
The Economics of Evil Google - mkr-hn
http://krugman.blogs.nytimes.com/2013/03/23/the-economics-of-evil-google/
======
alanctgardner2
This is getting ridiculous. It's been three weeks of highly public
complaining/pseudo-analysis about Google Reader. Now it's 'critical public
infrastructure', on par with public transit systems.

Can we have a reality check? It's an RSS reader. It was really good. Now it's
shutting down. Nobody relies on it to get to work so they can feed their
children. Building a replacement doesn't require digging tunnels, buying
trains, hiring drivers. The economic argument is interesting, but I'm
wondering if this wins for 'Most Hyperbolic Google Reader Shutdown Article'.

~~~
ChuckMcM
_"Nobody relies on it to get to work so they can feed their children."_

That isn't true but why it isn't true is not immediately obvious. Google
reader drives a _ton_ of traffic, what that means in real terms is that there
are a huge body of people who don't have time to regularly visit a blog, but
they do have time to look quickly at what 10 or 15 blogs have recently posted.
Thus they _discover_ where there is an interesting article on "your" blog and
visit. That is how it drives traffics to otherwise poorly visited blogs. It is
more effective than G+, Organic Search, and Facebook in that regard.

Those bloggers that benefit from this feed _do_ feed themselves and possibly
their family on income they get from their writing either in ad-clicks or
affiliate links.

When Reader goes away, a number of those blogs will be hurt, and those people
will be scrambling to find other ways to drive traffic to their sites.

Now this will also hurt Google because there is a crap ton of AdSense for
Content advertising on those blogs, and I expect that what use there had been
of Blogger will drop below the 'minimum sustainable point' and so Blogger too
will get tossed into the spring cleaning trash bin. Now its probably not
noticeable (much) the last time we (Blekko search engined) looked through the
blog crawls in depth Google was the dominant ad network provider on those
blogs, but they do something like 3.7B$ of revenue in 'Partner sites' [1] per
quarter and 1% of that being tossed out the window is only 37M$ per quarter
(or about 150M$ for the year) isn't a huge loss for them but its going to hit
a number of their "partners" quite sharply.

Unlike sites which are bogus flick-n-click ad reapers these folks are actually
trying to use the system in the way it is supposed to work, they write quality
content and Google helps them monetize it.

The thing that few people "get" about Google isn't that they are a search
monopoly (they aren't) it is that they are an _advertising_ monopoly (which
they are). They are synonymous with "internet advertising" and having dealt
with a lot of advertising partners, they all seem to end up re-selling
Google's ads in one way or another. Its like having three different pizza
restaurants but only one kitchen.

I'm hopeful that this will create opportunities for actually new advertising
networks to appear> We'll have to wait and see though.

[1]
[http://investor.google.com/earnings/2012/Q4_google_earnings....](http://investor.google.com/earnings/2012/Q4_google_earnings.html)

~~~
bmmayer1
No one owes those bloggers traffic. Certainly Paul Krugman is completely out
of left field to suggest that the traffic is a public service.

~~~
ChuckMcM
I agree that Krugman over states the importance. My point was that Reader
generates a lot of legitimate advertising revenue for Google, which they kill
off, and in the process may kill off some of their smaller "partner sites."
That refutes the equally over broad characterization that "nobody" uses Reader
to put food on the table.

------
pessimizer
Warning to people reading the comments before the article:

This article is not calling Google evil, it's examining the economic and
social incentives of maintaining a public utility as a for-profit company and
as a society. I tend to think that putting scare quotes around words in
headlines is really condescending behavior from headline writers, but threads
like this remind me that I'm not an authority of headline writing.

And for the people arguing that Krugman is an ignorant big government fraud
for claiming that Google Reader is a public utility - Mr. Johnson's water pump
on the corner that half of the people on the block use is a public utility.
It's economic analysis, not a communist grab for your guns, or a socialist
power play to keep capitalists from doing whatever they want to do, whenever
they want to do it.

edit: hadn't refreshed in a while before replying. This comment is
mischaracterizing the level of discourse in this thread now:)

~~~
javert
You're completely wrong. Krugman hates capitalism and free markets, and is on
a crusade to end them.

Claiming that X's property is a "public utility" _is_ a power grab.

~~~
pessimizer
No, it's claiming that it has utility for the public. There's a hint in the
name.

~~~
javert
That's a contradiction. I personally have utility for the public. So do
private companies. You can't call these things public utilities without
introducing a contradiction into the language.

People who try to introduce contradictions into the language only do so
because they are _motivated_ to do so, because they want to get something
dishonestly.

Another good example, besides the one we are discussing, is the idea that
people now call whatever they want a "human right." That's a contradiction,
because it's not necessarily the case that it's even _possible_ to _produce_
enough of whatever that thing is.

Mangling the language is a crime against thought.

------
liber8
This is the fundamental problem with modern liberal economic thinking:

>> _First, it’s a well-understood though not often mentioned point that even
in a plain-vanilla market, a monopolist with high fixed costs and limited
ability to price-discriminate may not be able to make a profit supplying a
good even when the potential consumer gains from that good exceed the costs of
production. Basically, if the monopolist tries to charge a price corresponding
to the value intense users place on the good, it won’t attract enough low-
intensity users to cover its fixed costs; if it charges a low price to bring
in the low-intensity user, it fails to capture enough of the surplus of high-
intensity users, and again can’t cover its fixed costs._ <<

Sure, it's well understood that certain people want others to provide a
service that certain people find very valuable, but aren't willing to pay for.
_That doesn't mean that service_ must _be provided by the government when
private parties refuse to provide it._

In 2003, I wanted an online store where I could purchase all of my pet-related
supplies. This would make me, and society, far more productive because we
would not have to spend time going to the pet store and purchasing those
products. We could all then spend that extra time being productive.
_Potential_ consumer gains exceeded production costs.

Unfortunately, actual consumer gains did not exceed pets.com's production
costs. So it died. And guess what? It turns out that when a company learned
how to properly structure, supply, and support such a service at the right
price, people were willing to pay for it, and thus _actual_ consumer gains
exceeded _actual_ production costs.

The government didn't have to step in and supply this vital service to its
citizens. Some of the smarter citizens figured out how to do it, at assuredly
a fraction of the cost of whatever government program might have been
implemented.

Note: before you claim that pets.com failed for some other reason, please
stop. I picked it as an obviously frivolous example. You can substitute most
other recent government programs if you’d like.

~~~
teebs
His argument is not that it costs more to run Google Reader than there is
benefit, so we need the government to run it. His argument is that the benefit
to society of Google Reader is greater than the cost to society of Google
Reader. Outside of a free market, it is better for society to have Google
Reader. Unfortunately, there is no price structure that allows Google Reader
to exist as a for-profit service. The market is inefficient, and the
government should step in to fix this inefficiency. Therefore, it might be
useful to run some services like Google Reader as government services.

I think that Google Reader should not be government-run, but he raises a
larger point. There could be some internet services that would be better run
by the government, and we don't really have any today. I don't think we can
dismiss that possibility. I can't think of any sites like that right now,
though.

~~~
liber8
Right, that's what _he's_ saying. _He_ believes that a certain good makes
society better off. And yet, the pricing mechanism, the fundamental
underpinning of capitalism, shows otherwise. (I'm speaking obliquely about
Reader, but more broadly about nearly everything technocrats love that people
aren't willing to pay the full cost of.)

You can argue that this reasoning is flawed (people aren't rational!), but the
results are hard to argue with. The market does a fabulous job of allocating
resources. Individuals, no matter how smart, don't.

~~~
_stephan
Please read up on public goods, natural monopolies and externalities before
you claim that the capitalistic market outcome always reflects what a good is
worth to society.

~~~
canes123456
Despite its problems, it is the best system we have. What is a better, asking
krugman?

------
dreamdu5t
"Google... a monopolist with high fixed costs and limited ability to price-
discriminate"

Google is not a monopoly and neither was Google Reader. Krugman is
intentionally disingenuous here to further his argument.

Krugman knows Google isn't a monopoly. He doesn't care. He's always trying to
push the same narrative with his blog: Big corp is evil so government should
step in and save the day! For anyone familiar with his blog, his agenda is
extremely transparent at this point.

~~~
_stephan
Where does Krugman state that Big corp is evil? Are you talking about banks?

Krugman doesn't state that Google is a monopoly and he certainly isn't
disingenuous here. He's just using the Google Reader situation and an article
by Ryan Avent as a hook to make an interesting economic argument about
monopoly markets with a certain cost and consumer demand structure.

BTW, building a competitive search engine is arguably associated with
relatively high fixed costs, and any social site is hugely affected by network
effects. These are both traits that can lead to natural monopolies.

~~~
dreamdu5t
_Where does Krugman state that Big corp is evil?_

The title of the post is, "The Economics of Evil Google." It's not written as
a question, but a statement. Nowhere in the article does he give any
indication that it is sarcastic.

 _Krugman doesn't state that Google is a monopoly and he certainly isn't
disingenuous here._

He doesn't state it, he implies it [1]. Otherwise, what does being a monopoly
have to do with Google? High fixed cost and limited ability to price
discriminate are not characteristics exclusive to monopolies. I don't see the
reason to refer to "a monopolist" unless he is implying that Google is a
monopoly.

When I read the article, I concluded:

* Krugman believes Google had a monopoly on RSS. [1]

* Krugman believes that RSS is a crucial public infrastructure [2]

* Krugman thinks the solution is a government-provided RSS reader. [3]

Just curious, what did conclude from this article that is different?

[1] "First, it’s a well-understood though not often mentioned point that even
in a plain-vanilla market, a monopolist with high fixed costs and limited
ability to price-discriminate may not be able to make a profit supplying a
good even when the potential consumer gains from that good exceed the costs of
production."

[2] "It seems hard at this point to envision search and related functions as
public utilities, _but that’s arguably where the logic will eventually lead
us._ "

[3] "So what’s the answer? As Avent says, historical examples with these
characteristics — like urban transport networks — have been resolved through
public provision."

------
michaelwww
> Ryan Avent, who argues that Google has been providing crucial public
> infrastructure...

Krugman proceeds assuming that were true, but it's not. There are plenty of
free alternatives to Google Reader. All this proves that old saying; never
pick a fight with someone who buys ink by the barrel.

~~~
mtgx
Krugman is such a faux-expert, that is way overhyped. He clearly doesn't
understand the technology very well, and he seems to be confusing RSS, the
protocol, with Google Reader the app. And even then, RSS is not a "critical
public infrastructure" that the government should maintain or whatever. It
seems like he's just fishing for (more) fame/hits here, as there was no reason
for him to write about this.

~~~
olefoo
He's commenting as an expert in Economics, not internet protocols. In this
case, he's looking at the economic effects of a service that is valuable to
it's users, and that appears to be both slightly unprofitable and a nautral
monopoly. He's not coming to any definite conclusions, he's exploring a set of
ideas; not drafting policy. Your comment adds nothing to the discussion; so
what are you getting out of making it?

~~~
Gormo
> He's commenting as an expert in Economics, not internet protocols.

Unfortunately, he isn't either. He isn't an expert in internet protocols
because he doesn't have a sufficient understanding of how the internet works.
He isn't an expert in economics because there's no such thing as an expert in
economics.

I mean this seriously: [macro]economics isn't an empirical science; no
experimentation, no experience, therefore no expertise. Mastering untestable
theoretical doctrine doesn't count as substantive expertise.

~~~
olefoo
Not to get too deeply into the weeds of philosophy of science; but
macroeconomics very is at least as much of a science as climate science.
Observations are made, hypotheses are tested against reality, and predictions
are derived that fail or succeed.

That said it also suffers from a similar pathology where academic
investigation is systematically distorted, occasionally suppressed outright
and researchers in the field are sometimes attacked ( literally ) for the
views that are ascribed to them.

~~~
Gormo
> hypotheses are tested against reality

How?

~~~
olefoo
Retrodiction. <http://en.wikipedia.org/wiki/Retrodiction>

------
mkr-hn
A relevant point of concern: Google Drive isn't actually downloading
documents.

Maybe someone's already brought this up, but I just tried Google Drive's
desktop application for the first time. It downloads what amounts to a
shortcut that's a text document with a link to the file on Google Docs.

The benefit of syncing is lost--you don't have a copy of a usable file you can
open in another program or save somewhere. Even Microsoft's SkyDrive downloads
real documents made in the web version of Office.

~~~
justinschuh
I can't figure out what you mean about the benefits of syncing being lost,
because the data is clearly synced. However, I can explain the "shortcuts"
you're referring to. Those are for native Google Docs, which don't have a
universal representation in other applications (they're tied to remote or
locally stored web state) unless you explicitly chose to export to another
format. Whereas Microsoft's SkyDrive is just raw MS Office Documents.

The tradeoff between the two is that with Docs you get real-time editing and
collaboration, but if you want a real local copy you'll need to target a
specific export format. Whereas SkyDrive always keeps a local copy, but it
requires you to explicitly save and resolve conflicts if you want to
collaborate with another user.

Of course, if you want to you can just use Google Drive as a dumb file syncing
mechanism without real-time collaboration or online editing. You just don't
use Google Docs and tell Drive not to convert files to Docs on upload.

~~~
mkr-hn
I opened a .odt file in Docs, but Docs cloned it into a new document and
created a [filename].gdoc file in the local Drive folder. I don't see a way to
work with the original file. It's nice that I can choose formats when
exporting, and even export in bulk, but I want to decide which formats I work
in. And it relies on this feature always being there.

It won't even let me just open a .odt. It opens in some kind of previewer when
I click the file. Opening it takes clicking in a menu to select "Open in
Docs." Then it clones to that magic format that's ethereal until exported.

~~~
justinschuh
Unfortunately, this is the same pain every application has with managing
external and native formats. In the case of Docs, the state for online editing
and collaboration is deeply integrated with the browser, and doesn't have an
analog in external formats. So, those features just aren't supported if you're
not using native Google Docs, because the underlying support doesn't exist in
other formats. And if you are using native Google docs, then the only way to
get the document in another format is to export it.

Accepting all that, I still don't understand the claim that the document isn't
synced.

~~~
mkr-hn
A .g[doc,sheet,...] file isn't a document. I want to open, edit, and save in
.odt _within_ Google Docs. There's no reason they can't make this possible. It
was possible before Drive.

I get that the collaboration features need the native format. I don't need
collaboration features most of the time.

~~~
magicalist
> A .g[doc,sheet,...] file isn't a document. I want to open, edit, and save in
> .odt within Google Docs.

so, open it, edit, and then download as -> .odt and name it the same as the
original file?

I don't really understand. You want its internal representation to be in odt?
What does it matter as long as it's not observable except by an icon and a
filename extension?

~~~
mkr-hn
You don't understand why I don't want to depend on there always being an
export option? I don't understand what you don't understand. I don't want to
have to export to .odt every time I make an edit just to maintain portability.

I want Docs to work like its desktop predecessors work. Even Office's web
applications do this. There's no reason Docs can't. I can make an edit in Word
and instantly open to see the changes in LibreOffice, or run some kind of
cross-cloud sync.

Maybe we're talking about different things? Here's the workflow I envision:

1: Create an outline for a book in Docs

2: Open it in LibreOffice from the GDrive folder

I can do this in 2/3 word processors.

------
calhoun137
I don't think it's fair to call Google "evil", but maybe I'm cynical because I
spend a lot of time reading about banks, insurance companies, the mainstream
media, walmart, lobbyists, drug companies, private prisons, garment factories,
weapons manufacturers, gun dealers, patent trolls, the recording industry, and
so on.

~~~
pseut
You're misinterpreting the title. Put "Evil Google" in scare quotes and it
makes more sense.

------
mwsherman
It's remarkable how little economics has to say about Google, their
motivations, and outcomes. There's nothing wrong with trying to fit new
information into existing models, but think of it this way: if you were a fly
on the wall for Goog's decision on Reader, would it bear any similarity to
this model?

~~~
spinchange
What is the alternative explanation? Reader evidently needed a very non-
trivial amount of resources to maintain and didn't have anywhere near the
amount of users to justify it. I lament that they couldn't keep it going, but
even the guy who started the project inside Google said he and people working
on it felt like its days were numbered from the outset.

------
MilesTeg
After reading the article several times it seems to me that it has nothing to
do with Google. The idea that a company that can't price discriminate and
isn't able to make a profit to provide a useful good is interesting. Words
like 'Evil Google' and 'Monopolist' are just added fluff for link bait.

~~~
pseut
From TFA:

 _"even in a plain-vanilla market, a monopolist with high fixed costs and
limited ability to price-discriminate may not be able to make a profit
supplying a good even when the potential consumer gains from that good exceed
the costs of production"_

The whole blog post is an analysis explaining why that's true. "Evil Google"
may have set people off (but it's pretty clear from TFA that Krugman's not
calling Google "Evil"), but "monopolist" is pretty central to the article.

~~~
MilesTeg
I am not an economist but I don't see why being a monopoly or not has anything
to do with it. Would a not-monopoly be able to make a profit if it had high
fixed costs and no ability to price discriminate? That's without even delving
into the question on if Google is actually a monopoly.

~~~
pseut
Avent's article (which Krugman's is discussing) discusses Google in the
context of possibly being a monopoly. Krugman's presenting an analysis that
shows that _even a monopolist_ may not be able to make money in some
circumstances where there's positive social value to a service being provided.
One would naively expect that a monopolist would be able to make a profit and
stay in business in those circumstances even if perfectly competitive firms
couldn't, and they often can which is why we have regulated monopolies, but
Krugman's showing that isn't always true.

If you want, you can take his post as a counterargument to the "why wouldn't
Google charge for Reader" question: it's possible that they could not have
charged a price that made it profitable. Without any data, who knows if it's
true or not, he's just showing how the logic would fit together.

~~~
MilesTeg
That was more or less my point. Krugman provides no evidence that the Google
Reader follows that model. It is an opinion article entitled 'The Economics of
Evil Google.' After the first paragraph there is no reference to Google only
'Monopolist' Compare that to the longer Economist article which is actually
all about Google and somehow fails to include either the words 'Monopolist' or
'Evil'. I guess I just don't like opinion pieces.

~~~
pseut
What was more or less your point? It's a discussion of monopolies.

------
mkr-hn
The article he's talking about is still worth reading, but this is a good
summary if you don't have the time/interest to read the whole thing.

~~~
spenrose
Here it is, and it's quite good:

[http://www.economist.com/blogs/freeexchange/2013/03/utilitie...](http://www.economist.com/blogs/freeexchange/2013/03/utilities)

"in the long run that's a problem for Google. Because we tend not to entrust
this sort of critical public infrastructure to the private sector. Network
externalities are all fine and good to ignore so long as they mainly apply to
the sharing of news and pics from a weekend trip with college friends. Once
they concern large swathes of economic output and the cognitive activity of
millions of people, it is difficult to keep the government out. Maybe that
deterrent will be sufficient to keep Google providing its most heavily used
products. But maybe not.

I find myself thinking again of the brave new world of the industrial city,
when new patterns of interaction led to enormous changes in economic activity,
in culture and personal behaviour, and in the way we think. We upgraded
ourselves, in terms of education, hygiene, and social norms, to maximise the
return to urban life. And the history of modern urbanisation is littered with
examples of privately provided goods and services that became the domain of
the government once everyone realised that this new life and new us couldn't
work without them"

~~~
rayiner
See, e.g. the NYC subway system.

------
skc
The "Dark Knight" quote of "You either die a hero or you live long enough to
see yourself become the villain" seems apt here to be honest.

------
bhauer
I'm no fan of Google. But what could be a thousand times worse than Google?

Oh I know. Search as a public utility.

~~~
venomsnake
That depends ... BBC get the job pretty well as a publicly financed utility.
So a search that is focused on quality and not ads supported by levy on
broadband with transparency in ranking and inclusion, with prohibition of
censorship ... may not be such a bad thing after all. Search is important.

Although I would just create an IP law that forces the corporation to put the
source code and assets in public domain on the abandonment of a service when
it gathers above some usage and traction. Someone will pick it up if the
interest is enough.

P.S. I am ready for the downvoting that will ensure.

------
gcr
Here's how Google should shut down a product:

Step 1: Over a period of say three months, slowly increase the average
response time of the product.

Step 2: Listen to people complain that load time is getting unbearably slow

Step 3: "Oh, we'd love to fix this problem but because of
$random_infrastructure_issue, and because we've got most of our developers
working on Android, we think it's time to shut the product down. After all, it
was getting old and slow, right?"

Step 4: Feel justified about their decision

------
bmmayer1
Revoking Paul Krugman's Nobel Prize would be a public good.

------
EGreg
Maybe this is a dumb question, but why wouldn't Google simply sell Reader to
some consortium, public or private group to continue running it? In terms of
money, shutting Reader down would get them less money than selling it, as long
as the price is greater than the cost of transferring the infrastructure.
However, maybe it will incur liabilities for Google?

[http://www.change.org/petitions/google-please-sell-us-
google...](http://www.change.org/petitions/google-please-sell-us-google-
reader)

~~~
Kylekramer
If I were to hazard a guess, it is that that Reader is too closely tied to
other Google technologies (caching, crawling, search) for it to really
function outside of Google.

------
kaa2102
"Nobody relies on [mail delivery, a national highway system, telephones,
wireless spectrum, police, libraries, etc] to get to work so they can feed
their children."

Necessity for sustenance or transportation does not drive the need for
something to be a public utility. I think we are really talking about the
tragedy of the commons. This has been a political and legal debate for
centuries. The private market is not able to maximize the average utility of
citizens in every market and AND earn profit.

------
ebbv
I respect Krugman and agree with him often but this is obviously dumb. It's
obvious to anything who knows anything about how the web works. Krugman should
have consulted with such a person before posting this boneheaded entry.

------
arbuge
Couldn't read this article initially because it's hidden behind an Evil
Paywall.

Solution: Evil Google. Googling the title in news and clicking that gets you
in without paywall limits.

------
lazylizard
so now Google Reader is like the banks/aig/car makers? too big to fail?

------
martinced
Krugman lost it a long time ago. The final nail in the coffin was when he
wrote that it actually was a good idea to mint a $1 trillion coin to dodge the
legislation preventing to raise the U.S. debt ceiling.

If you're into economy at all you should know that disciples of Friedman did
predict the precise situation the eurozone is in right now (including Spain
unemployment, the Greek default, Italy and France struggling) before the first
euro even circulated... Meanwhile Keynesians have never been able to predict
anything more than two or three years before they happened.

Keynesians are ultra-short sighted but politicians loves them because they're
basically telling them what they want to hear: more state intervention, create
even more money (the $1 trillion coin was just ultra rubbish, really), etc.

His whole book "End this recession now" is a gigantic pile of shit.

The situation ain't good because of the Keynesian doctrine and yet these
people want to do more of what does obviously not work: let's print more
money.

I never had much sympathy for Keynesians but honestly since he wrote about
that $1 trillion coin I've entirely lost interest.

He lost it.

~~~
jorgeortiz85
Advocating for a $1 trillion coin is a recognition that, if interest rates are
effectively 0%, there is no difference between short-term government debt and
government-issued currency. Minting a coin is just a hack for the Executive to
get around Congress's restriction on issuing debt.

I'm not sure what you're trying to get at with your Euro rant, bu Krugman has
been calling the Euro a bad idea since at least 1998.
<http://www.pkarchive.org/global/tag.html>

