The Economic and Moral Case for You Giving Me Money

Also, why I think that creating innovation is one of the most important political issues at the margin

Note: This is mostly intended in jest, though I do think the logic is sound. I would also appreciate your money.

This was originally behind a paywall so that I could practice what I preach, but it was a pain to set up substack paid subscriptions, so I decided against it.

Lots of people like capitalism a lot. Markets are a pretty good way of producing desirable goods and services at a low cost. But even the most steadfast defenders of markets agree that there are such things as market failures. These are cases when, even using the idealized assumptions that show up in an economics textbook, there will be inefficiency. One of those cases involves public goods.

Public goods are goods that are non-excludable and non-rivalrous. Nonrivalrous means that when one person uses a good, it does not prevent others from using it. My substacks are non-rivalrous — everyone could read them at once. Non-excludable means that I can’t easily exclude people from paying for them. An example is paying for the military — if the people at the border buy a military, they can’t choose to only protect the people who choose to pay a fee.

Now, my substacks are not quite a public good because they’re excludable — I can just prevent people who don’t pay 5 dollars a month from having access to some of my articles. But this isn’t a perfect solution because they are non-rivalrous — one person reading the article doesn’t prevent another person from reading it.

This gives us sound economic reason to expect my excellent substacks to be underproduced. Non-rivalrous things are underproduced. Suppose I put all of my articles behind a 1 dollar paywall. Well then, there’s massive economic loss — all people who value my articles at less than 1 dollar will not read my articles, and all the consumer surplus of reading the articles will be frittered away. Additionally, even if a person does value my articles at more than a dollar, they might not realize this.

So, this is the theoretical reason to think that I’m not being paid enough. Now let’s review the facts. I am currently making $0 from my substack! My posts on average probably get around 220 reads. I’ve gotten 16976 article reads this month. Assume conservatively that a read of my substack produces equivalent value to finding a nickel. This would mean that my posts have produced $848.80 worth of value. And yet despite this, I’ve gotten zero dollars. This will mean that my posts will be underproduced, for you all are free riders!!

Now, in my case, the economic loss is not that great. It’s only a few hundreds dollars, and I like writing enough to be willing to do it mostly for free — those this certainly does cause me to write less on the margin! But this shows something pretty shocking about general writing — that there’s way too little of it.

Let’s imagine that Scott Alexander gets 200 times as many reads as my blog does — this seems pretty reasonable; his articles have far more likes than mine do. Well, this would mean that he should be getting 169,760 dollars in this month alone. Overall, this means that there are way too few people wring about things — the incentives for innovation just aren’t enough. If, despite being quite a small substacker, I’m producing an amount of value similar to the value of a mediocre part time job, then the people with hundreds or thousands of times my readers should really be making a lot of money. Good writing should be a lucrative career — it produces enormous benefits for lots of people.

This applies broadly to innovation. We’d expect innovation to be underproduced in a free market — even with patents. After all, with patents one only gets the monopolistic value of their idea for a limited number of years. If I invent a drug that produces 1 billion dollars worth of value for the next 100 years, while only producing 500 million dollars for the next 20 years — until the patent expires — then I’ll be getting only 1/9th the total value of the drug. This is bad — if it costs me twice as much money to make the drug as the profit I get from the drug, it would be socially optimal for me to make it, but I won’t have an incentive to. This is one reason to think that we should have far more innovation, not just for pharmaceuticals, but for lots of domains.

So, while the proximate lesson is that it’s important to pay me money, the broader lesson is that we should have more innovation. And if you’re convinced that you should pay me money, here is my Patreon.

https://www.patreon.com/deliberationunderidealconditions