Infinite Monkeys - A Diamond In The Russia

October 2009


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	Wed, May. 13th, 2009 08:27 am

A Diamond In The Russia

From this article on the diamond industry:

Diamonds are an exception. “If you don’t support the price,” Andrei V. Polyakov, a spokesman for Alrosa, said, “a diamond becomes a mere piece of carbon.”

And:

“We have to tell people that diamonds are valuable,” he said. “We are trying to maintain the price, just as De Beers did, as all diamond producing countries do. But what we are doing is selling an illusion,” meaning a product with no utility and a price that depends on the continued sense of scarcity where there is none.

Good times.

Current Music: #291: Reunited (And It Feels So Good)-Chicago Public Radio-This American Life

marknau

	Thu, May. 14th, 2009 04:18 am (UTC)

And video games are different how?

michaelkvance

Raymond Luxury Yacht

	Thu, May. 14th, 2009 01:38 pm (UTC)

I'm going to assume two theses:

1) video games are a price controlled environment orchestrated by a few large businesses
2) video games have no intrinsic utility

(1) should be fairly easy to disprove based on how functionally different price mechanisms work in the weird hybrid cartel world of governments and De Beers that diamonds have. We have three major players in the games sphere, one of which offers less expensive hardware and software at a cheaper average retail price; as well as handheld software at an even lower price point. There is an active discount retail market, digital distribution pressure on that retail market (Steam weekend sales!), and no artificial scarcity except in the collector's market which is normal.

(2) is probably true for any entertainment product, although some works of art (also no intrinsic utility) are often held as investment hedges! Gold as reserve currency in some sense is the same, although it does have useful manufacturing properties, and a real scarcity component, that games do not.

Which is to say, my Turbografix 16 collection is my defense against the coming USD hyper inflation!

marknau

	Thu, May. 14th, 2009 07:55 pm (UTC)

#1 makes more sense if you take as the scope "a specific video game" rather than "all video game hardware/software."

We artificially limit the quantity of a specific game. Our marginal cost of providing another copy to a potential user is near zero. Particularly for PC games, we could, if we wanted, choose a distribution model that gets copies into people's hands for a marginal cost of pennies.

We choose not to in order to "artificially inflate" the price of a good with "no intrinsic utility."