Several commenters have a missed an important point in the shopping cart analogy (here and here).

Of course the manufacturers of shopping carts charge respectably for them -- perhaps $100 or even more. The point is, the actual marginal cost of producing a cart is trivial, once the fixed costs of the capital investment in the production line are excluded. Indeed, since much labor cost is essentially fixed now (viz GM), marginal cost in many industries is indeed close to zero. The shopping cart makers charge more because they must recover their fixed costs -- just as, for example, the maker of a movie must recover the cost of production, not just the marginal cost of distribution.

As discussed more fully here, this is true for all investment-heavy goods, which, in the modern economy, is practically everything. This means that the alleged distinction on this score that is often made between physical goods and intellectual goods is, in fact, invalid. The distinction is one of degree, and often a slight one.

posted by James DeLong @ 9:24 AM | DRM & Watermarks, etc.

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