Thursday, May 10, 2007

The Free Economy

By Uncle Cheng

“Nothing in life is free”. We have all heard people say that. Yet I am beginning to wonder if it is still true. Nowadays so many things seem to be free. It is a perplexing phenomenon of the modern world.

Evidently it is a strict law of economics that somebody somewhere always has to pick up the bill — i.e. nothing is ever free of charge. But how to explain then the free newspapers and free telephone calls that are thrown at us? It seems the public are being showered with goods and information for which we are not being asked to pay a cent. We are living in an amazing economy full of freebies.

Wherever you look goods and information, which we once had to pay for, are now available for free. It is not just free newspapers on the MTR. When did you last have to buy a ballpoint pen, a diary or a calendar? DVDs are given to us as promotional items or we can buy them for virtually nothing.

Of course the internet is the biggest driver of this free economy. It is an odd paradox that in this age when intellectual property matters more than ever before in history, digital information is increasingly free. The internet is full of free articles, videos, and vast archives of data. Dictionaries, books, images and just about anything imaginable are legally available for free on the internet. Why buy a dictionary when it can be sourced free on the web?

Then there is something called “open-source” free software like Linux which means computer users no longer have to buy expensive Microsoft software. Email addresses, which used to be charged for, are now free. Computer memory is now available for free from Yahoo and Google.

These changes are happening at an astonishing speed. Not many years ago it could cost HK$20 a minute to phone overseas. Such a cost today is unimaginable. In fact we can now use the internet to make phone calls free of charge. Google’s CEO, who should know about such things, says mobile phones will be complimentary items financed by advertisers. An American professor predicts phone calls to any destination worldwide will cost the same minimal price, which in the case of the U.S. means between 1 and 2 US cents a minute. That would mean the cost of calling Guangzhou from Hong Kong would be the same to Buenos Aires.

I also read that even food is being given away. Tesco supermarkets in Europe have been distributing free tins of beans. Websites enable consumers to check where food is free (freesite or ourfreestuff).

Where the free economy is having by far the biggest effect is in the world of intellectual property. The cost of distributing information has quite simply crashed. Think of it like this. If you read a publication on the internet it does not matter to the publisher if you are one of 1,000 readers or one of 1 million readers — the cost is the same. Maybe it is only a matter of time before all intellectual property is free of charge.

Old accounting methods are being turned upside down. Financial institutions used to sell investment analysis but give it away free. An internet user who prints a newspaper article bears the cost that was once borne by the publisher. A whole new business world is being created at record speed. A new invention is the “freemium,” which is a marketing ploy to tempt consumers with free items before selling then extras at premium high prices. The phone website Skype has a neat trick — members call one another for nothing but must pay to call non-members. Publishers have learnt that readers of their free-to-view websites can be made to pay for special interest items like football games.

Unfortunately there are some prices that are immune to the internet. Restaurants for example. The cost of eating out just goes up and up. I will be horrified when a meal in my favourite restaurant costs $1,000 a head and it will be little consolation that the cost of a hour-long phone call to San Francisco is only $10.

Sophie's note: Sigh, Sophie has been blogging for free. Sophie has not earned any money to buy dog biscuits, which are not free in the real or virtual world.


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