writes, it seems a little overboard even for me.

Does anybody else see this or do I need to re-install Windows or something even more ridiculous?

16

Barry 01.29.04 at 12:07 am

I see double posts, also. However, you should still reinstall Windows, then buy another copy, and install that. That will give you double productivity!!!

17

Matt Weiner 01.29.04 at 2:02 am

I see one post before the “keep reading” button and one after. I think this may be (as my friend who works in tech support likes to say) user error. (Might, I said, might.)
Trackback also seems to be disabled. Any reason why?

Comments on this entry are closed.