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.

Photo: Getty
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Another trade minister walks away from David Cameron's failed project

Francis Maude is lucky enough to be able to walk away from this Government and their failing policies – if only the rest of us could do so.  

After just nine months in the role Francis Maude has announced he will be stepping down as trade Minister. It means David Cameron will have gone through four trade ministers in six years.

The nine months that Maude has been in the role have not been happy ones – for him, or the British public.

Our trade deficit in goods has grown to a record £125bn and our overall trade deficit has risen to £34.7bn. Meanwhile, under the Tories the current account deficit increased to its largest level since 1830 – when the Duke of Wellington was Prime Minister.

We’ve also seen a widening gap between the Chancellor and the Trade Minister in that time. While initially championing Osborne’s much vaunted “£1 trillion trade target by 2020” recent weeks have seen Maude pouring cold water over the target – referring to it as a “big stretch” and indicating it is unlikely to be met. The “stretch” he refers to is the whopping £350bn that the Office of Budget Responsibility says Osborne’s 2020 target will be missed by.

Despite saying yesterday that he would be stepping down having devised a plan to tackle Britain’s huge trade problems these new figures – incidentally released on the same day as Maude announced he’d be leaving - are evidence that if there is a plan, it’s done no good so far.

While Maude might be able to just walk away from Britain’s dire trade situation others aren’t so lucky. Domestic export industries such as steel and manufacturing, where output is still lower than 2008, have come under huge pressure in recent years from soaring energy costs and cut price competition from markets such as China.

Boosting exports is key to tackling the historic deficit, but the government shows no sign that it really understands this. While Osborne fails to provide crucial support to the steel sector, which has seen devastating job losses, he isn’t failing to take every opportunity to court the increasingly unstable Chinese market which leaves Britain even more exposed to global headwinds. It was just a few months ago the Bank of England warned that if Chinese GDP were to fall by three per cent relative to its trend then the output in the UK would be around 0.3 per cent lower as a result, yet Osborne is undeterred.

It is workers in Britain that will be paying the price for these failing policies. Those losing their jobs at Tata steel, small manufacturing businesses suffering in the industry’s stagnation and many other ordinary workers are not lucky enough to walk away from the situation like Maude.

Their situation is compounded by the Government attacking ordinary people on middle and low wages in other ways.

Although Osborne pledged in November to stop all tax credit cuts, he is still going ahead with a proposed cut to the income disregard costing 800,000 people an estimated £300 a year. This is on top of the IFS’s analysis from just a few days ago that shows the Government’s planned cuts to Universal Credit will see 2.1 million working people lose out by an average of £1,600 a year.

And coming down the line Osborne’s ‘tenant tax’ which will force all but the very poorest council tenants to ‘pay to stay’ – charging them huge market rents to stay in their home – which many will be unable to afford.

Under the new measures a couple earning £15,000 each per year – scarcely over minimum wage each – would be asked to pay market rent for their home, or reduce their working hours in order to take them out of the income bracket.

Osborne claims to want the Tories to be ‘the Party of the workers’ but this policy shows how much of a farce that is. People who work hard on low pay will be forced from their homes.

Maude is lucky enough to be able to walk away from this Government and their failing policies – if only the rest of us could do so.  

Jon Ashworth is Labour MP for Leicester South.