iPhones and ringtones: a parable of markets.

"Markets in everything!"

There is a problem in the New Statesman office. Like so many companies, we have a growing abundance of iPhones. At least half of the 40 million they've sold are here somewhere, by my count. But all these people having the same phone leads to a downside: the distinctive Apple message alert goes off, and everyone checks their screens thinking that they are the ones with a new text.

There is an easy, socially optimal solution to this problem, of course: everyone changes their text tone to something new, we all grow to recognise our individual tones, and confusion need never reign again.

Unfortunately, what is socially optimal is not individually optimal. I don't want to change my ring tone, because I've already learnt to respond to it. If everyone else changed theirs, then I could keep mine the same. But those incentives are the same for everyone else; no-one wants to be the first mover, and everyone hopes to be a free-rider.

Why? Well, an economist might say its because there are no markets in action. If everyone could bid to be the person who gets to keep their old ringtone, then people would have an incentive – in the form of cold, hard cash – to switch, while the person who most wants to keep their phone sounding the way it used to forks out the money equivalent to how much they care. If we truly have an efficient market, then this cannot fail to make everyone better off. And if the highest someone is prepared to pay is lower than the lowest it would take to make everyone switch, then we are already at the optimal solution.

The alternative to markets, of course, is government intervention. We don't have a government, but we do have an editor, who could very easily impose a rule mandating that employees use custom ringtones. That would work almost as well, although it wouldn't be the optimal solution. And with that, there's always the risk of corruption. What happens when our he gets an iPhone?

Markets in everything, even ringtones. Credit: Getty

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

David Cameron shows Labour how to do it

Leftwing rhetoric masked rightwing reality in Cameron's conference speech.

“The tanks are in the kitchen,” was the gloomy verdict of one Labour staffer to a speech in which the Prime Minister roamed freely into traditional left-wing territory.

But don’t be fooled: David Cameron is still the leader of an incredibly right-wing government for all the liberal-left applause lines.

He gave a very moving account of the difficulties faced by careleavers: but it is his government that is denying careleavers the right to claim housing benefit after they turn 22.

He made a powerful case for expanding home ownership: but his proposed solution is a bung for buy-to-let boomers and dual-earner childless couples, the only working-age demographic to do better under Cameron than under Labour.

On policy, he made just one real concession to the left: he stuck to his guns on equal rights and continued his government’s assault on the ridiculous abuse of stop-and-search. Neither of these are small issues, and they are a world away from the Conservative party before Cameron – but they also don’t cost anything.

In exchange for a few warm words, Cameron will get the breathing space to implement a true-blue Conservative agenda, with an ever-shrinking state for most of Britain, accompanied by largesse for well-heeled pensioners, yuppie couples, and small traders.

But in doing so, he gave Labour a lesson in what they must do to win again. Policy-wise,it is Labour – with their plans to put rocketboosters under the number of new housing units built – who have the better plan to spread home ownership than Cameron’s marginal solutions. But last week, John McDonnelll focussed on the 100,000 children in temporary accomodation. They are undoubtedly the biggest and most deserving victims of Britain’s increasingly dysfunctional housing market. But Labour can’t get a Commons majority – or even win enough seats to form a minority government – if they only talk about why their policies are right for the poor. They can’t even get a majority of votes from the poor that way.

What’s the answer to Britain’s housing crisis? It’s more housebuilding, including more social housing. Labour can do what Cameron did today in Manchester – and deliver radical policy with moderate rhetoric, or they can lose.

But perhaps, if Cameron feels like the wrong role model, they could learn from a poster at the People’s History Museum, taken not from Labour’s Blairite triumphs or even the 1960s, but from 1945: “Everyone – yes, everyone – will be better off under a Labour government”.

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.