Posts Tagged economics

The Economics of Adblock Plus

Several arguments have been made, claiming that using programs such as Adblock Plus, which completely eliminate ads from the vast majority of websites, and certainly popular websites (unless the user manually chooses to allow the ads), are hurting the very websites people visit without subscriptions. I think such a thing may be thrown out of proportion for several reasons.

There is still an abundance of users who do not use ad blocking software and have no interest in it. Given that the sources of the arguments tend to be technically-oriented websites, their user base probably has a greater usage of ad blocking software than most other websites. Regardless, the very same users who run the software probably never intend to click on advertisements. I find most advertisements annoying as they needlessly waste CPU cycles, draining my battery life when I’m on the go and flashing their messages obnoxiously, trying to get my attention. I research before making a purchase — advertisements can hardly count as that, and as such, will never be a factor in any of my money spent online. Ad revenue given solely from views (something that I should think is a rarity) is made on the assumption that a certain percentage of views will translate into clicks (and sales), or else the pay-per-click option would have replaced it in that specific instance.

There is an explanation for this using microeconomics and it has to do with elasticity — perfect elastic demand, in this case. In the case of elastic demand, the quantity demanded for a product is fairly reactive to price changes — a lowered price would attract more buyers. In the case of inelastic demand, the quantity demanded for a product is fairly nonreactive to price changes. Imagine the quantity demanded for a free item, such as water from a drinking fountain, when the price of it begins to rise over 0. Would many (or any) people pay for drinking water if it wasn’t free? I highly doubt it. That is an instance of perfect elasticity, in which a small price change has a very large effect on quantity demanded. Thus, when drinking water left the $0 price mark, quantity demanded is virtually zero.

The red line indicates the demand curve -- a potentially infinite quantity demanded exists at the price $0 but none or virtually none exists at any other price, even $0.01.

The same applies to websites that lack paid subscriptions. If their ‘price’ was to leave $0, people would simply look for alternatives. If those are not found or are unsatisfactory, people would either have to adjust their lifestyles (i.e., life without that specific website or websites) or consider whether it would be worth it to pay for a subscription to the previously free website. I think alternatives would be readily available because competition between websites would allow webmasters who get little traffic to work for the views and accept less pay than the previous website considered acceptable. A hypothetical example: popular website X considers 300k views/month and 10k/month income unacceptable while previously unknown website Y considers 150k views and 1k/month income a godsend.

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“Paper Money is Trash”

Such a statement is often either implied or explicitly stated by precious metals-alarmists. You can find videos on YouTube where people have been predicting the demise of the dollar and the explosion of silver and gold prices for several years now — “It’s coming, here it is, this big thing, it’s coming!” — and tidbits from the news are collected and used as conclusive “proof” of market manipulation, conspiracy, and the imminent occurrence of whatever they are predicting. I can’t help but wonder what stake they have in the precious metals market.

There may be several types of people spreading the message: people who happen to own silver and/or gold and sincerely believe they ought to inform as many people as possible for their own good, and those who may or may not own silver and/or but make overstatements and suggestions that are have a specific purpose in mind — opinion-shaping. Many times it is asserted that the actual market price of precious metals is far beyond what COMEX prices the metals at. I’ve yet to find a concrete shred of evidence supporting such assertions. Historical references are about the best attempts at taking an argument out of a purely rhetorical state that I’ve seen thus far. Yes, gold and silver were used throughout history as money — copper as well. It is fallacious to assert that the exact trends must be followed in vastly different circumstances. I do not deny that precious metals are worth investing in. I deny the claims of $10,000 gold and $1,000 silver (per troy ounce) projections based upon the fact that the people making the claims are either laymen with regards to economics or have not established any ethos whatsoever (the interests they hold, as I mentioned earlier).

More on the rhetoric factor in this (as per the title of the post). Fiat currency, without its government decree, is intrinsically worthless. Silver has value independent of government because individuals are interested in attaining it for reasons such as investment, industrial use, and so forth. Silver’s scarcity and its many uses give the idea to some that silver has intrinsic value. I’m quite unsatisfied with that term as it comes across as rather vague, with the hope that the term will not be further questioned (as my experience has been thus far, mainly in moral philosophy), but I’ll continue to use it for simplicity’s sake nonetheless. Silver’s scarcity is only relevant because there is demand for it in the first place, otherwise no one would care how much or how little there was of it. Just as anything that is used in a transaction involving at least two parties, the demand for a good or a service is truly what gives it value. There can be demand for, say, bottle caps. Their price would be determined by their availability, which would be quite low since they’re fairly abundant, but the price is only relevant due to demand. The caps have low intrinsic value and no government decree to give them value beyond what people would normally pay for them.

If a man offered to sell me his car for 10 bottle caps, I’d accept the offer. Whether or not the man got a deal, the transaction was made. At that point in time, the buying power of my bottle caps was equivalent to a car. Let us introduce fiat currency into this. Fiat currency, like the bottle caps, has little intrinsic worth. However, the buying power of the fiat currency is unquestioned. I can easily swap back and forth a silver coin and its equivalent value in fiat currency. As with the caps, the buying power of the fiat currency is independent of its intrinsic worth. While I may not expect a fiat currency note to maintain any buying power for an indefinite amount of time, the buying power during the time of a given transaction involving fiat currency is equivalent to whatever was attained in exchange. The buying power of the silver coin works in the same way, but historically, precious metals are more resilient in terms of buying power.

Thus, if “paper money is trash” is the result of a contrast between fiat currency and precious metals, a fallacy of equivocation has been committed.

Formulated in a syllogism:
P1: Money must have value
P2: Fiat currency does not have value
C: Fiat currency is value-less

The problem with the syllogism is that “value” is misleadingly used.
Here’s an expanded version to make the fallacy obvious:
P1: Money must have intrinsic value
P2: Fiat currency does not have intrinsic value
C: Fiat currency does not have buying power

Value is used both in the sense of “intrinsic value” and in the sense of “buying power.” Even though precious metals have both high intrinsic value and buying power, the fact that fiat currency only has buying power, even if it is temporary, and insignificant intrinsic value, fiat currency cannot be classified as trash because trash cannot be something of any buying power to the one who refers to it as trash (the relativity of this is shown by the existence of “dumpster divers,” though I can’t say I’m familiar with the transactions occurring in those types of settings).

I say to those who consider fiat currency trash — let me relieve you of that trash, I’d be happy to take it.

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Greetings

I’ve decided to try out the WordPress.com service and will try my best to subject others to torture (i.e., thinking).  Hopefully my efforts to incite philosophical thought will be of use to someone.

Occasionally I will share things such as the following:

and other types of things a personal blog typically has.

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