Comments (5)

• Henry Miller

  The article starts talking about power too cheap to meter. Google has found that one of the largest areas they can control costs is by buying lower power computers (as in watts, not speed - sometimes a faster, more power hungry computer can do the work of 2 less power hungry computers).

  Of course google has many thousands of computers, it isn't worth looking at for the average buyer, but for Google the cost of power adds up.

  Published: December 24, 2007 6:09 PM

• Henry Miller

  The article starts talking about power too cheap to meter. Google has found that one of the largest areas they can control costs is by buying lower power computers (as in watts, not speed - sometimes a faster, more power hungry computer can do the work of 2 less power hungry computers).

  Of course google has many thousands of computers, it isn't worth looking at for the average buyer, but for Google the cost of power adds up.

  Published: December 24, 2007 6:13 PM

• Justin L.

  This article is impressive. If we follow the idea to its logical conclusion, a total free market would, inevitably, with the necessary technological breakthroughs, result in a literal man made Garden of Eden.

  Published: December 25, 2007 4:59 AM

• Bruce Koerber

  Apparently the free market brings about prosperity! Novel idea, eh?

  If we recognize the Source of all wealth we change our perspective from doubt into certainty. Can there be any more reason not to search for an economic science that discovers the harmony of science and religion?

  Published: December 25, 2007 7:51 PM

• David

  This Economist article makes a cogent point ( even if it sprinkles a few emotive red herrings around), but it neglects to mention the Schumpeterian component underpinning the process described.

  While economies of scale explain part of any trend towards lower prices, in the example of bandwidth, some credit needs to be given to the dotcom bust of the late 1990s: colossal amounts of fibreoptic infrastructure was laid down by companies that since failed. Investors lost billions without any hope of recovery, the companies vanished, but the infrastructure remained, and its original installation cost no longer figures in the viability models of those who landed up using it. So huge amounts of data can now cross the world in an instant, for ( almost) free.

  We've seen this before: Fortunes were lost investing in railway infrastructure in the 19th century, but that didn't stop the wider growth that rode off the back of the infrastructure that remained after the bankruptcies. Indeed, Id venture to suggest that these failures SPURRED that growth.

  So, to the extent that capital investment remains productive after its costs are either recouped, or sunk, or written off, subsequent pricing of the output from that capital infrastructure is inevitably driven asymptotically towards zero - absent rentseekers setting up tollbooths through the power of the legislative pen, of course.........

  Let me hasten to add that I do not favour any coddling of company failure, or protecting investors from the consequenbces of taking on too high a risk. This process is therefore as it should be. Over-investment ( or Mal-investment, to use a misesian term) needs to be flushed out, not supported or bailed out by government fiat with other peoples money, and the cleanest way to do that is to reprice the capital investment hrough the sale in execution of the assets at the instance of the failed company's creditors. At a lower capital cost in the hands of a new investor who makes it viable, its no longer mal- ( or over-) investment - it is reinjected into the entrepreneurial innovation pool.

  Published: December 27, 2007 8:36 AM