'Theoretical' Nobel economics explain WHY the tech industry's such a damned mess

Regulation is BAD. Unless we need regulation... but how do we know?

To change examples, is Microsoft pricing Xboxes at cost, or possibly even below cost, the sort of cut-throat smashing of the competition that we should be stopping or does that interplay between having a large platform base and thus lots of developers writing for that platform actually give consumers a benefit?

Economics: Even the price of your Xbox can be explained by balding men in suits

And yes, the answer is always informed by our interest in consumers: to go back to the Google example, whatever we do about that search dominance is going to depend on how well consumers do out of it. What the people at Foundem think about it all is irrelevant.

The above paper also, obviously, explains the economics of El Reg: it's free to read and thus it's at least a two-sided platform. The content attracts the tech-savvy reader; that audience is of interest to those who would advertise to the tech-savvy (and even better, those who sign off on tech budgets) and thus there's a market in delivering both to the respective audiences.

The trick, as every newspaper ever has worked out (and as the dead tree and free computing magazines of yore also knew) is carefully balancing the desires of the two groups of customers.

Tirole's also done some more interesting work into how having a monopoly in one part of an ecosystem allows power to be exercised in another part of that same ecosystem. The traditional view is that having a monopoly in one part of the value chain doesn't mean that one can exercise it at other points. Controlling the PC operating system doesn't mean that one can control the mobile phone operating system.

That might be true but that doesn't mean that control of the desktop means you can't “influence” the browser market. Or that control of search means you can't beat up people in comparison shopping. Maybe: remember that “it all depends”, as we hope the EU will remember as it looks at Google and as it may (or may not) have done when looking at Microsoft in the past.

The driving interest for Tirole has always been “well, whadda ya' wanna do about it?” but getting to that point has meant that he's had to work out (with others' help, of course) just what the heck is going on in these slightly strange markets. Thus he's had to build a decent theoretical model that we can use to analyse any specific instance. So this is a Nobel for real world work (despite many describing it as a theoretical one) which already informs much of how we regulate that real world.

Which isn't all that bad for something that's not a science, couldn't explain the crash and simply assumes that pure selfishness will lead to the best of all possible worlds, as so many blowhards tell us economics is about. ®

Bootnote

* Yes, yes, yes, it's not a real Nobel, Sveriges Riksbank Economics Prize in Memory of Alfred Nobel and all that.