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> (The used book market actually drives up the price of texts – to see why, think of what would happen to car prices if used car sales were not permitted.) My

> (The used book market actually drives up the price of texts – to see why, think of what would happen to car prices if used car sales were not permitted.) My best guess is he is trying to argue that if you disallowed used car sales, you'd get better economies of scale on new cars, as more would need to be produced to fill the void left my used car sales. While it might drive the price of a new car/textbook down, I still think it would drive the average amount paid by drivers/students up, which is what we really care about (as students, at least; obviously the textbook companies would love to sell more books). In fact, this seems to a case of the broken window fallacy[1] — a textbook case, one might say. ;-) (In that, if you essentially destroy the used text book's value by not using them, that this is somehow beneficial.) [1]: https://en.wikipedia.org/wiki/Parable_of_the_broken_window https://en.wikipedia.org/wiki/Parable_of_the_broken_window

nicholas73 10y ago
That's bad news, because not only is he a crook, he is an ivory tower economist who is going by gut feel (i.e. useless opinion). In the real world, prices are not just set by cost - actually most of the time it is set by what the consumer can pay. Cost is just a lower bound, but that's still bad news for the professor since car companies already enjoy plenty of economy of scale. Similarly, publishers a captive market like student textbooks are not going to lower prices. Printing is not the cost - it's not novels sitting on a bookshelf with no idea whether it will get picked up or not. tl;dr The guy is both a tool and an idiot.
pg_bot 10y ago
I think the point the professor was trying to make was that the increased supply of used books incentivizes the publishing company to print a new edition, which all of the students will be forced to pay for. This is analogous to how car companies update their models on a yearly basis.
Jtsummers 10y ago
When an economy's health is largely measured by movement of money, this does in fact help. If that were the only or best metric. In a consumption-oriented economy it may be considered that. Creating things that last years, decades, generations, doesn't keep the economy "moving" in this sense. It can cause some sectors to fail (a sort of boom-bust). If you create a near perfect product that lasts decades, you have an immediate need to ramp up production (to meet demand). Once the demand tapers off due to market penetration, growth slows, and then you shrink--potentially rapidly. If the product doesn't expire frequently (break, wear out, get lost, something) and is a non-consumable good, then your production needs to drop off or you need to make different things. I worked for an employer once that was in that situation. I saw it coming, but they straight up lied to the staff about what was coming up, how the future was great. Then we went from $500 million/year in revenue to $150 million/year because our massive ramp-up for production succeeded, now our product was in every system it needed to be in. New systems are made relatively slowly (big things, like airliners, but also smaller like military ground vehicles), and only needed our parts for maintenance (breakdown after ~10 years; maybe not break but need replacement/servicing) and the less frequent new production. By some metrics, this was a failure of the company (in fact, the division was sold off some time later). But it actually succeeded, it needed to pivot to maintenance and divert other resources to engineering other solutions (or let them go, which is what happened to many of them). They actually have pivoted, I'm told, at least some parts of it. They're doing more diverse sets of safety critical systems, including getting into the consumer ground vehicle market now. That need to pivot should have been obvious, but for some reason it wasn't to many of my peers, and the management ignored it (willfully) at least in their presentations to us.
- TeMPOraL 10y ago
  A consideration that seems to be constantly missing in such evaluations is that of waste. It's externalized, and I wish there was a way to force those costs back on producers. Creating short-lived products just to keep growth going is simply evil.
  - Jtsummers 10y ago
    Indeed. Something akin to superfund sites (https://en.wikipedia.org/wiki/Superfund https://en.wikipedia.org/wiki/Superfund) but extended to more than just those extreme cases.
- yuhong 10y ago
  And the current economy is credit based and thus consumption oriented, and student debt is a form of credit in fact.
ivv 10y ago
I think he is implying (correctly) that in the absense of a robust secondary market for cars, the prices for new cars would drop -- there would be less demand for new cars people knew they couldn't resell. It's a bad analogy, though, especially for an economics professor. By suppressing the secondary market for his book, he secures his monopoly on a mandated good, ensuring the higher price.

nicholas73 10y ago

That's bad news, because not only is he a crook, he is an ivory tower economist who is going by gut feel (i.e. useless opinion). In the real world, prices are not just set by cost - actually most of the time it is set by what the consumer can pay. Cost is just a lower bound, but that's still bad news for the professor since car companies already enjoy plenty of economy of scale. Similarly, publishers a captive market like student textbooks are not going to lower prices. Printing is not the cost - it's not novels sitting on a bookshelf with no idea whether it will get picked up or not. tl;dr The guy is both a tool and an idiot.

pg_bot 10y ago

I think the point the professor was trying to make was that the increased supply of used books incentivizes the publishing company to print a new edition, which all of the students will be forced to pay for. This is analogous to how car companies update their models on a yearly basis.

Jtsummers 10y ago

When an economy's health is largely measured by movement of money, this does in fact help. If that were the only or best metric. In a consumption-oriented economy it may be considered that. Creating things that last years, decades, generations, doesn't keep the economy "moving" in this sense. It can cause some sectors to fail (a sort of boom-bust). If you create a near perfect product that lasts decades, you have an immediate need to ramp up production (to meet demand). Once the demand tapers off due to market penetration, growth slows, and then you shrink--potentially rapidly. If the product doesn't expire frequently (break, wear out, get lost, something) and is a non-consumable good, then your production needs to drop off or you need to make different things. I worked for an employer once that was in that situation. I saw it coming, but they straight up lied to the staff about what was coming up, how the future was great. Then we went from $500 million/year in revenue to $150 million/year because our massive ramp-up for production succeeded, now our product was in every system it needed to be in. New systems are made relatively slowly (big things, like airliners, but also smaller like military ground vehicles), and only needed our parts for maintenance (breakdown after ~10 years; maybe not break but need replacement/servicing) and the less frequent new production. By some metrics, this was a failure of the company (in fact, the division was sold off some time later). But it actually succeeded, it needed to pivot to maintenance and divert other resources to engineering other solutions (or let them go, which is what happened to many of them). They actually have pivoted, I'm told, at least some parts of it. They're doing more diverse sets of safety critical systems, including getting into the consumer ground vehicle market now. That need to pivot should have been obvious, but for some reason it wasn't to many of my peers, and the management ignored it (willfully) at least in their presentations to us.

TeMPOraL 10y ago
A consideration that seems to be constantly missing in such evaluations is that of waste. It's externalized, and I wish there was a way to force those costs back on producers. Creating short-lived products just to keep growth going is simply evil.
- Jtsummers 10y ago
  Indeed. Something akin to superfund sites (https://en.wikipedia.org/wiki/Superfund https://en.wikipedia.org/wiki/Superfund) but extended to more than just those extreme cases.
yuhong 10y ago
And the current economy is credit based and thus consumption oriented, and student debt is a form of credit in fact.

ivv 10y ago

I think he is implying (correctly) that in the absense of a robust secondary market for cars, the prices for new cars would drop -- there would be less demand for new cars people knew they couldn't resell. It's a bad analogy, though, especially for an economics professor. By suppressing the secondary market for his book, he secures his monopoly on a mandated good, ensuring the higher price.