Wednesday, 9 February 2011

Paying for air

Our current economic theory in essence is based on supply and demand. If there is an abundant supply then we will demand less and so the price will go down. Imagine what the last strawberry on earth would fetch on an open auction. Limit to supply is called scarcity and underpins capitalism.

There is one problem with that though; humans are an inventive bunch and we are slowly solving the problem of scarcity. For example, apart from initial development cost most media is free or nearly free to distribute. Hell, you could even make CD's out of corn starch with individual CD being so cheap that it's almost free.

Diamonds are the most well know illusion out there. The rarest gemstones in the world are Rubies, yet as you well know diamonds fetch a far higher price. For diamond companies it is important to create scarcity to keep diamonds highly desired and therefor highly prized.

The biggest con of Western capitalism though has to be text messages. A text message is limited to 160 characters each requiring a byte. It's so small that it is piggybacked onto the phone network, occupying otherwise unused space in a control channel used for network maintenance.  If you bought 1GB of data use for $100 then by right your text message would cost you 0.00149¢. In other words with 1GB of data you could send 6,710,886 texts. Great, if you don't sleep, don't eat and send a text message every 10 seconds you can keep your self entertained for 2 years, 1 months and 16 days. 
"Charging them to RECEIVE messages?! That's brilliant!"
The price of anything in reality is what you can be persuaded to pay. In turn if we think that a particular product is scarce we are willing to pay more. That's how mobile phone operators have been able to increase price of messaging while the true cost has been decreasing even more.

I wholeheartedly recommend Priceless: The Myth of Fair Value (and How to Take Advantage of It) for any economics student who wants to find out more.

20 comments:

  1. I read about diamond and rubies in college, and was shocked about how far were the levels that the human greed could reach.


    Hell, you control market to keep slaves working?

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  2. The market price is based on the manufacturers will, the demand is insignificant. The story about demand and supply is a myth, at least in the modern world.

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  3. Wow, I didn't realize how much we're getting ripped off with text messages...

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  4. I also like how money is an even bigger ruse. If the economy disappeared you'd be left with some green paper, round metal pieces, and some electronic numbers.

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  5. Wow, I never figured I was getting buttfucked so hard......very interesting and thanks for the post, great read

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  6. And that, sir, is one reason why I don't text.

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  7. The Diamonds picture reminds me of Blood Diamond, really good movie

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  8. The best part about diamonds, is it is possible to literally create diamonds. While the tech and machines are expensive, the materials to make them is dirt cheap.

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  9. that text messaging thing is funny, I never heard that and it does not surprise me. I always wondered why the limit was 160. This is a great topic, ive been looking into the Federal Reserve and in general our countries Financial empire, will look forward to seeing what else you write about

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  10. Really sad how much we get charged for shit. . .

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  11. It has to be small in order for it to piggyback on other data. Originally it was 128 bytes but was later improved to 140 or 160 7 bit characters.

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  12. This is a fantastic post! I've been telling friends about the text message rip off for a long time.

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  13. They do that to consumers because they can. We just need to stop being retards and open our eyes as a group.

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  14. Wow, never knew that about diamonds.

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  15. Thanks for that, it was really interesting to read.

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  16. Interesting, also with diamonds the big chain stores like Zales and Kay rip you off with their made up charts. It would be cheaper to buy diamonds from local store owners. Its also sad how the human race runs on economic improvement rather than advances in the world of science. Keep it up I love learning new things like these.

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  17. Im surprised so many find this so shocking. Men are evil, greedy, bastards who like to serve it with no lube. Take it and like it ;)

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  18. I'm an economics masters student :) There's a lot more bullshit to this than anyone could ever imagine.

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  19. i wonder why i have a sms flatrate without using it.. time to cancel it!

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