The Consumer Surplus Era

Erica Sadun writes about developing aps for Apple’s mobile devices:

As far as I can calculate, I have now shipped well over a million apps on App Store — that’s extrapolating from the 600+ thousand copies that iTunes Connect tells me I’ve pushed out in the last six months, not including updates and such — just individual purchases. And no, I haven’t earned much from those purchases because nearly everything I’ve put on App Store to date has been free.

That’s not the point.

Being able to touch that many people’s lives, and offer them a few nice utilities is the point. Even as a primarily free developer, it’s brilliant to know that I can create apps that matter, that entertain, and that help. I love when people write me and say: “This app is fun” or “helpful” or “silly” or “delightful.” And I wouldn’t have been able to do that without App Store.

She says she’s excited that there’s going to be an “ap store” for Macs now, because like the ap store for Apple’s mobiles it will greatly simplify the distribution of programs that she writes primarily because she wants people to use and enjoy them.

This seems like a good time to trot out Karl Smith’s handy demonstration of the difference between a given sector’s contribution to GDP and its sector to consumer welfare:

The gap between what a given sector contributes to measured GDP and what it contributes to human well-being has always been with us. But the ways in which digital technology makes the non-commercial production and dissemination of information goods viable opens up vast new horizons of consumer welfare. Whether or not someone would enjoy manufacturing automobiles in his spare time as a hobby and distributing them to hundreds of thousands of people for free, it’s not possible to do. The marginal cost of building a car is pretty high, distributing cars is difficult, and the start-up costs of building a car factory are enormous.

Producing information goods—software, text, music, etc.—and distributing it on the internet isn’t like that at all.

Consequently, the realm of activities with gigantic divergence between measured GDP and welfare value is vastly expanding in ways that I don’t think policymakers and civil society donors are yet responding to in fully appropriate ways. The case for finding ways to directly and indirectly subsidize the creation of such goods is extremely strong. But more generally, I think we should expect the significance of this kind of thing to expand in the future. After all, the most active and intense hobbyists are typically senior citizens who, thanks to being retired, have the time and inclination to indulge their passions and desire for recognition and community. But the current cohort of senior citizens in the developed world has very weak digital skills.