Newman Paper: Free Things Aren’t

John M. Newman of Memphis has written The Myth of Free.  Here's the abstract:

Myths matter. This Article is the first to squarely confront a powerful myth that pervades modern economic, technological, and legal discourse: the Myth of Free. The prevailing view is that consumers capture massive welfare surplus from an ever-rising flood of innovative new products that are offered free of charge. This windfall was made possible, we are told, by the convergence of digitization and networking, which eliminated the marginal costs of such products. Free was born, heralding the end of scarcity and an age of abundance.

But that orthodox origin story is fatally flawed. This Article first formalizes, then critiques, the Myth of Free. It addresses four questions raised by the Myth’s premises: (1) have the marginal costs of digital goods fallen to zero? (2) if not, is “close to zero” close enough for firms to round down the difference? (3) do suppliers of Free products employ marginalist pricing strategies? (4) are Free markets perfectly competitive?

Unsurprisingly, given its faulty premises, the Myth’s conclusion is incorrect: there is still “no such thing as a free lunch.” Free signals neither the end of capitalism nor the demise of standard economic theory. In place of the Myth, this Article provides a revisionist history of Free, explaining its origins and forecasting its future.

Moreover, the Myth of Free is not benign. It has led to an undeserved protected status for certain suppliers, who receive immunity or favorable treatment in close cases involving contract, antitrust, privacy, and consumer-protection laws. It has motivated policy proposals that would eliminate market interventions or (paradoxically) competitive markets themselves, without adequate justification in either case. Worse yet, policies designed for a post-scarcity world necessarily overlook the persistent problems attendant to scarcity. This Article seeks to dispel the Myth of Free before it can wreak further harm.

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